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A new licencing system is being introduced for 116 clubs from the Premiership down to the National League. National North and South clubs are not involved as yet.
As yet just four clubs of the 116 have reported a profit last season
They are Liverpool, Bournemouth, Plymouth Argyle and Peterborough United.
Whilst Hereford are outside of the 116, they did report a profit.
Average pre-tax losses: PL £31.1m, Championship £15.1m, League One £5.0m, League Two £2.6m.
Therefore with so many clubs reporting losses it's thought a new system is needed
Sports Journalist Henry Winter explains:
New licensing system for the 116 clubs in Premier League, EFL and National League requires them to hold “sufficient resources” to steer them away from any potential “cliff edge”. Level of risk will be assessed on a club-by-club basis by Independent Football Regulator.
From 2027/2028 season, clubs in the top five divisions will require a licence from the IFR in order to compete. Clubs need to show liquidity to meet their financial commitments and cope with "stress" such as relegation or withdrawal of owner funding. Club liquidity will be monitored on an ongoing basis by the IFR which can also impose measures such as “reducing expenditure or restructuring debt”. (Players not counted as liquid assets as “clubs cannot readily realise their value outside transfer windows”). Clubs must also show evidence of “having meaningfully consulted" with fans.
“It cannot be right that so many clubs exist on a cliff edge where one change could threaten their entire existence – fans should be debating formations not finances,” says IFR CEO Richard Monks. “Our licensing regime will ensure that club risk is managed appropriately, creating a more stable environment for growth and investment.”
Four “key risk factors” that IFR expects clubs to “monitor and mitigate” are...
*Business Model – funding gaps between income and costs.
*Liquidity & Cash flow – the ability to meet short-term financial obligations.
*Solvency and Debt – risks to operating in the medium to long term.
*Governance – adequacy of financial decision-making and risk management.