The EFL, Sheffield Wednesday & A Stretch Too Far

First of all, though, a brief recap. The EFL Championship’s “profitability & sustainability” rules limit the financial losses that a club can report to £39m over a rolling three-year period. In June 2019, Sheffield Wednesday’s owner, Dejphon Chansiri, bought Hillsborough from the club for £60m. The profit was backdated to the previous season’s accounts. This profit turned a £35.4m loss in 2017/18 into a £2.6m profit the following year. Profitability & sustainability rules successfully swerved.

Of course, it’s not as simple as that. The EFL Championship may be one of the most exciting leagues to watch in Europe, but it is also built on financial sand. Clubs ran up a record high total of £307m in pre-tax losses for the 2017/18 financial year, with spending on player and staff wages exceeding club revenues by 11% despite record revenues of £749m.

The pungent, money-drenched scent of the Premier League hangs heavy and cloying in the air, and there is clear evidence that many clubs are taking huge financial gambles in the pursuit of a place amongst the gilded twenty. This growing understanding is what part of what prompted the creation of the profit & sustainability rules in the first place. That the reaction of several club owners has been to double-down and try to evade these rules rather than living within their means or being more creative in the ways in which they run their clubs speaks volumes about them.

The issue with the points deduction handed down is that it has been deferred until next season, ostensibly because the regular league season has already ended. This is a nonsense explanation. The season has patently not ended – Fulham, Cardiff City and Brentford are all still playing for a place in the Premier League, but a points deduction this season against Sheffield Wednesday has no bearing upon that. But it would impact upon the bottom of the table. They finished their season in sixteenth place in the table, on 56 points. A twelve point deduction would drop them to 44 points, bottom of the table and relegated.

This doesn’t affect Hull City, whose relegation would either be confirmed in bottom place in the table or second from bottom place. But both of the other relegated clubs, Charlton Athletic & Wigan Athletic, have justifiable cause for complaint. Charlton, who are undergoing turbulence of their own at the moment, would have risen a place in the league table and avoided relegation had the points deduction been applied this season. If we accept that the idea of the league table already having been cast in stone is nonsense, then why should Charlton Athletic effectively be relegated by the fact that it took the those concerned so long to reach their conclusions?

Because it certainly has taken a long time. Charges were first brought against Sheffield Wednesday in October last year, fully eight and a half months ago, and responsibility for it being procrastinated over for this amount of time rests squarely on the shoulders of the EFL. The nature of the case did mean that independent valuations and investigations had to carried out. It was important to get the right result. And the Covid-19 pandemic has obviously taken its toll on everything and everyone. But this doesn’t excuse the fact that five months passed between the charges being brought and the start of the lockdown. This could have been done and dusted months ago.

Wigan Athletic’s grievance comes from a different angle, but is equally valid. Wigan suddenly and unexpectedly collapsed into administration  last month, just weeks after being bought by new owners. There’s likely a lot to come out about this, but the upshot of it all was that Wigan were deducted twelve points for entering into administration and dropped to second bottom place in the table. As per EFL rules, the deduction was applied this season because they were affected by it. Had they stayed up anyway, it would have been deferred until next season.

So the key point here is: these are both financial transgressions, so why hasn’t the same threshold been met by the independent commission that dealt with the Sheffield Wednesday case as was applied to Wigan? Had an equal application of the rules been applied, Sheffield Wednesday’s relegation would have come about alongside Wigan. But Wigan could equally argue that, if Sheffield Wednesday’s points deduction is being deferred until next season, then why shouldn’t theirs? After all, those behind the shenanigans at Wigan have left, and won’t be coming back. The man behind the shenanigans at Sheffield Wednesday is still the owner of the club, and according to a statement issued by the club last night is “considering legal action” against the EFL.

The matter of points deductions for clubs entering into administration isn’t without controversy. Critics argue that in most administrations, those who were responsible for the club’s collapse have often left, leaving the punishment to be borne by players, staff, supporters and, crucially, prospective new owners. There’s a very reasonable chance that poits deduction makes the rescue of clubs suffering insolvency events more difficult, by making them less attractive propositions to new buyers.

There is an important principle at play about clubs gaining unfair advantages as a result of financial recklessness and chicanery, but why is this blunt – and far from always effective – instrument the only one available? And why is it only applied so rigidly to the very narrow criteria of a club entering into administration? Why shouldn’t it also apply to a club that seeks to mask vast financial losses by playing around with the ownership of its home?

It’s entirely plausible that the actual reason for this discrepancy is that one punishment was handed down by the EFL, whilst the other was decided by an independent commission and will be implemented by the EFL. The latter of these gives the EFL what I can only really describe as “implausible deniability.” They are the overall governing body, here. The independent commission does still work for them, after all. But all of this really speaks volumes about the mess that passes for the governance of football, these days.

The FA surrendered its role in terms of financial governance several years ago, leaving it up to individual leagues to make up their own rules instead. We now have a jumbled mess of regulations between leagues, and even within leagues the rules can be applied erratically, whilst the EFL often gives the impression of being a little too keen to palm matters off onto independent commissions, rather than fighting a robust corner in initial hearings. It all combines to paint of a picture of a body that would rather not be regulating at all, and which would rather prefer the whole damn lot to just bugger off.

The problem with this way of thinking being combined with light touch regulation is that the very lack of regulation leads to these situations coming about in the first place. And it becomes self-perpetuating. It is less than a year since the EFL expelled Bury, the first time this had happened in exactly 100 years, after having approved their owner without apparently ever confirming proof of funds less than a year before that. They approved the person that he bought the club from, too. They approved the Wigan owners this year.

The professional game clearly needs a single, independent regulator, with clear, concise rules that close every loophole that clubs could be tempted to exploit in order to maximise their shots at the moon. It could replace the unfit for purpose Owners & Directors Test with a test worthy of what these community instututions deserve. It could punish owners who put clubs into administration – deposits repayable upon the sale of a club with inducements for encouraging fan engagement or part-ownership, for example – rather than those left behind to clear up the mess. It could recall that this is supposed to be a sport, and that if it has to be a business, then it could at the very least be a well-run business.