BCFC: Profit and Sustainability

On Thursday evening the EFL and Birmingham City Football Club released a statement on their respective websites confirming that Kristian Pedersen was now registered as a player and that the transfer embargo was ended. After a fairly long summer of waiting, is this now happily ever after as far as the whole embargo thing is concerned?

Finances and BCFC

I think many Blues fans felt the same relief I did that this whole embargo thing is somewhat over.

While it’s not perfect – Blues are still heavily restricted in the players that they can sign – the news that Blues would be allowed to sign five players in this window could make a lot of difference to a squad on paper.

The BBC reported that Blues would not be allowed to pay any transfer fee or compensation for a player, and that there is a wage cap enforced – but Blues will be able to enter the loan market for players which closes on August 31st.

Is this end of the saga?

Short answer to this question is no – but the good news is that there is good news.

Blues have been referred to a Disciplinary Commission which will decide which sanctions if any to impose on the club. They have a wide range of choices available under the rules from fines to points deductions.

Disciplinary Commissions are rare and the fact that Blues have been referred to one should show that Blues have annoyed the EFL somewhat this summer.

Indeed, the fact that the EFL said that they were “exceptionally disappointed” that Blues signed Pedersen should be an indicator of the strength of feeling there.

However, that doesn’t mean that the EFL will throw the book at Blues.

My reading of the situation is that Blues have been given some rope to show that their intentions are good and that they will accept that they have to follow the EFL’s plan to get out of the situation they are in with respect to the Profitability and Sustainability rules (P&S).

I believe that if Blues make no waves in their signings and are able to bring in money, then when the Disciplinary Commission rolls around we’ll get a slap on the wrist and this will all be forgotten.

EFL Chief Executive Shaun Harvey was at St Andrew’s on Saturday which helps the feeling that there is a way out of this sorry mess without having to do anything rash.

Blues need players though – these conditions still look tough

While it’s true that signing players without any fees, compensation or loan fees is tough I think that there could potentially be flexibility there.

For example, Blues are interested in former Arsenal midfielder Josh Dasilva.

Because Dasilva was offered a contract by Arsenal which was equal to or better than the one he was on that lapsed, Arsenal are entitled to a compensation fee should he sign for another club – and of course Blues aren’t allowed to pay compensation fees.

However, I think if the club work with the league, Dasilva is the kind of signing where there may be a compromise.

Due to his age (19), his lack of professional appearances and his potentially very low salary, I’m hopeful that the EFL will see Dasilva as being in the spirit of trying to stay within the bounds of the P&S rules and will allow it to happen.

I think if Blues stick to looking at bringing in younger players, then the EFL may well be happy to play ball with us.

How do we stay out of trouble?

Kieran Maguire, a lecturer in football finance at the University of Liverpool made a couple of very salient points on Twitter that point to what Blues need to do.

The first seems simple.

Under the rules Blues are allowed to swap up to £8mil of debt for equity in the club per season.

Blues haven’t done that in the last two seasons, which seems ludicrous as it would have given us an extra £16million of breathing room in the calculations.

It’s my understanding from one of my contacts that Blues are now exploring this avenue – although apparently it’s not the easiest of processes due to the ownership structure of the club.

That should sort us out for this campaign – but it begs the question why wasn’t this process undertaken before because it would have meant none of this summer’s shenanigans would have happened.

The second is more about the long term problems Blues faces.

A wage to turnover ratio of 189% is completely unsustainable at any level of the game and shows just where the crux of the problem is for Blues.

While I accept the money is coming in from the owners, I’m always cautious about that because when the money stops coming in, it quickly means the club is up the creek without a paddle.

Blues need to do what they can not only to bring wages down to a more affordable level but to bring more revenue streams into the club.

While I’m willing to accept that promotion and the millions from broadcast revenue is one way of achieving that I think we also have to accept that is the dream everyone else is chasing.

For me this summer has been a bit of a warning.

While it seems nice at the time to go on a spending spree, there is always a cost at the end of it.

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