FTI Consulting Public Affairs Snapshot – Stoppage Time: Will football have to be regulated?

The European Super League (ESL) was devised on the pretence of bringing the world’s biggest clubs and best players together to compete in an elite European league. But almost immediately, the curtain dropped on what was a clear attempt by the wealthiest of clubs – including Manchester United, Manchester City, Chelsea, Liverpool, Arsenal and Tottenham, “the Big Six” – to  monopolise football. The ambition to progress, without the consultation of fans, saw unprecedented levels of repudiation across the media as well as the potential for a high degree of state intervention by a Conservative government. Whilst the ESL collapsed before such intervention took place, it has led the way to a considered discussion on how the Government can prevent such attempts from taking place in future. With a Conservative Government in place that, uncharacteristically, no longer fears state  interference, we assess if football is heading down the path of more stringent regulation.

Governance and Meritocracy

The threat of an ESL-type “break away” by England’s top clubs is nothing new to the footballing world. Indeed, plans for such a league were first devised as early as 1998, and its consistent presence used as a leverage mechanism to adapt the rules of the trickle-down structure of the English football system.

Nonetheless, this iteration of the ESL was markedly different, given the financial impact of the COVID-19 pandemic on Europe’s biggest clubs, alongside the promise of funding from JP Morgan in the formation of the league. Coupled with the windfall in cash that would come from broadcasting rights, Florentino Perez, the President of Real Madrid – one of the clubs hardest hit financially by the pandemic, announced the launch of the ESL, with England’s Big Six signed up.

Reaction to the ESL was immediate and unanimous in its condemnation. UEFA, the FA, and the Premier League each voiced their own opposition. UEFA went further, threatening to ban clubs involved in the ESL from all other domestic, European and world football competitions. Soon after, players, managers, Government, and  a member of the Royal Family voiced their concerns on what was an attempt to override the merit of English football. Indeed, during FTI Consulting’s roundtable, it was made clear that not only was the announcement of the ESL ill-timed, but that it threatened to take away all that fans hold dear about the sport. The waves of negative reaction, ultimately, led to the Big Six withdrawing from the ESL within three days.

In Westminster, instincts about the ESL being another attempt to exercise leverage were also quickly dashed by the financial weight behind the announcement and the focus soon turned to what, if anything, Government could do to hinder its launch. A windfall tax on profits, closing the borders to European ESL teams and removing police support at ESL matches were just some aspects of the “legislative bomb” that Prime Minister, Boris Johnson, and Culture Secretary, Oliver Dowden, considered imposing. But the proposal with the most weight behind it was an overhaul of the governance of football, as the monopolistic behaviour that the Big Six displayed was vowed never to happen again. Following the collapse of the ESL, Oliver Dowden announced he had “no choice” but to move quickly and launch the Government’s manifesto of a fan-led review, which will seek to make recommendations on how governance can be improved. The priority, according to the Government, is to put the interests and experiences of fans first. Two important aspects are to be assessed: existing Ownership and Directors’ tests and the need for an independent football regulator. Whilst it is yet unclear how any changes will be enforced, there is no doubt that football governance will be changed following the review.

The Political Moment

Although the collapse of the ESL has prompted the Government to act, the political environment in which the Government currently finds itself in provides an equal opportunity to do so.

The premise of opposition to the ESL in the first instance came from its dissolving of the merits of competition, the excitement of which comes from the “underdog” clubs punching above their weight, such as Leicester City winning the Premier League in 2015/16 and FA cup this year. But the excitement of such a story is also rooted in the traditionalist culture of what it means to be a football fan. That the Conservative Government, committed to astronomical levels of spending in order to level up the Northern regions, should find itself in a position to continue on its path of state intervention on such an important cultural subject sounded almost too good to be true. Politically, the Government can now position itself as a defender of the culture of football and following through on widespread reform will only solidify Conservative support, particularly in the Northern regions. That both Johnson and Dowden are willing to take tough action for the sake of the fans will only increase the former’s popularity in opinion polls.

But the positioning by the Government is by no means exclusive to Conservative campaign policy. Indeed, FTI Consulting’s roundtable was told that football clubs need not be viewed simply as businesses, but rather “pieces of heritage” that would be deserving of a similar protected status. What’s more, the Labour party consistently voiced support for the Government’s plans to stop the ESL and has welcomed its review into football governance. In their view, supporters’ rights at the point of a change in ownership is a much more practical solution, as is an increase in financial regulations to protect fans.

Regardless of what solutions are finally tabled, the review itself has ample cross-party support, making it inevitable that changes to English football are afoot. That the Conservative Government has the right political setting to do so will only hasten their intention to act.

Investment

One topic of debate during the session looked at the attractiveness of English football in a post-review world.

It was emphasized during the session that the attractiveness of English football could be affected from an investor point of view should the Government stringently regulate the game. Football has become a victim of its own success, given that the more profitable aspect of the game comes from the TV audience as opposed to the stadium goers.

As the ESL launched, questions were raised as to why the prominent German clubs had not signed up. The reason, that their ownership structure involves a 50+1 structure with fan representation, has since been called for in the English game. But whilst the Government certainly has the political will to enact change across football, there is disquiet regarding the clarity of thought to impose such a model and how this may have adverse effects on investment. A model similar to that of the Spanish system – where clubs have an elected President – may also not be conducive to an attractive investment opportunity, given the high levels of financial uncertainty being attributed to these clubs specifically.

From a smaller to medium club perspective, the issue of investment and financial regulation is an even stickier environment and executives of these clubs are under no illusion that there is always going to be a bunching of the top teams winning competitions and reaping the financial rewards. However, there is a clear desire for a greater transparency in how the money that the more successful clubs obtain is distributed to smaller clubs. It is believed that such changes will help reconcile supporters and expose the real equitability that takes place whilst attracting investment at the same time. How the Government goes about enforcing such measures remains to be seen, but the call for greater financial fair play in the wake of the ESL fiasco will be heard by those conducting the upcoming review.

The Future of Football

The ESL – in the format it was proposed – is unlikely to return. But there is equal doubt over the attempts of the Big Six, or indeed other up and coming large clubs, to refrain from such a pursuit again.

These clubs will be firmly returned to the drawing board at present, albeit with tails between legs. Their underlying motive of generating ever-larger profits in a financially challenging environment will never be relegated. After all, football clubs are businesses and businesses need to grow. But what may ensue in the immediate term is not so much a desire for a windfall super league, but rather the turning of the screw on lucrative agents fees – popular with fans – and a potential downward pressure on players wages – popular with society in general. For the first time, the so called big clubs appear to be on the backfoot. Whether Government regulation attempts to help or hinder such operations in future will not be known for some time. However, it is clear that the Government has no option but to regulate the beautiful game.