Reasons behind Championship financial crisis as three more clubs fear punishments

By Ricky Charlesworth

At least three Championship clubs have been earmarked as being under intense scrutiny with regards their financial situations.

Second tier trio Bristol City, Middlesbrough and Stoke City are all said to have proverbial red lights attached to their names with regards their financial health.

The Robins published a record loss of £38.4million in their most recent set of accounts last month.

Under the EFL's profit and sustainability rules, clubs who incur losses of more than £39m over a three-year cycle are subject to a punishment.

This happened recently with Reading. The Berkshire club were docked six points earlier this season after the EFL said the club exceeded permitted losses by £18.8m.

The various financial issues caused by the coronavirus pandemic have left many clubs struggling to fall in line with the requirements of the three-year cycle.

As well as seeing revenues hit due to time playing behind closed doors, the transfer market has also been hit making it harder for clubs to cash-in on players where necessary.

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Bristol City's chief executive Richard Gould, speaking to the Telegraph, said of the worrying financial picture at his club: "We've got this big bow wave about to hit us next year on Profit and Sustainability.

"We can see it coming and it's only been brought about because the transfer market has crashed. Otherwise the business plan, which albeit required quite a lot of investment from the owner, was relatively sound."

Gould admits that the club are "probably" going to breach the league rules next year unless they cashed in on their star assets but insisted the club's board are reticent for that to happen.

He says the club are in dialogue with the EFL but that they could end up in a position next season where "maybe we'll just take the points".

He added: "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."

As for Boro and Stoke, the other clubs highlighted in the report, they are in their fifth and fourth seasons outside the Premier League respectively.

Last May the Potters posted huge pre-tax losses of £88m.

In accounts posted to Companies House for the year ending May 31, 2020, Stoke say they were hit hard by a combination of the pandemic and the continued ramifications of relegation from the Premier League.

Joint-chairman John Coates said at the time: "Clearly we've had a Covid-affected year and we didn't take any Governmental help. We guaranteed wages and didn't make redundancies.

"There has been (an increase in debt to the owners). In terms of what our plans are to do with that, clearly it doesn't make great balance sheet reading to have a huge debt like that and we'll continue to look at that and decide what we will and won't do in respect of that.

"However, clearly it is a completely interest free loan that is provided and we remain totally committed to the club. It is owed to the owners and nobody else. In that sense it is a soft debt."

As well as Reading, Derby County were handed points deductions this season.

The Rams were docked 12 points for entering administration before a further nine-point docking for historical financial breaches.

EFL chief executive Trevor Birch said of the financial landscape: "Our job is now to safeguard those clubs for generations to come, and I am encouraged by some of the recommendations put forward as part of the fan-led review, which we hope will deliver a healthier, fairer competition for the long-term.

"The pyramid is the lifeblood of the game - it has endured for over 100 years and we have to ensure its future for the next 100 years.

"If we can achieve what we're aiming for in terms of a sustainable operating model, I believe the EFL has a very strong future."

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