Birmingham City investigation: Inside track on EFL probe
By Rob Dorsett, Sky Sports News reporter
Last Updated: 22/03/19 4:00pm
Sky Sports News reporter Rob Dorsett provides the inside track into the EFL's investigation into Birmingham City...
A three-person disciplinary commission met earlier this week to decide if Birmingham were guilty of breaching new Profitability and Sustainability rules, introduced at the start of the 2016/17 season.
Birmingham were handed an immediate nine-point deduction by the EFL on Friday and, here, Sky Sports News' Rob Dorsett takes a closer look at the situation...
Why have Birmingham been investigated?
Birmingham are understood to have exceeded the £39m allowable losses over a three-year period (up to the end of the financial year, 2018).
Birmingham's accounts for the 2017/2018 campaign showed a loss of £37.5m for that single season, so the EFL warned Birmingham they were likely to go way beyond the permitted limits.
It is understood the EFL felt there was no attempt to curtail spending and the club's losses thereafter, so these have been listed as aggravating factors in the EFL's case against Birmingham.
Birmingham argued they should not be given a points deduction for breaking the EFL's new financial rules on Profitability and Sustainability.
A three-person Independent Disciplinary Commission heard representations from the club, and also from a lawyer representing the EFL, who argued that Birmingham's repeated breaches of the rules deserved the stiffest possible penalty.
The three-person commission was made up of an independent chair, with the remaining two commission members selected by Birmingham and the EFL respectively.
The punishment is the first under the EFL's new Profitability and Sustainability rules that were introduced at the start of the 2016/17 season.
It will likely set a precedent for any future punishments for other clubs who fall foul of the EFL's financial rules.
Feeling amongst other EFL clubs…
Sky Sports News has been told a number of other Championship clubs have been monitoring what happens in this case.
It is understood a number of them held concerns about the level of punishment Birmingham might receive.
There is a feeling that setting a maximum allowable loss of £39m for any three-year period is too low a threshold, given how transfer fees and wages have increased in recent years.
Stoke City, for example, spent £19m in one day on two players in January, when they signed Benik Afobe and Ryan Woods.
Stoke still have the benefit of Premier League parachute payments to soften the financial blow, but a number of other Championship clubs feel they cannot compete, if they harbour ambitions of trying to win promotion to the Premier League.
Under the old Financial Fair Play (FFP) rules, QPR agreed a £42m settlement with the EFL in January 2018 and accepted a short-term transfer embargo, after overspending in the 2013-14 season. Bournemouth and Leicester have also reached cash settlements for breaching FFP regulations.
What next for Birmingham...
Sky Sports News understands Birmingham will remain with an 'Imposed Business Plan' for the remainder of this season, which means they have to share and discuss all significant financial dealings with the EFL.
It is understood the club are not now under a 'soft embargo' and they will not face a transfer window ban this summer, but discussions about the future will continue with the EFL.
Birmingham will be able to enter into contract negotiations with their captain Michael Morrison for the first time with the 'soft embargo' now lifted. Morrison's current deal expires in the summer.
Birmingham, like all clubs, will have to publish their annual accounts later this year, and if they fall foul of the permissible £39m losses over the previous three years again, they may face further punishment.
Analysis: Is relegation a real threat?
Sky Sports EFL reporter Simeon Gholam: While a nine-point deduction is not as disastrous for Birmingham's season as 12 points would have been, all of a sudden the club are looking nervously over their shoulders rather than trying to chase down the sides above them.
The club are in relegation form as well. They have suffered four defeats on the spin and it does not get any easier for them from here, as they face three of the current top four right after the international break. A visit to West Brom, live on Sky Sports Football, is followed by Leeds and Sheffield United visiting St Andrew's.
Ipswich and Bolton may be out of touch of the rest but Rotherham, Reading, Millwall and Wigan will all be just below them in the table and Garry Monk's side have well and truly been sucked into that fight to avoid finishing 22nd.
Six weeks ago a dramatic 4-3 win at QPR had seen them move to within two places and four points of the play-offs. A season that could have concluded with a trip to Wembley may now well end with them having to plan for life in League One.