Many had predicted that Birmingham City would be hit by a 12 point deduction when the issue was decided by an independent Disciplinary Commission.
From the full breakdown of the process after various mitigations, including the Blues swiftly admitting their breach, the points-off tally stood at six points, but the act of intentionally ignoring the rules, when it came to providing Harry Redknapp with a £20m+ transfer kitty, meant it was such a serious breach that three additional points were added on.
“The seriousness of an intentional breach is an aggravating factor which requires the deduction of at least 3 additional points”
Blues fans will no doubt be less than impressed by the owner’s disregard of their financial plight in the face of Profitability and Sustainability Rules by their reckless spending, when you consider point 14 of the Disciplinary commissions’ report:
14.The trend of increasing losses during the monitoring period appears from the evidence of Mr Ren to have been mainly accounted for by the expensive acquisition of players in the January 2017 and summer 2017 transfer windows. In January 2017 the manager Gianfranco Zola signed four new players at a total cost of £7.45 million. In the summer 2017 transfer window the new manager Harry Redknapp made 9 permanent signings and brought in 5 loan players at a total cost of £23.75 million. From the evidence of Mr Khawaja, the CFO of the Club since August 2018, the player expenses of £11.3 million in 2016/17 nearly doubled to £22.45 million in 2017/18. Mr Ren accepts that the main cause of the breach of the P&S Rules in the 2017/18 season was the cost of signing new players and the cost of hiring and firing the two managers.
The more you look at the report, the more astonishing it is when it comes to the accounts:
Wages as a percentage of turnover increased from 120% in 2016/17 to 195% in 2017/18. Over the same period net debt increased from £31.7 million to £71.1 million. (from point 15).
In terms of Aston Villa, recent accounts have shown a similiar overspend on wages, which has added to concerns, so despite reinsurances from the Villa board, it’ll be interesting to see how things turn out in the FFP wash.
In the meantime, along with the full report on the Birmingham City case, linked above, below is the EFL’s statement on the matter in terms of Birmingham City.
EFL STATEMENT: BIRMINGHAM CITY
An independent Disciplinary Commission, appointed under EFL Regulations, has today ruled that Birmingham City will be deducted nine points as a result of a breach of the League’s Profitability and Sustainability Rules (Rules).
It follows a review of the financial submission from Birmingham City for the three year period 2015/16 to 2017/18 where it was determined the Club had recorded losses in excess of the £39.0m upper loss threshold.
On 14 August 2018 the Club was charged with a breach of those Rules. At a hearing on 18 March 2019, the Club pleaded guilty to the charge, and after hearing representations from both parties, the panel has fully considered the matter and ruled a nine point deduction is appropriate, which will take effect in the current season.
An EFL spokesman said: “The Profitability and Sustainability Rules, aligned with those in the Premier League, became effective in 2015/16. Season 2017/18 was the end of the first full reporting period with Birmingham City the only Club found to have breached those requirements, when it incurred adjusted losses of £48.787 million, £9.787 million in excess of the permitted losses.
“The Disciplinary Commission had the opportunity to consider all relevant factors in reaching its determination, including the Club’s mitigation.”
The parties have 14 days in which to appeal the decision, and in the circumstances no further comment will be made.
The Championship league table will be amended with immediate effect but it must be recognised that this remains subject to the outcome of any appeal.
A copy of the decision of the Disciplinary Commission can be read here.