The new form of football financial control, known as Squad Cost Ratio (SCR), which will be implemented in the Championship next season, appears to be a significant step in the right direction, however as a finance expert, I believe there is room for improvement.
Calculating first-team expenses as a percentage of overall club income is a significant improvement over the previous three-year cumulative loss strategy.
Furthermore, effective targeting and tracking will now be conducted in-season. The primary benefit of this is that any points reductions will be implemented during the season in which they occur, or even avoided before they occur.
However, certain concerns still require more attention, including:
The 85% recommended ratio appears to be excessive. Fifteen percent is insufficient to cover the ongoing expenses of running a football club. I feel that 70/30 would be considerably more reasonable.
The treatment of transfer expenses must still be questioned. Purchase transfer fees will be allocated over the term of the contract, up to a maximum of five years, provided that the player remains in the club’s employment. Sales transfer fees will be distributed throughout three years. However, the latter poses hazards, especially when substantial monies are received, potentially tempting teams to overestimate their capacity for future returns. Consider NCFC and James Maddison. Does it also provide gaming possibilities, as we witnessed with Jonathan Rowe?
Premises costs. The new regulations appear to address some of the gambling options available here; yet, some may be missed. How is the practise of certain clubs owning their premises under different firms being addressed? Will the likes of West Ham be able to obtain a competitive edge due to their large effective government subsidy for the London Stadium?
Impact on ticket prices. Clubs are encouraged to charge regular supporters more for watching football, possibly ignoring future ground developments. A system that awards clubs a notional credit for each average attendee rather than enabling actual income earned may be more effective at guaranteeing that they change their pricing to the socioeconomic situation of their local economy and seek full grounds and an improved atmosphere. Norwich City is a glaring example, with exorbitant adult season ticket costs and no concessions in many sections of the stadium.
Financing considerations. How will the owners’ £10 million yearly equity investment be measured? How will it be reconciled with the Interest Payable stated in Norwich City’s accounts to reflect the owner’s coupon rate on preference shares?
The previous system reached its lowest point with the recent ridiculous case of West Bromwich Albion, as well as controversies over Interest Payable to club owners and charitable donations.
The new system looks to be far better designed, but there is no chance for complacency, and a promise to continuous professional financial audit would be beneficial.
Mark it down as a positive, but, like VAR, it may have some unforeseen implications.
