Some clubs could be required to hold more than £40m in liquid assets in order to be granted a licence to continue competing by the Independent Football Regulator (IFR).
Those deemed higher risk will be asked to demonstrate cash reserves equivalent to five months of operating losses, which for some clubs would run into the tens of millions of pounds.
The proposal is part of the IFR’s consultation on reducing clubs’ risk to make them more resilient to sudden financial shocks such as losing owner funding.
It comes after the IFR’s draft State of the Game report last month found that 94 per cent of professional clubs were loss-making, and a third were reliant on owner contributions to survive from month to month.
“The State of the Game report revealed just how serious the financial issues have become at some of our clubs. It has shown there is an urgent need to take action,” said IFR CEO Richard Monks.
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SUBSCRIBE HERE“Today we have set out how we plan to work with clubs to establish a more resilient financial base and to reduce their exposure. Our approach is proportionate to the financial risk and builds in a long lead time for clubs to enable them to stabilise their finances over the next three years.”
What it means for Premier League clubs
Clubs would have three years in which to build their cash reserves in order to meet the licensing conditions by 2030. The requirements are likely to be less strict in the Premier League, where clubs are generally on a firmer financial footing, but they will be assessed on a case-by-case basis.
In the four divisions below the top flight, all clubs would be asked to hold liquid assets equivalent to their monthly wage bill as a minimum. Those designated as medium risk based on a number of factors would also have to hold cash reserves to cover two months of operating losses, with high risk clubs needing five months’ worth.
At the extreme end, teams with the biggest operating losses – which in 2023-24 were the £87m at Southampton and £81m at Leicester City – that could total more than £40m including the one month’s wages.
The IFR’s initial risk assessment will take place in 2027 and could be adjusted as teams’ fortunes improve or worsen over the following three years.
It is hoped that clubs’ losses will come down in the intervening years, when EFL teams are likely to benefit from an improved financial redistribution agreement with the Premier League.
Two thirds of clubs’ liquid assets must be in cash, Gilts and US Treasuries, or money market funds. Up to a third can be in transfer receivables – staggered payments due from other clubs relating to player sales.