A culture of ‘gambling’ for Premier League promotion is spreading throughout the English Football League and potentially placing clubs at risk, a new report into English football’s finances has found. While the top-flight’s finances are booming largely thanks to record television deals, the situation is far more precarious lower down the pyramid.

A report by financial experts LCP has found that the revenues of the Premier League’s Big Six teams account for nearly half the revenues of the top four divisions in English football. Income in the top-flight is only set to increase, with the league banking a new £6.7billion TV deal with Sky and BT last December.

Those finances could not be in starker contrast to many of the clubs in the shadows of the likes of Manchester United, Arsenal, Liverpool and Chelsea. The report has found that losses in the Championship rose 49 per-cent on the previous year’s findings, 70 per-cent for League One, and a staggering 220 per-cent for League Two.

Teams desperate for a slice of the Premier League pie are risking their long-term sustainability by spending vast sums of money in a bid to win promotion. While Derby and Reading are viewed as examples of that occurring in the Championship, that culture has trickled into Leagues One and Two.

Bart Huby, co-author of the report and a partner at LCP, told Express Sport: “What we see in that mentality of gambling for promotion has now seeped into Leagues One and Two. On the one hand you can see that as a positive because there are lots of people willing to invest in clubs, to put extra money to try and get promotion.

“Football is booming, the crowds are up, investors are keen to invest, and I think we can call it the Wrexham Effect. There is that extra glamour to lower league football through Ryan Reynolds and Rob McElhenney. They have been successful.”

But he added: “The risk and the downside that we and the regulator may see, I think of it as potentially overheating. You have a lot of money being lost. If at some point there were to be a tipping point for whatever reason not to see lower league football as glamorously exciting, that could switch round quite quickly. Owners might say we’ve put a lot of money in but we can’t see a point in carrying on anymore.”

Rather ominously, 17 of the 92 clubs in the top four divisions disclose a material uncertainty over their ability to remain operational for a further 12 months. Thirty-eight teams admitted a dependence on discretionary owner funding to meet their obligations. A majority of clubs are heavily reliant on their owners.

LCP warn of a “house of cards”-style systemic failure as a result of clubs owing each other significant amounts of money.

More positively, revenues are up by 11 per-cent across the four divisions, rising from £6.5bn to £7.2bn, the report says. Football is more popular than ever and average crowds across the four divisions are on the rise. However, 86 per-cent of clubs lost money and total losses in 2022-23 (£1.2bn) were 31 per-cent higher than in 2021-22.

A long-awaited new financial deal between the Premier League and the EFL is yet to be agreed. It is understood that top-flight teams are concerned that passing larger sums down the divisions will simply lead to continued over-spending. EFL teams want a deal that reflects the soaring revenues in the Premier League.

LCP recommends a redistribution system that sees clubs rewarded for ‘good behaviour’ – such as being prudent with funds and being well governed. The other recommendation is a revamped owners and directors’ test.

The new Labour government has also pledged to pick up the Football Governance Bill in this Parliament, with the legislation set to introduce an independent regulator for football (IFR). Prior to the election, the Conservative government promised to introduce an IFR which would have powers to monitor and enforce requirements related to financial regulation, club ownership, fan engagement, and protection of club heritage.

Labour are set to keep much of the same wording of the bill but Express Sport has heard of concerns that their version of the IFR could be more interventionist than the Conservative-designed version.

The full report can be found by clicking here.

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