Reading FC has six point deduction confirmed
The club has now been plunged into a relegation battle
Last updated 4th Apr 2023
The EFL has confirmed Reading have been deducted a further six points for breaching a business plan agreed in November 2021.
The club says the infringement was over the amount of income Reading had promised to bring in.
The decision leaves Reading in a battle to survive in the Championship - they are now 20th in the table - just a point above the relegation zone.
The club's Head of Football Operations Mark Bowen has issued an open letter to the fans:
"When I arrived back at the club last May, I made a pledge to myself to be as transparent as possible with you, our supporters. Fans want to know everything about their club, that is right and fair and fully understood. It is in my nature to want to tell our supporters as much as we possibly can and be open about the decisions we make and the challenges we face as a club. However, I hope you understand that, at times, it’s not always possible and throughout this challenging season and specifically during this difficult period when we have been back and forth in regular conversation with the EFL, we have been governed by the EFL and what we have been able to communicate. Now is the right time to bring you up to speed with the tangible progress we have made, the challenges we still face and the short and long-term aims for Reading Football Club.
"Let’s begin with the biggest hurdle we have faced this season…player recruitment. And within that vital topic, there have been many, often insurmountable hurdles in our path.
"As you will all know, we have been under embargo. Every single thing we have done, we have had to abide by rules set by the EFL. Every single decision we have made relating to player recruitment or contract negotiations has gone through a rigorous, time-consuming process.
EFL restrictions
"So first up. We haven’t been able to pay any transfer fees, any loan fees, nor any compensation fees for players. People I know within the game come to me recommending young players all the time, players who I have often thought would be great additions to this club – but to bring them in required a small compensation fee. As a club, we simply weren’t allowed to pursue even those players. Paying any sort of fee has just not been possible.
"Then, if we identified a player who didn’t require a fee, we had to persuade them and their agent that Reading Football Club is the place to be. We contact the player’s agent and speak to the player and I have been honest an open with everyone I have spoken to – explaining what type of contract we can offer them, what sort of percentage the agent is entitled to. To help put it in perspective, in football player recruitment is heavily influenced by agents and some clubs are paying agents between 10-15% when a deal is struck. We have been limited to a maximum of 3%. That gives you an example straight away about how difficult it has been to attract players, who rely heavily upon their agents in their decision-making process.
"Next, if we have overcome those first two hurdles, there’s the wage we can offer. We had both a limit to comply with and an average to adhere to; we had to assemble a squad within a capped wage bill agreed in our previous business plan with the EFL, not allowing us to pay above a certain average wage to a player – an average well below what the majority of Championship clubs are paying their players. That wage had to include everything – agency fees, accommodation fees, performance bonus fees…and if we went above that average wage in signing a player, the next player we brought into our 25-man squad had to be at the right level below it to balance the wages out overall.
"After all that, if all those boxes had been ticked, the proposed deal had to be submitted for approval and were subject to a ratification process at the EFL to ensure they were happy with it. Mostly, they came back with the green light because we knew where we were with the numbers. There were a couple of occasions when we needed their guidance to tell us where we could go with a contract offer and how we could structure an offer within their regulations. Our Club Secretary, Sue Hewett, has been here a very long time and thankfully she is not only very good at her job but she is also an incredibly patient person and I have relied on her help and guidance a lot!
"So, with all these complications in trying to recruit players to the club, we have been looking at a very, very small shop window. Without any disrespect to the players we have here this season, we couldn’t really target players in their prime, aged between 24 and 28 years old. We were limited to look at younger players, untried and untested but with potential – the likes of Amadou Mbengue for example. Or we could try to recruit players towards the back ends of their career; Shane Long had other offers but came here through his affiliation with the club and with his family home nearby.
"We always knew, in terms of recruitment, that this year we would be treading water. In actual fact, it has been like treading in quicksand. Recruiting players capable of keeping this club competitive has been our biggest challenge in trying to set this club on the right footing once more. But, as a club, that hasn’t stopped us from making huge progress.
Structure
"Back in May, I made some key changes in the recruitment team. I was very lucky to be able to bring in Brian Carey after six years at Tottenham – he had numerous other offers but I brought him to this magnificent training ground and basically tried to sell him the club and the journey. It was a blank sheet of paper I was selling to him and we looked at where we could try to take this club in the future. And he bought into the challenge. Then, three or four months ago, we persuaded Jared Dublin to join us, who had played a significant part in developing the current squad at Sheffield United. Brian has brought in a few people as part of the network, but we are still in the embryonic stages of building a strong recruitment structure and we’re not there yet. We want to develop it further and see it become an elite recruitment department capable of challenging the best in this league.
"We had to put together a squad very quickly last summer, that was competitive and would ideally push us up the table but primarily compete to keep us in the division. Then, the aim was to get free of the embargo and embrace the opportunity to go forward and build something. The recruitment of players has to be our top priority and being free of the many restrictions will make a huge difference next season, thanks in part to the structure we now have in place and the strategy we have going forward.
"But the historical issues of previous years and the positive challenge ahead of us in the future have to make way for the here and now.
And right now, we are presented with a six point deduction and a fight for survival.
What went wrong
"Last season, the club entered into discussions with the EFL on our punishment for breaching Profit & Sustainability rules. The club came to an agreement on a six-point deduction in 2021-22, with six points suspended until 2022-23 if an agreed plan to fill the financial gap was not followed. Those terms were admittedly ambitious, requiring significant player sales income – but had the club not agreed that plan, our points punishment last season would have been more severe and – to be clear - would ultimately have led to relegation from the Championship. Despite our very best efforts throughout the course of this last year, and for a complex variety of reasons, player sales income wasn’t achievable to the level needed to meet the plan and, despite all the progress we made in reducing our wage bill, because of that we failed to meet the agreed terms. We came up with an alternative and viable solution, which would have satisfied the financial shortfall requested – but the new independent Club Financial Review Unit were expecting player sales in accordance with our agreed business plan and they informed us in March that, as that original plan hadn’t been adhered to in the methods we had set out, we were in breach. And we have no option but to accept that.
"However, through a lot of hard work from our Board - Bryan Stabler, Dayong Pang and myself, we have been able to ensure the business plan meets the Unit’s criteria going forward. It has taken time for them to consider this and come back with a ruling – but now we are very confident that this six-point penalty is the last of our medicine and we will now be allowed to come out of the embargo and be able to trade again in the summer. We must still be sensible, we will still be given a budget to stick to, but we will not be governed by the EFL on every decision we make and our every move won’t need to be ratified. In simplest terms, they will give us a sensible number and, thanks to all the good work we have done in the last year, we have earned their trust for us to operate wisely and not exceed that budget. Last summer we had so many different hoops to jump through to be able to get anything done at all. This summer will be different.
Upset
"It upset me that the news of the six point deduction broke before the discussions had concluded. Why? Well, from a football perspective, because that six-point deduction has been hanging over us ever since. But it frustrated me more from a club point of view. I don’t go on social media much, but naturally it’s important in my role to gauge the mood of the fans. I felt that supporters generally felt good about a club beginning to get its house in order. Then rumoured news of this six-point penalty – and suddenly a lot of fans were saying ‘same old Reading, same old rubbish!’. And that made me both angry and sad - because I know that this is not the ‘same old Reading’ that it was a year or more ago. A lot of hard work has been done since last May, good people have come into the club and now this latest chapter in the club’s history is being tarred with the same brush as an historic one. We are building a lot of bridges, putting a huge amount of work into our strategy to create an elite environment, and we are in a much better place compared to where we were three years ago.
"Actions, I appreciate, speak louder than words. We know that. And the short-term aim is to stay in this league. We’ve got seven games to go and we’ve got enough points on the board to give ourselves a good chance. Maybe without the point deduction, we could be planning for next season fairly safe in the knowledge that we would be in the Championship. But with the deduction, it is a fact that we will probably be looking over our shoulder until the last day. I’ve been in the game a long time and it’s a misconception when people say ‘It doesn’t matter what other clubs do, it’s about us.’ Believe me, it isn’t. We have to win games, yes. But it also has to be about what other clubs do and you have to keep an eye on what is happening around you and react accordingly. It’s survival of the fittest. That’s not to say, we’re not trying to win every game – of course we are! But we have to be mindful of what we need to do to get over the line. So yes, just like you, I’ll be checking all the results, trying to make sure that come the end of this season we’re still in this league. And we can then move forward.
Strategy
"In the long-term, we do have a strong strategy. As a club, you’ve got to have a way you want to play, a clear idea of the type of player you want to recruit. In the main, everyone wants to see the same thing – you want to see a young, hungry, vibrant, energetic, attacking club that wins football matches and develops young players. That is what every club in the world wants. And it’s what we have to aim for. With the restrictions in place, as I’ve explained, that has been virtually impossible. Coming out of the embargo this summer will allow us to target players who fit into that culture. It opens up the shop window.
"That strategy has to filter into our Academy. Even if means attracting young promising players which other clubs will then want to buy for large sums of money – of course fans will be disappointed when you grow a talent and lose a player of high potential to another club, but if you’re achieving a good fee, a return on your investment, it is a clear sign you have a healthy club. This club has gone too long without that subculture in place and we want a team of players who are coveted by other clubs.
"Now, that is something we can strive for. It was a major disappointment to everyone here when we lost our Academy Category One status, considering the legacy that Eamonn Dolan and others built at the club. Part of my job was to initially look into the reasons why we lost that status and there were no individuals to blame – it came down to funding issues of the past, the pandemic, the transition to the new training ground, a number of elements which meant we didn’t meet the Premier League’s criteria. But, earlier this month, we had the audit of our Academy; a team of people in here at Bearwood for a full week and they left no stone unturned! They look at everything, how you are coaching, how you are educating, how you are running your Academy and, at the end of the week, we met with them. The decision won’t be made until May, but the auditors were full of glowing praise for us. In simple terms, Category One status means it is harder for other clubs to pinch your best players and it means the games our young players play against are the best in the country…which will only make our players quicker, better and stronger going forward. I am but a tiny cog in that process – but huge credit to the people who have worked relentlessly in the last six to eight months to try to get that Category One status back for the club. And we all have our fingers crossed.
Owner
"Our owner, Mr Dai, is a private person and not one for speaking through the media. But his financial support has been relentless for this club. Unlike fans at some other clubs, no Royals supporter can throw criticism at our owner for not supporting the club financially. He keeps putting money into it and his ambition hasn’t changed it - wanting to take this club into the top flight. And if we can continue to develop our strong strategy, I’m sure his support for the club will only grow further. We’ve got a good stadium, we’ve got a fantastic training ground and - married with an owner who cares and wants to support us - the ingredients are there. We’ve just got to make sure we use those ingredients in the right quantities to achieve success.
Message
"So my message to you. Fans care, first and foremost, about what happens on the pitch. Secondly, they want to see the club being run the right way. I’ve touched on the recruitment department and our Academy staff, but there are a lot of other people doing a lot of good things away from the coal face of the football at this club, from making us more environmentally sustainable, running community projects within the Trust or simply making the grass grow out on the training pitches every day. We’ve still got a lot to do, we’re not pretending we’re the finished article. But progress is being made and the seeds are there for us to push forward next season and beyond. Everyone from the fans, to the staff, to the players, is emotionally tied up in this sometimes frustrating football club. I have been here as a player (albeit just the one game!), Technical Director, Manager, Sporting Director and now Head of Football Operations and I know what an amazing football club this is and can be.
"If I ask you to be patient, I know that a lot of you will come back at me and tell me that your patience is wearing thin. And I understand that. But we have a huge challenge in the short-term in front of us – in trying to stay in this league. And, we need your support. If we are successful, we all know we have an opportunity and a responsibility to try to drive this club forward next year."
Statement in full from the independent Club Financial Reporting Unit of the EFL:
Reading Football Club will be deducted six points from the 2022/23 Championship table, after the Club admitted that it has failed to comply with the budget restrictions imposed, following a previous breach of the EFL’s Profitability and Sustainability Rules (P&S).
The points deduction is an activation of a suspended six-point penalty, which was set out in the terms of an Agreed Decision between Reading and the EFL in November 2021.
The EFL has been notified and will apply the sanction with immediate effect.
This is the first time a Club in the EFL has been subject to a review by the newly formed independent Club Financial Review Panel (CFRP), chaired by Christopher Quinlan KC, which considers matters put forward by the EFL’s independent Club Financial Reporting Unit (CFRU). The entire process is independent of the EFL Board and seeks to ensure EFL Clubs’ compliance with relevant financial regulations.
After reviewing information submitted by Reading in March 2023, it was determined the Club has breached the original Agreed Decision in two ways:
I. The Club is relying on a ‘related party transaction’ in its P&S Submissions by seeking to include profit from a proposed sale of an investment to an entity controlled by the Club’s owner. This sale was not completed at the time of the Club’s P&S submissions on 1 March 2023. This is a breach of the original Agreed Decision, which makes clear that Reading needs to be P&S compliant without relying on player sales or related party transactions conducted after 1 March 2023. The Club has agreed it would not be compliant without the proposed transaction.
II. The Club has not generated profit required from player sales in line with the budget which formed part of the original Agreed Decision.
The Club has admitted to the two breaches of the original agreement with the EFL and has agreed to this six-point points deduction by way of an Agreed Decision with the CFRU. The Panel has ratified that decision.
In addition, the Club will be required to agree a new budget with the independent Club Financial Reporting Unit for the 2023/24 season aimed at ensuring future compliance with the regulations. This will be finalised once the Club’s full P&S Review has been completed for the current season.
Director of the independent Club Financial Reporting Unit, John Potterill-Tilney said:
“I would like to thank the Club for its transparency and cooperation during this process and the Club Financial Review Panel for helping us deliver an agreed sanction in just over one month since submissions were provided.
“This Decision and sanction, as confirmed by the Club Financial Review Panel in a short time frame, within the relevant season, will now give the Club clarity to plan for the period ahead, on and off the pitch.
“The EFL’s regulations establish the CFRP as an independent panel with the responsibility of reviewing the financial performance of EFL Clubs. This decision, the first of the Panel under the new Regulations, confirms its determination that Reading FC breached the terms of an earlier Agreed Decision, and the approval of the sanctions that follow from those breaches.”