Damian Collins has warned that Wigan will not be the last club to go into administration if nothing is done to save the Football League.
The Championship side recorded a net loss of £9.2 million in their most recent annual accounts for the year ending June 30, 2019, a figure which is likely to have been significantly exacerbated by the impact of the coronavirus pandemic.
The club, which won the FA Cup in 2013, will be deducted 12 points as a result of the move, but this will not be applied until the end of the Championship season.
If they are relegated, the sanction would be applied to the start of their League One campaign in 2020-21, but if their results on the pitch are good enough to stay up, it will be applied to the final 2019-20 table instead.
Save football in this country
Last month Collins wrote to culture secretary Oliver Dowden along with the FA and the Football League outlining a six-point plan to avoid more clubs going bust.
He has warned that as many as ten football league clubs could go under if the government doesn’t get involved.
Following Wigan’s announcement, he said:
“We have warned for weeks that football clubs face financial ruin because of the loss of match day revenue, caused by the coronavirus lockdown.
“It is sad to see a club like Wigan, that only a few years ago won the FA Cup, now going into administration.
“With no plan in place for paying spectators to be allowed back into football grounds, the clubs are stuck with the high fixed costs of paying their players at a time when their income is falling dramatically.
“Many football clubs have at best been run on a break even basis, but there are plenty more who are reliant on loans from their owners to keep going.
“This model was already broken, but the coronavirus lockdown has made things worse.
“I fear more clubs will go into administration, as Wigan have, but without a clear plan to held them, these clubs will fail to settle their football debts and face expulsion from the football league.
“Our game plan for football sets out how this can be avoided. It’s time for the government and the football authorities to agree proposals to help football clubs in administration.
As part of a six-point plan, Collins has recommended:
• A ‘Football Finance Authority’ (FFA) scheme should be created by the Football Association – but working with and backed financially by the government – to provide financial assistance to EFL clubs.
• Funds should be provided by the FFA to allow clubs to meet their short-term liabilities and provide them enough breathing space to restructure their finances, but couldn’t be used to invest in recruiting new players or improving the club’s infrastructure. Rather than being offered as loans, these funds would instead be exchanged for a minority shareholding in the club, of between 10 per cent to 49 per cent, depending on the level of investment required and the value of the club.
• Independent directors would be appointed to the boards of clubs as representatives for this minority shareholding. These directors can be nominated by either a registered Supporters Trust or by the relevant local government authority, but they must be non-political and subject to approval as ‘Fit and Proper’ by the FFA.
• These Independent Directors shall have real-time access to the financial records of their club and can report their concerns back to the FFA. Clubs that continue to trade outside the rules of the EFL would be put into a form of administration by the FFA, where a credible plan would be implemented by independent auditors to bring the financial affairs of the club back in line with the League’s rules.
• Either a recognised Supporters Trust or a local authority can subsequently acquire the FFA shareholding in their club at a discount to market value, and funds raised in this way would be returned to the government to help repay the public investment in this scheme.
• The EFL’s financial regulations should be set and enforced by the FFA, the governing body of which should include representation from the EFL, the Professional Footballers Association (PFA), the Football Supporters Association (FSA) and the clubs themselves, but with an independent majority.
Read more about “A way forward for football” here.