Chairman has seen club revenues drop 85 per cent during coronavirus pandemic; predicts "numerous" EFL clubs will fall into administration next season
Tuesday 7 July 2020 13:47, UK
Players wages and transfer fees in the EFL will fall significantly as a result of the coronavirus - that's the view of one Championship chairman, who has seen club revenues drop 85 per cent as a result of the pandemic.
The executive - who wishes to remain anonymous, and who we will call Mr X - has told Sky Sports News that the unprecedented financial crisis will also see "numerous" EFL clubs fall into administration next season.
"It's inevitable," he said. "Almost all Championship clubs are loss-making businesses, and almost all of them have seen revenues drop by more than three-quarters, with no gate receipts, no corporate guests, reduced sponsorship.
"Those two factors together mean a lot of football businesses are unsustainable."
Mr X is convinced that the money clubs can devote to players in the three lower leagues of English football will fall - and bumper player pay days are a thing of the past, with the prospect of a salary cap being imposed to try to protect clubs.
"It's already happening," says Mr X. "Whenever the salary cap does come in - and it will - it means that future player contracts will have to be cheaper, and more affordable for the clubs.
"If you're signing a new player, or re-negotiating a contract with a player for the next three or four years, because of the future salary cap, you have to offer that player less money.
"And if they refuse the contract - good luck in finding another club that will pay you the money, because we will all be in the same boat."
Mr X goes on to say that the drop in club revenues has happened at a time when outside investment in EFL clubs is at an all-time low. A perfect storm.
He points out that there are two different models of ownership for almost all EFL clubs - either they're owned by rich local business people, or they're owned by "speculative foreign investors". He believes both sources of revenue will be starved because of the coronavirus.
"The uncertain economic future is one thing - that will dissuade local investors from putting their money into risky ventures like football clubs. But the strict EFL financial rules, which prevents people buying success by pumping money into a football club - that means that we are seeing less and less foreign investment into the EFL too."
Foreign investors tend to buy Championship clubs in the hope of winning promotion to the promised land of the Premier League - huge TV revenues once in the top division can mean a lucrative return. But Mr X says the EFL's Profitability and Sustainability rules mean would-be investors from overseas think it's too risky to put their money forward.
He has sympathy for the EFL in how they have dealt with Wigan, who are facing a 12 point deduction after falling into administration last week - just four weeks after they were bought by a Hong-Kong based company.
Mr X points out the governing body doesn't have the power to stop unscrupulous individuals from buying English football clubs.
"All you really have to do to buy an EFL club is show evidence of funds, and not have a criminal record for any financial misdemeanours," he explains. "If there is evidence of money-laundering or fraud, a deal can be blocked under the EFL's Owners' and Directors' Test.
"But otherwise, there is no legal justification to block the sale of a club."
Mr X goes on to say that, even if a football club owner is convicted of a financial crime once he or she has bought the club, all the EFL can do is bar them from acting as a club director - they can't force the club to be sold to a new company.
The EFL has already begun addressing some of these difficult issues, and it has conducted a full review of its governance procedures in the light of Bury FC's financial demise, and withdrawal from the league last summer.
