Record Losses & Points Deduction Danger

Bristol City CEO sends message to EFL over FFP reform as club face future points deduction
Bristol City posted record losses of £38.4m last month and while they should meet the relevant Profit & Sustainability criteria for 2021, next year and beyond will be deeply challenging for the club to fall in line

Bristol City CEO Richard Gould believes the EFL’s Profit & Sustainability require urgent reform to preserve the credibility of the Championship following the “act of God” that was the pandemic, which has left the club fighting record losses and in danger of a points deduction in the near future.

Last month, the Robins published record losses of £38.4m as their business model was dramatically impacted by the pandemic; with 32 league and cup matches at Ashton Gate played behind closed doors and the near-total collapse of the transfer market outside of the Premier League.

City’s policy of “player trading” has long been a fundamental approach of the Lansdown’s to ensure the much-desired process of “sustainability” and had helped ease the club’s growing wage bill which in the most recent accounts stood at £35.3m.

When City make their submission to the EFL regarding their position for this season, with the deadline by the end of February, they will fall within the requirements of losses not being able to exceed £39m over a rolling period of three seasons.

The EFL adapted the rules last year, following a vote among the league’s 24 clubs, so the two Covid-impacted seasons of 2019/20 and 2020/21 are now taken as an average.

So for this year’s submission, the Robins will contain the £11m profit from 2018/19, the £10m loss from 2019/20 and the £38.4m deficit from 2020/21, with the last two figures then packaged as a £24.2m loss plus a forecast for 2021/22.

There is also the mechanism of Covid-related “add-backs” in which City can include the estimated lost revenue for ticket prices - which can be calculated by the historic data. Yearly spending on infrastructure such as women’s football and the academy is also taken into account.

In short, they will fall within the £39m threshold for 2021 and avoid any points deduction regarding this season.

The problem arises next February, when their submissions are made that that £11m profit from 2018/19 is no longer part of the equation, which will almost certainly then – barring a mass firesale of the squad over the next six months - breach the £39m.

City estimate that, by next year, the pandemic has cost them around £30m in lost transfer revenue, based on previous earnings, a number that would have, in theory, moved them significantly closer to being in the black.

Discussions are still being held to establish whether forecast transfer revenue can be included, along with ticket sales, as an “add-back”, with City to seek independent auditors and transfer experts to determine the full figure, which is deeply subjective.

However, with the majority of the Championship’s clubs to publish their accounts in the coming weeks, and substantial losses expected across the board, the EFL may be forced to further amend the system.

In effect, by next year, a significant number of the division’s 24 clubs could be falling foul of Profit & Sustainability and therefore liable for points deduction, which harms not only the future of those clubs and the league, but the credibility of the domestic game.

“Are we blameless? Probably not,” Gould told Bristol Live. “Because we have spent quite a lot of money on transfers and our player salaries have gone up quite significantly over the last three or four years.

"That was all fine while there was a transfer market there to fund it. But now there isn’t, or at least there isn’t one the way that it was, that’s where we start falling foul of FFP.

“Where the uncertainty is, to what extent will the EFL accept there has been a crash in the transfer market? We have this bow wave of costs that is coming year-on-year closer to the FFP element and with the loss of transfer income, there is not much we can do.

“There is some stuff we can do, but it’s whether or not we choose to: do we want to sell all our best players this summer? No. Do we want to try and convince the EFL that FFP is now useless because there’s been an act of God called Covid that has changed the entire market? Yes, we think there’s a good case for that.”

City are one of only four second-tier clubs from 2020/21 (one are Norwich who are now in the Premier League and another is Wycombe Wanderers who are now of League One) to have published their accounts for the financial year ending 2021, and the expectation is that big red number of £38.4m won’t be an outlier across the rest of the division.

And in the context of Financial Fair Play, few will have a £11m profit, like City for 2019, therefore raising the possibility of falling foul of regulations for this year, which is likely to bring the matter to a head and drive reform.

New regulations, which are yet to be confirmed, could include a salary cap for clubs based on a percentage of turnover.

“The EFL have always said that the current system is on its last legs and they’re going to use a new system of control, so we’ll be lobbying the EFL to bring in that new system, sooner rather than later, and use the Covid period as one where they don’t prosecute clubs overly, because of an act of God,” Gould added.

“And it won’t be just us. All those Championship clubs who have not been in the Premier League recently but have been challenging to get there, who have got good owners.

“Many of the clubs, looking at FFP black holes next year, will very strongly argue that the FFP laws simply cannot deal with Covid, and therefore don’t ruin the credibility of the league due to Covid. That will then be up to the EFL.

“I suspect a number of clubs will take very strong action and will have very strong legal cases, should they choose to go down that line.”

As Gould admits, the looming FFP issue will impact City’s decision-making moving forward, with expenditure in the transfer market need to be carefully managed, while the wage bill needs to be further reduced.

City’s release of 10 first-team players in the summer is estimated to have made a saving of around £6m but further reductions will be required, hence why high-earners Kasey Palmer and Jay Dasilva are readily available on the transfer market.

That also brings into light the futures of talents such as Han-Noah Massengo, Alex Scott and Ayman Benarous, however Gould insists that City don’t want to sacrifice their ability to compete by being forced to sell off their present and future.

The CEO has also indicated that, should it come down to it, the Robins may be more willing to stomach a points deduction rather than taking pennies in the pound for some of their best players.

“We don’t own all sides of this debate and there may be more issues that come from left field,” Gould said. “But it’s something that supporters need to be aware of because it’s going to shape our decisions over the next 6-12 months but we don’t want to do it in a way which reduces the club’s ability to compete.

“But we’re not letting it impact our short-term thinking. It’s in the back of our minds but we’ve got confidence that we can see common sense prevail.

“Would we go and spend £10m on a player now? No, of course not. You’ve seen what we’ve been doing with George Tanner and Rob Atkinson. We’re unlikely to be shopping in Chelsea much longer. We’re going to have to amend our level.

“We just want to be treated fairly and we have to get the argument out on the table.

“Would we prefer to sell all our players or take a penalty hit, if they decide to prosecute? Well, that is a decision that we’ll have to look at and a judgement we take in the summer when we get more feedback from the EFL.”
https://www.bristolpost.co.uk/sport/football/bristol-city-ceo-sends-message-6477092

 

'The Robins will contain the £11m profit from 2018/19, the £10m loss from 2019/20 and the £38.4m deficit from 2020/21, with the last two figures then packaged as a £24.2m loss plus a forecast for 2021/22.'

Bad news, bad history leading to a frugal future, not a lot to shout about.

 

I agree 2019/20 was the start of the big deficits with a £10m loss, history tells us the consequences of that period, we are broke.

 

Covid is the main killer for the last 2 years of our income stream but selling of the most precious pieces of our crown jewels created earlier profits and reckless signings of lower quality ability players for very high wages and excessively long contracts have crippled us along side the virus.

 

.......and Boris...and you could throw Putin in for our demise