Championship clubs agree to follow spending rules

From the start of next season, any club recording a loss in excess of £6m will be hit with a transfer embargo. If they win promotion to the Premier League, they will be fined a ‘fair play tax’ which could rise into millions of pounds.

For both Leeds United and Barnsley, who have maintained a tight grip on finances this season, the new rules will be a welcome introduction.

Both Sheffield Wednesday and Huddersfield Town are set to record losses in their pursuit of Championship football but have generous owners in the shape of Milan Mandaric and Dean Hoyle, respectively.

Only three clubs voted against the regulations which also prevent owners from funding their clubs through loans.

The amount owners will be allowed to invest will be reduced season-by-season, starting at £6m next season, £5m the year after, and £3m in the 2014-15 season. The move should help prevent clubs going into administration by creating a league of financially self-sustaining outfits.

The new regulations are based on UEFA’s break-even model of Financial Fair Play (FFP) which has already been adopted by clubs in League One and Two and follows a strategic review by the Football League Board that identified club finances as the organisation’s greatest challenge.

League chairman Greg Clarke, said: “On the pitch we have three exciting, competitive divisions with crowds at their highest levels for 50 years. But that success isn’t necessarily being reflected on our clubs’ balance sheets and we have to remedy that situation or face an uncertain future.

“I’d like to commend the Championship clubs for the courageous decision they have taken today. It means that for the first time, all 72 Football League clubs have agreed to take concerted action towards controlling their financial destiny.

“Whilst we cannot promise that these rules will deliver results overnight, they will begin to lay the foundations for a league of financially self-sustaining football clubs.”

Doncaster Rovers chairman John Ryan, who voted in favour, said: “This is good news for all the smaller clubs because it gives them a better chance of competing. I know they have not been successful this season but when a club like Leicester City invests £10m-£20m it distorts the market place. Now we should have a more even playing field.

“Football needs to get itself in shape,” added Ryan, who made an ill-fated attempt to bridge the financial gap this season when signing out-of-contract overseas players on short-term deals. “We are likely to lose £5m next season as a result of our relegation and everyone needs to tighten their belts.”

Barnsley have been operating under the new guidelines, voluntarily, for the last 12 months and general manager Don Rowing feels his club will reap the benefits next season.

“We have been running our club along these lines for the last 12 months because we knew it was coming and saw no reason to wait,” said Rowing. “This season we have made a small profit.

“Other clubs continue to chase the dream without wanting to face the nightmare that can bring,” he added. “It is not in football’s best interests to continue spending amounts of money that are unsustainable.”

Under the new regulations, promoted clubs who fail to adhere to the amendments must pay a fair-play tax ranging from one per cent on the first £100,000 to 100 per cent on anything over £10m.

Any proceeds will be distributed equally among those clubs that have complied with the FFP regulations for the season in question.

Non-promoted clubs will not be punished financially for failing to adhere to the new rules but instead placed under a transfer embargo until they are able to prove they comply with the FFP regulations (either for the previous reporting period or a future reporting period).

Clubs relegated from the Premier League will not be subject to sanctions in their first season in the Championship as long as they have met their financial obligations under Premier League regulations. They would, however, be subject to the potential of a Fair Play Tax if they achieved promotion in the first season in the Championship while not complying with the FFP regulations.

Clubs relegated to League One will not be entitled to any payout derived from the Fair Play Tax and will be required to comply with the FFP rules in operation in that division.

Permitted losses at Championship clubs will reduce from an acceptable deviation of £4m for 2011-12 to £2m by 2015-16 with additional investment in certain areas of club infrastructure being excluded including youth development and community programmes.

The permitted level of shareholder equity investment will reduce from £8m for the 2011-12 season to £3m by 2015-16.

Clubs will also be required to provide annual accounts to the Football League by December 1, covering the previous playing season.

Clubs already in League One and League Two, meanwhile, will continue to limit spending on wages to a proportion of turnover. The scheme – known as the Salary Cost Management Protocol (SCMP) was first introduced in League Two seven years ago.