The EFL are considering the concept of allowing “add-backs” for lost transfer revenue to be included in Profit & Sustainability calculations, Bristol Live understands, which if permitted would be a huge boost to Bristol City.
The Robins posted record losses of £38.4million for the financial year ending 2021, which has put them under threat of falling foul of financial fair play regulations for next season, as it is likely to take them over the £39m threashold for losses permitted over a three-season period.
City have blamed the huge rise in losses, having posted £10m for the previous season, on the collapse of the transfer market outside of the Premier League, as their revenue in this department fell from £26m to £6m, Sammie Szmodics to Peterborough and Niclas Eliasson to Nimes the only substantial sales.
As a result of the "act of God" that was the pandemic, CEO Richard Gould told Bristol Live in January that the P&S framework needed revising to allow greater flexibility for clubs who used the transfer market to offset wage bills that exceeded turnover.
"Are we blameless? Probably not,” Gould said. “Because we have spent quite a lot of money on transfers and our player salaries have gone up quite significantly over the last three or four years.
"That was all fine while there was a transfer market there to fund it. But now there isn’t, or at least there isn’t one the way that it was, that’s where we start falling foul of FFP."
The EFL have made amendments to the process over the last 12 months, with the two Covid-impact campaigns of 2019/20 and 2020/21 now packaged together and losses taken as an average.
The league has also permitted “add-backs” of £5m and £2.5m for lost ticket revenue due to playing matches behind closed doors. But there has, as of yet, been no formal confirmation that lost transfer revenue will also be considered.
City have now sent their P&S submission to the EFL and it’s understood an independent auditor has been employed to determine that the club was denied around £30m in expected transfer sales due to the impact the pandemic had on the transfer market, as clubs below the top-flight and many across Europe were too financially crippled to spend.
Those calculations are now under consideration and a resolution is expected in the coming months as more Championship clubs publish their financial results for 2020/21. Earlier this week, Reading recorded a red number of £35m, Stoke City’s stand at £56m following the publication of bet365’s accounts, while Nottingham Forest detailed a pre-tax operating losses of £34.4m on Friday.
In a statement, Forest said: "The owners remain committed to the long-term future of the club and its funding. The board sees remaining within the discipline of the EFL’s Profitability and Sustainability Rules to be a high priority which is even more challenging following the pandemic."
There are established Championship clubs who have managed to keep losses to a lower level with Millwall (£13.1m) and QPR (£4.5m) at the bottom end of the scale while Blackburn's owners Venky's posted losses of £21.4m just before Christmas.
Speaking last month, City chairman Jon Lansdown estimated that up to seven clubs in the second tier are in a similar position to the Robins in terms of potentially falling foul of P&S which could then incur points deductions for next season.
Reading and Derby have suffered points penalties this season of six and 21, respectively. While in the 2020/21 campaign, Sheffield Wednesday were penalised by six points. However, each of those cases were specific to those clubs and their own financial dealings irrespective of Covid.
City’s argument, which is likely to be mirrored by a number of clubs, is Covid’s impact has been Championship-wide, therefore it’s a league issue that goes beyond a solitary club’s complaints.The EFL will also be mindful of the impact on the credibility of the league if, say, seven clubs were to lose points.
It's not a universally-held view with former Crystal Palace chairman Simon Jordan among those believing clubs should be responsible for their financial upkeep, irrespective of Covid, and the idea of relying on the transfer window to offset costs was, in effect, a risky financial model to abide by.
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