Blackburn Rovers and their rivals must prove their ability to deal with “major financial shocks” as part of a new licensing system set to be introduced by the Independent Football Regulator from the 2027/28 campaign.
Clubs will be required to reserve “appropriate resources” to deal with changes in circumstances such as relegation or withdrawal of owner funding.
Every team competing in the top five leagues of the English pyramid will be required to obtain an IFR licence, which will only be awarded to those who show that they are not operating on the financial “cliff edge”.
The level of risk will reportedly be assessed on a “club-by-club basis”, and it is hoped that the changes can prevent situations such as the ongoing troubles at Sheffield Wednesday. There have been plenty of other recent examples, including the plights of Bury and Macclesfield.
The IFR will require transparent reporting of financial accounts and could step in to ensure that clubs reduce expenditure or restructure debt if it is considered a threat to its ongoing operation.
However, the IFR cannot force the sale of players because they are not considered liquid assets and cannot be realised outside of the transfer window.
Clubs will also be required to show meaningful evidence of consultation with supporters’ groups and trusts, although the new rules will not replace those already adopted by the EFL.
Four key areas will be monitored by the IFR. The first is the business model, including potential funding gaps between income and costs. The second is liquidity and cash flow, which is essentially the ability to meet short-term financial obligations.
The third is solvency and debt, which includes risks to the club’s operation in the medium and long term. The fourth is governance, such as the financial decision-making and management.
IFR chief executive Richard Monks said: "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.
"Our licensing regime will ensure that club risk is managed appropriately, creating a more stable environment for growth and investment.
"The IFR will work with club and support them to meet the licensing requirements, which are absolutely essential to our mission to change English football for good."
Rovers backed the introduction of an independent regulator when it was first proposed to Parliament, hoping it would be an “important milestone to help secure the long-term financial sustainability of England’s football pyramid”.
The club is yet to publish its accounts for 2024/25. Rovers reported a £3.3million profit in the previous year following the club-record sale of Adam Wharton to Crystal Palace.
Based on the clubs who have reported their 2024/25 accounts so far, Championship sides are losing around £500K per week on average as they juggle the demands of competing in the second tier and financial sustainability.
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