Colin Lee: Wages and contracts will be hit by post-Covid financial woes
- Credit: Tom Sandberg/PPAUK
With club revenues plummeting 85 per cent during the coronavirus pandemic, I believe a number of EFL Clubs will sadly fall into administration next season.
Players' wages and transfer fees will fall significantly. With the knock-on effect of coronavirus, almost all of the clubs have seen revenue drop by more than three quarters, with no gate receipts, no corporate guests and reduced sponsorship.
These factors mean many football businesses are unsustainable.
Bury were expelled from the Football League in August 2019 and Wigan entered administration two weeks ago, just one month after being taken over by a Hong Kong-based company - the signs are there.
With the prospect of a salary cap being imposed to try to protect clubs, the bumper player pay days could become a thing of the past. Future player contracts will have to become cheaper, and more affordable for the clubs.
If you're signing a new player or re-negotiating a contract with a player, because of the future salary cap it is very likely you would have to offer the player the same money or more likely less money.
It is also likely that the length of contracts will become shorter with a review date built in to protect the club. If the player refused the contract it will become difficult finding another club because every club will be in the same boat.
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I recently spoke with my close friend Keith Curle, Northampton Town manager, who have just gained promotion to the First Division - on the financial difficulties clubs now face due to coronavirus.
He confirmed that management, staff and players will have to accept the financial difficulties and restrictions being imposed on all clubs and that staff and players need to understand and accept that, in some cases, it's a case of accepting what's on offer or run the risk of becoming unemployed.
Length of contracts will be shorter, squads will be smaller and players and staff will be under pressure to perform without the protection of a lengthy contract.
The uncertain economic future will almost certainly dissuade local investors from putting money into risky ventures like football clubs.
But the strict EFL financial rules, which prevents owners pumping in money to buy success means we are seeing less foreign investment into the EFL.
It is known that foreign investors tend to buy Championship Clubs in hope of gaining promotion to the Premier League where the rewards are huge, TV revenues once in the top league mean a very lucrative return.
However, with the EFL profitability rules and sustainability rules it is unlikely overseas investors will want to invest in what has now become too risky a business to put their money forward.
I feel for Wigan, a club I have had an association with, who are facing a 12-point deduction after falling into administration just four weeks after they were bought by a Hong Kong-based company.
The problem lies within the system where providing buyers can show evidence of funds and do not have a criminal record for any financial misdemeanours, they qualify to become the new owners – if there is evidence of money laundering or fraud, the EFL have the power to block the deal under the EFL's Owners and Directors Test but otherwise there is no legal justification to block the sale of a club.
However, if following the purchase of a club, the owner is convicted of a financial crime, as it stands the EFL can only bar them from acting as a club director – they can't force the club to be sold to a new company.
Thankfully, the EFL has already begun addressing some of these difficult issues and it has conducted a full review of its governance procedures following Bury FC's financial demise and withdrawal from the league last summer.
Finally, congratulations to Wycombe Wanderers and their manager Gareth Ainsworth for achieving promotion to the Championship for the first time in their history.
It goes to show what can be achieved with fantastic team spirit, togetherness and shrewd management.