How the EFL’s New Financial Regulations Will Affect League One Clubs
The EFL has voted through major overhauls to its financial regulations for next season. The object of the changes is to encourage long-term sustainability, curb massive owner losses, and align more closely with the rules for the Premier League.
The rules vary from division to division and, as a result of our most recent defeat at Wembley, it makes sense to concentrate for the time being on those that apply to League 1.
Clubs in the third tier have kept the long-standing Salary Cost Management Protocol (SCMP) but voted to significantly tighten the restrictions to stop owners from continuously bankrolling unsustainable operational losses.
The percentage of turnover that League One clubs can spend on wages has been reduced from 60% to 50%. In a major change, manager and coaching staff costs must now be included in this calculation rather than just players as it was before.
Clubs relegated from the Championship will still get a small extra allowance, but this has also been reduced. They can spend 65% of their turnover on wages during their first season down, reduced from the previous 75%.
There are also changes to the rules on investment by club owners. All owner equity injections are now factored into the SCMP at 50%. For example, if an owner invests £500,000 into the club, only £250,000 of it can be used to subsidise wages on top of the funds allocated from annual turnover. This restriction is designed to force owners to spend the other half of their investment on club infrastructure such as stadiums, youth academies etc. rather than inflating player wages.
Quite how effective these changes will be in curbing player wage inflation beyond the level club revenues can support remains to be seen, but we must hope it represents a step in the right direction.
Article by John K Bilsbury