Football regulator could reduce competition and damage smaller clubs, says think tank
21 March 2022
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New analysis says Crouch Review recommendations would threaten competition, discourage investment, and stifle innovation – and government should reconsider its support
A new report from the Institute of Economic Affairs urges government to reconsider its support for the Fan Led Review of Football Governance, casting doubt on the need for and benefits of a new state-mandated regulatory system.
While the Review’s Chair has claimed the enquiry was the result of “three points of crisis in our national game,” the paper suggests this justification is flimsy. Bury FC has been replaced by Bury AFC, which is performing well; the pandemic is winding down; and plans for a European Super League were quelled by the self-regulating nature of English football.
The Review sees the main purposes of the IREF being to ensure financial stability, a bigger role for fans in influencing business decisions, and improvements to governance.
But the concern that football is inherently financially unstable ignores a history which shows very few clubs closing permanently. This industry is almost unique in that most businesses in operation a hundred years ago are still around today.
And while the Review was intended to address the tension between the legal and commercial reality of football clubs as private businesses, and the way many supporters understand the club they support as a more intangible community that ‘belongs’ to them, fans are not a homogenous group. They will have different views about how football should be organised and delivered, rather than identical interests.
Under the proposed regulatory model, clubs will be forced to submit a wealth of financial and other information – including detailed business models and equality, diversity and inclusion plans. All will have to be approved before a licence, which must be renewed each year, is granted. Monitoring and collating this material and investigating clubs for potential breaches – which in serious cases could involve the IREF temporarily taking over the running of a club – will require a substantial number of regulatory staff.
The Review team had no experience and showed little understanding of how regulatory bodies operate in practice. While regulators may look attractive in theory, they are seldom popular in practice.
Excessively tight regulation of who can be an owner or director could make it difficult for clubs to replace existing owners, particularly at lower-league levels. This could be a new threat to their survival.
While the licence fees will be on a sliding scale, with Premier League clubs paying more, they would certainly be substantial even for lower-league teams – and the compliance cost will likely be considerably greater. The costs to Premier League clubs could run into hundreds of thousands of pounds; even a National League team might face annual costs of tens of thousands of pounds. The Review does not attempt a cost-benefit analysis to justify this.
Several measures recommended in the Review involve substantial new restrictions on private property rights which may be challenged in the courts and could give rise to substantial compensation claims. If upheld, they could deter future investment in football and in the wider UK economy.
Creating incentives for new owners to enter football and invest in clubs is crucial. Such investment enables movement up leagues, while helping clubs to remain competitive and develop grounds or facilities. Strict control of spending is a recipe for mediocrity and would still further entrench the position of today’s leading clubs.
Professor Len Shackleton, IEA Editorial and Research Fellow and co-author of Red Card, said:
“Football has a prominent position in many people’s lives, and supporters have strong opinions on how the game should be organised and run. They often feel that the leagues and the FA are not up to the job, and the idea of an all-powerful government-backed independent regulator has a superficial attraction. But it could well bring new problems in its wake, and fans should be careful what they wish for.”
Victoria Hewson, IEA Head of Regulatory Affairs and co-author of Red Card, said:
“As a football fan, reading the Fan Led Review was a dispiriting experience. As a supporter of free markets and limited government, it was crushing.
“If the recommendations of the Review are implemented, there is a real risk that technocratic decision making will take over and extinguish the drama and romance from the game. It will also drive out the investment that keeps English football competitive and improves the experience of fans at the grounds and watching at home.
“That the government would do this to one of our most successful and high-profile exports sends a terrible message to international investors and trade partners across all sectors.”
ENDS
- Calls for an Independent Regulator for Football (IREF) – as set out in Tracey Crouch’s Fan Led Review of Football Governance – are gathering steam.
- A new paper from the Institute of Economic Affairs warns the move could undermine England’s position as home to the world’s most vibrant and competitive leagues.
- The cost of the IREF will be paid for by clubs seeking licences. It would not be unreasonable to suggest the direct and indirect costs to Premier League clubs could run into hundreds of thousands of pounds.
- A National League team might face annual costs of tens of thousands of pounds.
- The situation with Chelsea, where government has strict control of all outgoings and even of ticket sales, shows that far from bringing stability and protecting fans, regulatory interventions could severely hamper clubs and even cause them to go out of business.
A new report from the Institute of Economic Affairs urges government to reconsider its support for the Fan Led Review of Football Governance, casting doubt on the need for and benefits of a new state-mandated regulatory system.
While the Review’s Chair has claimed the enquiry was the result of “three points of crisis in our national game,” the paper suggests this justification is flimsy. Bury FC has been replaced by Bury AFC, which is performing well; the pandemic is winding down; and plans for a European Super League were quelled by the self-regulating nature of English football.
The Review sees the main purposes of the IREF being to ensure financial stability, a bigger role for fans in influencing business decisions, and improvements to governance.
But the concern that football is inherently financially unstable ignores a history which shows very few clubs closing permanently. This industry is almost unique in that most businesses in operation a hundred years ago are still around today.
And while the Review was intended to address the tension between the legal and commercial reality of football clubs as private businesses, and the way many supporters understand the club they support as a more intangible community that ‘belongs’ to them, fans are not a homogenous group. They will have different views about how football should be organised and delivered, rather than identical interests.
Under the proposed regulatory model, clubs will be forced to submit a wealth of financial and other information – including detailed business models and equality, diversity and inclusion plans. All will have to be approved before a licence, which must be renewed each year, is granted. Monitoring and collating this material and investigating clubs for potential breaches – which in serious cases could involve the IREF temporarily taking over the running of a club – will require a substantial number of regulatory staff.
The Review team had no experience and showed little understanding of how regulatory bodies operate in practice. While regulators may look attractive in theory, they are seldom popular in practice.
Excessively tight regulation of who can be an owner or director could make it difficult for clubs to replace existing owners, particularly at lower-league levels. This could be a new threat to their survival.
While the licence fees will be on a sliding scale, with Premier League clubs paying more, they would certainly be substantial even for lower-league teams – and the compliance cost will likely be considerably greater. The costs to Premier League clubs could run into hundreds of thousands of pounds; even a National League team might face annual costs of tens of thousands of pounds. The Review does not attempt a cost-benefit analysis to justify this.
Several measures recommended in the Review involve substantial new restrictions on private property rights which may be challenged in the courts and could give rise to substantial compensation claims. If upheld, they could deter future investment in football and in the wider UK economy.
Creating incentives for new owners to enter football and invest in clubs is crucial. Such investment enables movement up leagues, while helping clubs to remain competitive and develop grounds or facilities. Strict control of spending is a recipe for mediocrity and would still further entrench the position of today’s leading clubs.
Professor Len Shackleton, IEA Editorial and Research Fellow and co-author of Red Card, said:
“Football has a prominent position in many people’s lives, and supporters have strong opinions on how the game should be organised and run. They often feel that the leagues and the FA are not up to the job, and the idea of an all-powerful government-backed independent regulator has a superficial attraction. But it could well bring new problems in its wake, and fans should be careful what they wish for.”
Victoria Hewson, IEA Head of Regulatory Affairs and co-author of Red Card, said:
“As a football fan, reading the Fan Led Review was a dispiriting experience. As a supporter of free markets and limited government, it was crushing.
“If the recommendations of the Review are implemented, there is a real risk that technocratic decision making will take over and extinguish the drama and romance from the game. It will also drive out the investment that keeps English football competitive and improves the experience of fans at the grounds and watching at home.
“That the government would do this to one of our most successful and high-profile exports sends a terrible message to international investors and trade partners across all sectors.”
ENDS
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