EFL: Nine Point Deduction

The EFL today confirmed in a statement that the independent disciplinary hearing has ruled that Birmingham City will be deducted nine points as a result of a breach of the League’s Profitability and Sustainability rules. The ruling brings to an end months of waiting to see what would happen and will be imposed on Blues immediately.

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The EFL statement can be found at this link, and the full decision can be found at this link.

The Punishment

The full decision is quite wordy at 15 pages, but the punishment is simple enough to understand.

Under the guidelines given, the punishment for breaking the rules is 12 points. However, this is reduced on a sliding scale based on how much a club was over.

As Blues were found to be £9million over, that gave a reduction of five points to take it the deduction to seven.

Blues were given one point back in mitigation as they have complied with the letter the club were sent by the EFL on August 2, so that makes a deduction of 6.

However, as Blues were so far over in one season – well over £20million above the threshold – that was considered an aggravating factor which added a further 3 points deduction, making a total of 9.

This deduction is to be put into place immediately.

So what about Kristian Pedersen?

The decision confirms that Blues were under a registration embargo from May 2 until the club’s year end (June 30) so that final P&S result following any transfer profits can be confirmed.

Birmingham City entered into a transfer contract with FC Union Berlin on June 8 and applied to the EFL for registration of the transfer on June 29.

The EFL emailed former FD Roger Lloyd and former financial controller Gary Moore referring to the embargo which had been placed on the club on July 3 and confirmed that the embargo would remain in force on July 13.

EFL Chief executive Shaun Harvey told the hearing he had never seen in six years a club ignore a registration embargo and that it had put the club in a very difficult position.

However, the disciplinary commission did not see the signing of Pedersen as an aggravating factor, referring to the EFL allowing Blues to register Pedersen in August 2018. Thus Blues were not given any further punishment for Pedersen.

The Commission did confirm that it was clear from Ren Xuadong’s evidence that the club knew that in entering into transfer contracts it was running the risk that the registration would be refused.

The club had forecasted player profits of £8.3million and failed to do so, despite continual assurances to the EFL that it would. It was only on July 10 that the club accepted that they would break the P&S limits.

Going forward

There is nothing within the hearing document talking about embargoes going forward – but nothing clarifying that these have been lifted either.

The EFL have also not clarified in their statement that Blues are allowed to trade freely or offer contracts either.

I can’t say without any certainty, but it’s my belief that until the 14 day period where the EFL or Blues can appeal the decision is over we can’t expect any further clarification and the business plan imposed on the club remains in place.

Once the decision is confirmed – and I do not believe the club will appeal – I think we’ll see things going back to normal.

Interestingly, next week is the deadline for forecasts for this year’s P&S result.

As Blues have failed, it’s my understanding Blues will only be measured on one year – this year – for their result. As long as the club have kept the P&S result to less than £13million lost, we should be fine.

What worries me is that the disciplinary hearing seems to confirm what I have believed for a long time – that the owners and/or their representatives such as Ren or Edward Zheng Gannan did not understand that the club had to meet the limits required.

I hope that on his visit to the club today, Wang Yaohui (Mr King) will have impressed upon Ren and Zheng that they must do better in their governance of the club.

Other clubs

There are two things I think to draw from this result.

Firstly, the EFL confirmed in their statement Blues were the ONLY club to have failed the P&S requirements last year.

Many clubs were in trouble last May but that statement shows that it’s all about how clubs react to the initial forecasts.

I think it also shows the danger of relying on accounts alone. The result for P&S purposes differs greatly and the truth is, we don’t know how much clubs can claw back.

As an example, the initial figure I saw for Blues was an aggregate loss of £61million – but at the hearing it was down to £48million.

Secondly, other clubs will need to be wary this season as now a precedent is in place.

There are a host of clubs who I believe have been pretty financially irresponsible this year – including our pals from across the expressway – and now the onus will be on them to get themselves into line as they can no longer plead ignorance of what the sanctions are.

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