Football Governance Bill - The King's Speech

“Legislation will be brought forward to safeguard the future of football clubs for the benefit of communities and fans.”

An Independent Football Regulator will put fans back at the heart of football and help to deliver a sustainable future for all clubs. It follows on from the 2019 manifesto commitment to conduct a fan-led review of football, which highlighted a number of systemic issues in football that this legislation addresses.

● The Regulator will address systemic financial issues in football while providing the certainty and sustainability required to drive future investment and growth, so that the Premier League and the English Football League remain a global success story. It will also provide greater protections for club heritage, address the issue of breakaway competitions, and most importantly ensure that fans have a greater voice in their own clubs.

● The Regulator will not change the fundamentals of the game - it will ensure a more sustainable future, with fans at its heart, for generations to come.

What does the Bill do?

● The fragility of the English footballing pyramid has been exposed in recent years. The collapse of Bury FC, the devastating impact of the pandemic on clubs, and the botched plan for a breakaway European Super League have all revealed the financial unsustainability of some clubs and the need for more accountability for fans.

● In 2019, we committed to a fan-led review of football, which recommended the establishment of an Independent Football Regulator. This legislation will strengthen the governance and financial resilience of football clubs to protect the national game and clubs’ link with communities and fans, by:

● Establishing a new independent regulator for English football clubs to address issues of financial sustainability and ensure fans' voices are listened to. The Regulator will operate a licensing system, where all clubs in the top five tiers of the men’s English football pyramid will need a licence to operate as professional football clubs. The Regulator will have powers to monitor and enforce compliance with requirements in financial regulation; corporate governance; club ownership (Owners’ and Directors’ tests); fan engagement and club heritage protection; and approved competitions. This approach to regulation will be proportionate to a club’s circumstances based on criteria like league, club size, and financial health. The Regulator’s narrow focus will be protecting the long-term sustainability of clubs for the benefit of their fans and communities and helping to prevent the collapse of clubs like Bury and Macclesfield Town.

● Creating a new, strengthened owners’ and directors’ tests to make sure a club’s custodians – their owners and directors - are suitable. We have seen growing concerns about financial mismanagement in football, and questions about illicit finance. The new Owners and Directors Test will protect fans from irresponsible owners.

● Setting a minimum standard of fan engagement, which clubs will need to meet, and requiring the support of a majority of fans for any changes to the club’s badge, name, home shirt colours. While most clubs have a strong relationship with their fans and consciously engage them in decisions about club heritage, not all do. Fans of Cardiff City and Hull City have had to recently had to battle to bring back, or keep, their club’s colours and badge (Cardiff City) and name (Hull City).

● Requiring clubs to seek the Regulator’s approval for any sale or relocation of the stadium and demonstrate how they have consulted their fans as part of this. At Derby County, we saw the issues caused by the decision to sell the club’s stadium to a separate company owned by the club’s owner.

● Preventing clubs from joining breakaway or unlicensed leagues. In 2021, Premier League fans faced the prospect of a breakaway European Super League that was fundamentally uncompetitive, and which threatened to undermine the footballing pyramid against the wishes of fans. Fans will no longer face the prospect of seeing their clubs sign up to ill-thought out proposals such as the European Super League.

● Intervening as a last resort to ensure financial sustainability through the redistribution of broadcast revenue. The Government recognises that the current distribution of revenue in the top 5 divisions is not sufficient, contributing to problems of financial unsustainability and having a destabilising effect on the football pyramid. The Regulator will have powers in extremis – if the leagues themselves have not come to a voluntary agreement – to ensure financial sustainability.

● Establishing a compulsory ‘Football Club Corporate Governance Code’. Clubs will be required to report annually on corporate governance, setting out how they apply the principles of the Code and why this is suitable for their circumstances.

Territorial extent and application

● The Bill will extend and apply to England and Wales. The regime will only apply to the English football pyramid, with regulations setting out which leagues (the top 5 tiers) will be captured.

Key facts

● The Premier League is a global success, attracting more viewers and higher revenues than any of its international rivals: in the 2021-22 season the Premier League’s aggregate revenue was £5.5 billion - compared to Spain's La Liga (£2.8 billion) and Italy’s Serie A (£2.1 billion).

● However, this cannot disguise the underlying fragility of the English football pyramid. Fundamental problems of perverse incentives, poor governance, and defective industry self-regulation mean there is a high and growing risk of financial failure among clubs:

~ clubs are consistently loss making and rely on external funding. From 2010-11 to 2021-22, Championship clubs made collective pre-tax losses over £3 billion and they exceeded £1.7 billion in the last five seasons for which data is available (2017-18 to 2021-22);

~ even at Premier League-level, from the 1999-2000 season onwards, 19 out of 23 (83 per cent) Premier League seasons have resulted in pre-tax losses, highlighting that this is a persistent issue even for the highest earning clubs.

● Levels of borrowing and debt are increasing. Across the Premier League and Championship combined, net debt increased to £4.4 billion in 2022. This shows that many clubs across the pyramid are financially vulnerable. The unique importance of football clubs to their fans and local communities means the social costs of financial failures would be significant. The introduction of an Independent Football Regulator will help to promote and secure the financial sustainability of clubs and reduce the likelihood of financial collapse.

Contains public sector information licensed under the Open Government Licence v3.0.