The controversial European Super League proposals shone a light on the upper echelons of elite football in Europe and indeed, the game, in Britain. The attempted restructuring of elite European football competitions was condemned by many and remains subject to ongoing litigation. It created a media frenzy and fan uproar that was followed by apologies from most of the clubs involved and the proposals being shelved, at least for the time being.
This, combined with ongoing concerns about fan engagement and improving the financial management of clubs, forms the backdrop to the government’s ongoing review of football in England. The most recent development is “A Sustainable Future – Reforming Club Football Governance: Consultation Response”, published on 7 September 2023. The paper was published following a targeted consultation with stakeholders and is the latest step in this process, which the government hopes will provide “ongoing commitment to support, promote and protect the national game, as well as ensuring that fans are placed at the heart of it”.
The initial review and report published in February 2023 recommended the introduction of an independent regulator (“the Regulator”) (see our previous article here). The Regulator would sit in a wider regulatory framework designed to safeguard clubs from mismanagement and financial vulnerability. The government insist such a framework is needed, citing more than sixty clubs going into administration since 1992.
Some critics believe the proposed reforms go too far, citing the strength of the English Premier League in the global market as a sign that the current model is successful.
The government insist that the evidence of financial unsustainability in the national game is clear and that despite a hands-off approach thus far, the game has been unable to resolve these issues itself. Clubs consistently operate at a loss and rely on external funding to stay afloat. In the Championship alone, the clubs made a collective pre-tax loss of £2.8bn last season and almost all clubs operate with an unsustainable wage-to-revenue ratio. With this in mind, the government’s proposal is to create a regulator that is well-resourced and has a clear statutory remit, with the aim of promoting independence, accountability, and transparency from the top of the game to the bottom. The Consultation Response provides very little additional guidance about how this will actually be achieved.
Scope
The Consultation Response indicates that the Regulator’s scope (initially at least) will be narrowly focussed on financial sustainability, rather than seeking to address wider issues in the game. In practice, the Leagues and FA will continue to have an important role to play as, for example, the Regulator will not have any involvement with the Financial Fair Play regime.
The Consultation Response, somewhat defensively, cites other examples where government intervention or legislation could impact sporting matters and competition, such as the involvement of HMRC, international sanctions, or visa requirements. While that is of course correct, it does not recognise the fact that these examples apply to all UK business, and what is proposed here is an intervention targeted directly at football.
Independence, consistency, and managing the regulatory landscape in football
In each of these areas the Consultation Response does not provide much additional colour to the original proposals. Repeated reference is made to ongoing review and engagement with experts and industry to ensure that the Regulator’s structure is flexible, but does not provide a clear indication of the way in which this will be achieved.
The Consultation Response does confirm that, when it comes to enforcement, there is no intention for the Regulator to be empowered to impose sporting sanctions (e.g. points deductions). While financial sanctions would be available, they would be unlikely to be enforced if that would in itself create financial instability, and the removal of a club’s licence (preventing it from participating in football) would be highly unlikely in most circumstances.
Owners’ and Directors’ Tests (ODT)
Notwithstanding the recent changes made by the Premier League to its ODT, the Consultation Response confirms that the government still intends to impose a statutory test and a requirement for owners and directors to inform the Regulator of any changes in circumstances. The three key elements of this test will be:
- A fitness and propriety test
- Enhanced due diligence of source of wealth
- A requirement for robust financial plans
At this stage there is a lack of further detail, and it is that detail that will determine whether the proposed ODT is any more effective than the controls already in place.
Financial distributions
One area of interest is that the Consultation Response indicates that, when it comes to ensuring agreement on reform of the distribution model of revenue throughout the football pyramid, the government’s preference remains that this should be led by the football bodies. However, if agreement cannot be reached, it will step in to address the issue.
This article was co-authored by Fraser Meighan, Paralegal in our private wealth and tax, and immigration teams.