Game changer: Does English Football need an Independent Regulator?

Dr Andrew Jones and Dr Tom Bason, Centre for Business in Society

Why now?

As part of the Government’s Football Governance Bill the introduction of an Independent Football Regulator will be enshrined in law in order to give supporters a greater say in the running of the game. The introduction of the Independent Regulator was a key conclusion of the Fan-Led Review into football governance which argued that the game had failed to develop its governance structures as it had grown commercially. The Fan-Led review, a 2019 manifesto commitment from the Conservative Party, took place in the aftermath of the collapse of the proposals for a European Super League, where six Premier League clubs (Manchester City, Liverpool, Arsenal, Manchester United, Tottenham and Chelsea) had initially agreed to compete in a ‘closed shop competition’ with a host of European rivals including Real Madrid and Juventus. The furious fan reaction to the proposals effectively killed the possibility of such a competition being established in the short-term, but the failed plan has increased the level of scrutiny surrounding the governance of the English game. At the centre of these concerns remains the ever widening financial gulf between the Premier League and the rest of the English game, with the recent failure to agree a New Deal for Football, highlighting the contradictions and tensions present between the elite and the rest of football in England. Concerns also remain over ownership rules, and how governing bodies can act in instances such as the ongoing crisis at Reading where commitments and financial obligations have repeatedly been disregarded. And the elite of the game there is also a live debate surrounding the nature of financial rules, with punishments for Nottingham Forest and Everton raising questions about process and sporting uncertainties concerning the relegation battle from the Premier League.

The Regulator: Powerful or Powerless?

The Independent Football Regulator (IFR) will have three broad objectives: 1) reduce clubs in financial distress, 2) protect cultural assets, and 3) promote fan engagement. The principal approach to achieve these objectives is through the introduction of a new licensing system, which mandates clubs to meet specific criteria to secure a license for professional club operations.

First, clubs will need to demonstrate that they have the financial resources to support their operations and that they are adhering to a business plan. Unlike existing financial regulations in the game, which apply a retrospective analysis of previous accounting periods, the IFR will be able to conduct live assessments of the club’s financial status. Second, there is a requirement for clubs to meet a non-financial resources threshold, including aspects such as the clubs’ corporate organisation, governance frameworks and the credentials and qualifications of the owners. While the Premier League and Football League already employ an Owners’ and Directors’ Test, the recent challenges facing numerous clubs in recent years indicate that it does necessarily provide the required levels of protection. The enhanced Owners’ and Directors’ Tests will now include more rigorous due diligence on the sources of wealth of prospective owners, and importantly, will grant the IFR the power to disqualify existing unsuitable owners and directors.

Finally, clubs will need to demonstrate that they are consulting fans about “relevant matters”. While one of the key strategic recommendations of the Fan Led Review was that clubs should be required to create a “‘Shadow Board’ of elected supporter representatives which would be consulted by the club on all material off pitch matters”, the plans do not appear to go this far. However, clubs will need to consult fans on several topics, including the club’s strategic direction and business priorities, match-day issues and matters relating to the club’s heritage such as the home ground, colour of the shirt and the club badge. Further, any relocation from the home stadium would need to be approved by the IFR. However, the most contentious element is likely to be the backstop powers granted to the IFR to determine the revenue distribution if the Premier League and Football League fail to reach a mutual agreement. The contrast in initial responses from the Football League and Premier League likely hinge on this issue. The latter voiced reservations about the “unintended consequences of legislation that could weaken the competitiveness and appeal of English football”, fears dismissed by Rick Parry, Chairman of the Football League, who called the Football Governance Bill “landmark legislation” that can “can help fix the game’s broken financial model”.

Will it work or will it kill the golden goose of the English game?

It is clear that the current governance and regulatory structure in English football needs reform to encourage the development of a more sustainable and equitable game across all levels. However, will an IFR actually help towards the creation of a better game or is it simply political window dressing? Some inside the game already are stating their opposition, such as West Ham owner David Sullivan.

At one level it is apparent that football does not present the same challenges as other regulated industries such as energy or banking where a regulator is vital to ensure protection and fairness for consumers and the public. Those involved in the Premier League also point to the league’s success as a reason as to why a regulator is not needed, but the counter argument is that the current status quo only benefits a small number of elite clubs. For the rest, ‘chasing the dream’ of the Premier League remains a costly exercise, risking potential financial meltdown or points penalties should it not be realised. However, the desire to address such imbalances may ultimately depend on who is given the IFR role. Should this individual be drawn from the Premier League sphere of influence, then they may not be as driven to address such structural imbalances. Equally, a politically driven appointment may also not result in effective governance for the game. Indeed the risk of additional governance, particularly a framework driven by central government as opposed to the game itself, may deter investment with the Premier League’s openness to both domestic and overseas investors a key factor in helping build the competitions reputational and financial strength. If investment is directed elsewhere, then the positive benefits of the Premier League globally, with it becoming a valuable asset for the UK, are likely to be diluted. As such, the IFR may risk killing the golden goose of the English game, leading to a weaker on-and-off field outcome for stakeholders across football.

Through understanding the impact of organisations’ activities, behaviours and policies, the Centre for Business in Society at Coventry University seeks to promote responsibility, to change behaviours, and to achieve better outcomes for economies, societies and the individual.