English Football: Financial Sustainability and Governance

Toby Perkins Excerpts

Thursday 6th March 2025 Westminster Hall

[Yuan Yang (Earley and Woodley) (Lab) [R]]

I beg to move,

That this House has considered the financial sustainability and governance of English football.

It is a pleasure to serve under your chairship, Mr Turner. Clubs across the country face unsustainable finances and poor governance, which is why so many MPs have gathered here to represent their local clubs. We have a range of clubs from up and down the football pyramid and up and down the country: from Brighton to Basingstoke, from Bolton to Luton, from Wolves to Aylesbury. We have MPs from various parties, and we even have Reading fans in the same room as Oxford United fans, showing the unity and strength of feeling across Parliament that football must have a sustainable future.

Before I go into the concerns that we all share, and the remedies we would like to see, I will give a brief history of how we got here. Since the premier league was formed over three decades ago, over 50 clubs in the top six tiers of the English men�s football pyramid have gone into administration. One of those clubs is Bury. After being sold for �1 in 2019, Bury went out of business and was expelled from the league. The following year, 2020, saw the demise of Macclesfield Town and Wigan Athletic going into administration. In the following year, 2021, while England�s top six clubs briefly broke away to try to form a European league, Derby County slipped into administration.

These clubs and this chaos is just the tip of the iceberg. According to research by the non-governmental organisation Fair Game, the majority of the top 92 clubs in the game are technically insolvent, meaning their liabilities exceed their assets. That is a precarious situation for any business to be in, but football clubs are not just any business; they are the foundation of many of our communities, and they bring many of us pride in the areas that we live in.

One of the clubs that might be technically insolvent is Reading football club, which has its home stadium in my constituency of Earley and Woodley. Reading is one of the oldest clubs in England, and had previously been known for its good management. Now, after four winding-up petitions, five points deductions and persistent late tax payments, Reading sits on the brink. I started getting involved with the campaign to rescue Reading football club when I bumped into some fans at a local fair in Woodley a few years ago, who had read my reporting in the Financial Times. They knew I had an interest in scrutinising companies with complex structures and distant owners, and they asked whether I had an interest in scrutinising a local company with a complex structure and distant owners. But fans should not have to do that kind of scrutiny. Life needs to be a lot simpler for fans just to be able to follow the game, and not worry about whether the game is up for their local club. So many fans have experienced what Reading has gone through, and we owe it to them to voice the problems that we see across the football pyramid.

I will pick out three particular problems, which I am sure will feel familiar for many of those listening: first, how clubs receive income; secondly, how they spend their money; and thirdly, irresponsible ownership.

[Mr Toby Perkins (Chesterfield) (Lab)]

Chesterfield football club wanted me to put on the record its support for the work of football governance. Does my hon. Friend agree that it is extraordinary that, on the one hand, we have a monstrous success story in the level of money in football, but on the other, we have almost the entire English football league running effectively bankrupt and relying on the owners for bail-outs year after year? That simply cannot make sense as a model, can it?

[Yuan Yang]

I agree with my hon. Friend, who is an advocate for his local club, that too many clubs across the country are suffering from the unfair distribution through the football pyramid. In fact, that is the first issue I will describe: the problem with the money going in. The last four decades have seen a complete transformation in English football, which has been characterised by a widening gap between the clubs at the very top and the rest of the football pyramid. Ticket sales over that time have become less important as a source of revenue. Instead, the biggest source has become the multibillion-pound broadcast deals agreed by the Premier League.

We all celebrate the success of the Premier League�s dealmaking, generating the most revenue out of the big five European leagues. That dealmaking is notable for many reasons, not just the large amount of money involved. The 20 premier league clubs get together to sell a deal collectively. However, economists and competition lawyers have raised concerns about the impact that collective selling has on fans and smaller clubs, and they have argued that collective selling is justified only when there is a public benefit. However, most clubs do not currently benefit from these broadcast revenues. The vast majority stay in the premier league and, as a result, the gap between the top and the rest grows wider every season.

This season, premier league clubs and the four recently relegated clubs held on to 94% of the league�s broadcast revenues. That means that the remainder of the 68 clubs in the EFL received just 6%. In comparison, the German Bundesliga ensures an 80:20 split between the top two divisions. Meanwhile, the Union of European Football Associations�better known as UEFA�allocates 75% to the champions league and 25% to the two competitions below it. Those leagues have chosen those ratios because they find that it creates a sustainable pyramid for them. The EFL has long sought a similar distribution ratio with the premier league.

We want all clubs to work together to protect the pyramid as a whole because, without its base, the top of the game would crumble. As we all know, the pyramid serves as a platform for player development and talent spotting. Reading�s Michael Olise broke through locally and moved on to Crystal Palace, and I am sure that we can think of many such examples.

The national popularity of the premier league rests on our strong local football cultures, which are spread by clubs in their communities and the sports charities attached to them, working with people aged six to 60-plus. However, last year, the premier league and the EFL failed to agree a deal for a more equitable distribution of funding between clubs, underscoring just how sticky the first problem of income is.

The second problem is the money going out�the expenditure. Costs have been driven up to unsustainable levels. The concentration of riches in the premier league creates an overwhelming incentive to spend big and chase the dream. According to football finance expert Kieran Maguire, on average, for every �100 a championship club brings in through revenue, it spends �101 in wages. That is clearly unsustainable. Reading�s current owners, Dai Yongge and Dai Xiu Li, took over in 2017 when Reading was near the top of the championship. They also chased the dream. By 2021, Reading football club was spending over 200% of its annual revenue on player wages. Overall, Reading�s owners have invested over �200 million in the club. It is no surprise that they would spend at that level.

The NGO Fair Game has shown a clear correlation between how high a club is in the league and how high its spending is on wages. This competition is made more intense because of parachute payments, which I will not go into at length. However, overall, the pressure to compete means that clubs often spend beyond their means. This is unsustainable. We have spending rules such as financial fair play, but breaches continue to happen.

--- Later in debate ---

[Mr Toby Perkins (Chesterfield) (Lab)]

As I said in my brief intervention on my hon. Friend the Member for Earley and Woodley (Yuan Yang), I have been contacted by Chesterfield football club, which is very keen that its support for the Football Governance Bill be known.

I would like to start by expressing the sadness that everyone in Chesterfield feels at the news that the club�s owner, Phil Kirk, has inoperable cancer and is receiving end-of-life care. He is the absolute epitome of a great owner and has absolutely transformed Chesterfield�s fortunes. Chesterfield has also had the opposite: Darren Brown almost took the club into insolvency at the same time that he was going to jail, so we know that there have been many owners who have let clubs down.

There have also been lots of owners who did everything they could, but were simply not wealthy enough to operate within a business model according to which the better a club does, and the further along the way it gets towards the premier league, the greater its losses are on every step of the way. It loses money by being promoted from league one to the championship. There is a perverse incentive where the financial success of the company gets worse the better it does, until it reaches the promised land of the premier league. That all needs changing. It is madness.

We have a very wealthy game. A slightly better distribution would still allow the premier league to be the golden goose, but it would also support the pyramid.