The EFL decision to change their financial regulations is significant for Blues.
And, in the main, it is positive for them.
Championship clubs voted to replace the profitability and sustainability (P&S) rules with a squad cost ratio system, that caps spending on player costs at 85% of football-related revenue.
These costs include player and head coach/manager wages, amortised transfer fees and agents fees.
As part of the change, an equity top-up allowance of £33 million over a three-year period (up to a maximum of £15m a season) will be sanctioned.
The proposal, which comes into effect next season 2026/27, aligns the Championship with the Premier League.
Profitability and sustainability rules were introduced at the start of the 2017/18 season. Championship clubs were permitted to lose a maximum of £39 million over a three-year rolling period.
The EFL claim the Squad Cost Rules (SCR) “. . . allows for real-time monitoring during the season, rather than reviewing ‘after the event’, with the aim of giving clubs greater clarity and the club Financial Reporting Unit earlier visibility over clubs’ financial position.
“The framework also includes safeguards around commercial deals linked to owners or associated parties. The changes are intended to create a simpler and more responsive system of cost control within the Championship.”
So why could this be good for Blues?
It’s all about making money – at which Blues are becoming adept since Knighthead’s arrival as owners.
Teams relegated from the Premier League with parachute money will be in a strong position (’twas ever thus), but also those who can generate millions from commercial activities.
Blues, as a club based in the UK’s second biggest city with Knighthead’s backing, are on an upward trajectory. They are selling a story and a vision, that is garnering appeal.
Anchoring around Tom Brady’s involvement and a remarkable, transformative £3 billion stadium and sports quarter project, the immediate to long-term opportunities to grow and get bigger and bigger are obvious.
When Blues were in League One, accounts showed that their revenue was £36.5 million – up by £7 million on their relegation season – and a record for that level. And this was with a decline of £6 million in broadcast revenue.
For the current season just ended, it would not be a surprise if revenue was around £50 million.
Chairman Tom Wagner and CEO Jeremy Dale have regularly mentioned Blues ambition and expectation to be the best revenue-generating club in the Championship outside of those receiving parachute payments.
For comparison, when Blues were on their way to the League One title, West Bromwich Albion’s revenue for their Championship season 2024/25 (when they finished ninth) was £30 million.
Derby County’s revenue was posted as £32 million for the 2024/25 Championship season and Hull City £25.8 million.
In that same season, the revenue of Norwich City – the first without a parachute payment – was £39 million. The season before it was £73 million, due to the Premier League’s relegation safety net.
Blues had a major up-tick in St. Andrew’s sell-outs post-relegation – their average attendance this season in the Championship was in excess of 27,000 – and matchday revenue in 2024/25 rose by £4 million.
The infrastructure improvements at the ground, including the fan parks, helped food and beverage takings alone sky rocket.
Since the takeover, Knighthead have been aggressively pursuing major deals, securing agreements with the likes of Nike, Undefeated, Delta Airlines, Vertu and Coral.
The behind the scenes documentary on Prime Video – Built in Birmingham: Brady & the Blues – was another lucrative adventure for Blues, and also heightened awareness of the club worldwide.
Blues have created new high-powered roles tasked with finding new revenue streams and maximising existing ones.
Naturally, with lofty ambitions of gaining top-flight status as soon as possible and then becoming part of the established elite – at home and in Europe – costs rise. It ain’t cheap.
Wages increased by 9% in 2024/25 to £38.9 million – 107% per cent of revenue. Blues made an operating loss of £39.3 million, which was up 34%. The outlay on player purchases was £27.7 million, players sales £14.7 million. Albion’s wages were 122% of their revenue, incidentally, for that same accounting period.
So it is clear that managing squad salary and transfer trading sensibly is a must and general activities cannot be lavish at the expense of damaging the bottom line.
Anyone playing fast and loose with the new regulations won’t have any breathing space to try and wriggle out.
Clubs will be audited by the EFL and green and red thresholds introduced, with an automatic six-point deduction applied in the season an offence occurs for exceeding the upper threshold.
The point deduction increases based on the size of the breach. For every £6.5 million spent beyond the ceiling, an additional one-point penalty is added.
Yet, ultimately, the more money you make, the more can be spent on players and improving your squad. Those with the biggest financial muscles will be able to flex them yet more.
Twenty of 24 Championship clubs voted in favour of implementing SCR.
During the course of this season, Championship clubs have been operating an SCR system in shadow, alongside the P&S Rules, to allow assessment of the changes
