Championship clamps down on debt
Championship clubs could be hit with fines totalling millions of pounds if they fail to adhere to tough new financial fair play regulations announced by the Football League on Wednesday.
It is hoped that the regulations will help clubs avoid being plunged in to financial peril like Portsmouth, who face the "distinct possibility" of liquidation this summer, according to Football League chairman Greg Clarke.
The regulations will be brought in next season, but fines and transfer embargoes for non-compliance will not be introduced until the 2014-2015 season.
The aim is to curb spiralling debt in the Football League which Clarke revealed could hit the £2 billion mark in five years' time if no action is taken.
"The Championship is spending more and more and more money on players chasing the dream,'' Clarke told a press conference on Wednesday morning.
"We do not want to kill the dream. What we want to do is make sure it affordable and make sure that the price of the dream is not the destruction of football clubs. The problem is getting worse and we were going to be facing an extinction event of actually losing potentially three or four clubs - not to administration, but to liquidation.''
Under the new rules, Championship club owners will be limited in what they can invest in their team every season.
Next season, their total investment can be no higher than £6 million. The following year they will be limited to investing £5 million in the club and in the 2014-2015 season they will only be allowed to invest £3 million per year.
Huge expenditure on transfer fees and wages by Championship clubs has become the norm over the years, as owners chase the holy grail of qualifying for the top flight.
The Football League want such extravagant spending to become a thing of the past though, and the new regulations also stipulate that annual losses can total no more than £4 million next season, £3 million per season in the 2013-14 and 2014-15 campaigns, and £2 million from the following year onwards.
To put how much of a change this will require to recent levels of expenditure, QPR, who were promoted to the Premier League last summer, recorded a loss of over £25million last season.
Such a financial return would result in a huge fine under the new regulations, which declare that any non-compliant club will be hit with a 'Fair Play Tax' if promoted.
The scale of the fine varies on how much the club has gone over the allowed threshold, but the worst case scenario could see clubs fined over £10million.
If the club is deemed to have breached the regulations and does not achieve promotion, the league will place a transfer embargo until they are compliant with the fair play rules.
Clarke insists the regulations, which need the Premier League's backing, must be introduced to prevent crises even worse than the one unfolding at Portsmouth from happening.
Portsmouth have had a succession of owners in recent years but have been in administration twice in three seasons and have been relegated to League One after their 10-point deduction in February.
Clarke fears for the future of the south coast club, who four years ago won the FA Cup.
"I think it [liquidation this summer] is a distinct possibility because the debts of that club are immense, tens of millions of pounds, and they have relatively few assets. Unless someone comes along with significant capital to invest in that club, that club will be liquidated by the administrators,'' Clarke added on Sky Sports News.