Further progress has been made over recent weeks in the evolution of a framework that seeks to mitigate the sort of risks that triggered the problems at Sheffield Wednesday and too many other clubs, including our own.

Changes in financial regulation

As Derby fans are well aware and as alluded to elsewhere, English football is nothing like as attractive to potential investors as some politicians would have us believe, while media interest in celebrity owners at clubs like Wrexham, Swansea and Birmingham City also creates a false impression in this regard.  This reinforces the need to limit the risk of financial failure and restrict the extent to which existing club owners attempt to buy success (and all too frequently fail), while attempting to preserve fair competition.

These objectives drove the introduction of the profit and sustainability rules which at Championship level restricted clubs to operating losses totalling no more than £39 million in any three year period.  However, at a meeting on May 15^th Championship clubs voted in favour of a move to a squad cost ratio (SCR) system similar to that of the Premier League.  Full details are yet to be issued but SCR will limit player and team manager costs (including transfer fees) to 85% of income plus amounts injected into the club in the form of an “equity top-up allowance” of up to £15 million per annum, with a total maximum of £33 million over three years.

As these limits are applied annually rather than to a three year period they will support more effective real-time monitoring.  Importantly the new mechanism will also facilitate more timely action when breaches occur or are anticipated – including sanctions in the form of fines and, for more serious transgressions, a minimum six point deduction.

News from the Regulator

The Independent Football Regulator (IFR) has continued to build its suite of regulations and guidance.  Recent contributions include a supplement to the IFR’s Owners, Directors and Senior Executive Regime, dealing with rules relating to temporary appointments to senior management functions when unforeseen absences arise.  These rules aim to strike a balance between the need for practical and pragmatic solutions to short-term challenges and clubs’ obligations for on-going maintenance of required governance standards.

These standards are reflected in a second set of consultation documents dealing with club licensing regulations.  These detail the requirements clubs will need to meet to obtain and retain the licences they will have to hold to participate in the top five levels of English football commencing from the 2027/28 season.  These requirements include clear expectations for the maintenance of effective fan engagement comprising not simply communication but meaningful consultation with supporters on matters of relevance to them.  The principles of effective fan consultation have been defined and explained by the IFR as follows:

• Collaborative e.g. developed with input from fans
• Two-way i.e. not a one-way information flow
• Open e.g. club shares information proactively before decisions are made
• Integrated i.e. embedded in the club’s governance and decision making processes

The licensing consultation also included the draft Club Corporate Governance Code.  This establishes principles – supported by recommended practices – which clubs must apply in respect of its:

• Board, purpose and strategy
• Risk oversight and controls
• Board composition and accountability
• Equality, diversity and inclusion
• Stakeholder relationships and engagement

Clubs will be held accountable for their compliance with the fan engagement requirements and the Corporate Governance Code through an Annual Fan Consultation Report and once every two years a Corporate Governance Statement explaining how they have applied the Code’s principles.  Both of these documents will be publicly available.

If you would like further information on the consultation documents referred to above – for which RamsTrust has submitted comments – as well as earlier output from the Regulator, they can be accessed via the IFR’s website here.