The Independent Football Regulator (IFR) has produced a 'State of the Game' report, which has taken a forensic look at English football over the past 18 months, concluding that the game's finances are dangerously exposed, with the majority of clubs living on the edge of financial disaster. The IFR added that interest and investment from around the world continues to grow within English football, but the underlying foundations of the pyramid are under intense strain and require urgent reform. Despite over £9bn generated in revenue, 94 per cent of clubs are loss-making, with long-term security being put at risk through excessive short-term spending to keep up with rivals.
This, the IFR says, has led to a "dangerous cocktail of rising debt and an over-reliance on owner funding, leaving clubs and their fans at risk". The report acknowledges that the success of the Premier League has driven economic success, making English football the "richest, best and most deeply competitive in the world". However, it points to "financial cliff-edges between and within leagues", with the average Premier League club making more than eight times the revenues of an average Championship club, and the system of parachute payments paid by the Premier League to Championship clubs relegated contributing to significant overspend by clubs in the Championship.
Indeed, the report highlights player wage inflation leading clubs to take big risks chasing a place in the Premier League. The State of the Game report found that lower down the pyramid the pressure from operating costs was also on the rise, with 17 EFL and National League clubs incurring costs exceeding revenues. These clubs would be loss-making even if they did not pay their players.
It uncovered too that more than 60 per cent of EFL and National League clubs are technically insolvent, with their liabilities exceeding the book value of their assets. And it found that more than a quarter of clubs would be unable to survive for more than one month if owner funding was withdrawn, with the majority lacking a basic contingency plan to mitigate their risk. Chair of the IFR David Kogan told Sky: "I think what we see in English football is two completely different positions.
"The first is £9bn comes in every year, yet we have 94 per cent of the clubs of the 160 we regulate are trading unprofitably. "We have 32 clubs that have got less than 30 days' cash cover in their accounts. So if the owner walks away or drops dead, they're insolvent and go bust.
"So what we see in football is rising debt. It's a problem of cash cover and liquidity within clubs, and it's a lack of management, and what financial management? And now we're in a position to help those clubs achieve a more stable future." Kogan added: "What we're implying is today there's enough money going through into the Premier League and the EFL and into their individual clubs for the sun to shine.
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