Reading Football Club are on a slide that looks irreversible. By chasing the riches of top flight football they went into debt. When the Premier League dream faded, player salaries and transfer costs were racing past income.

Wages versus Income

At one point, Reading’s salaries were 234% of income. So, in other words, for every pound they received in revenue, they spent £2:34. Unsustainable, yes…until you look at the riches of the Premier League. Promotion would have swamped that debt and put Reading in the black almost overnight.

The gamble failed and Reading’s woes weren’t helped by Covid with no supporter income. Judging by the last 5 years of accounts, Reading are about £140 million in debt, presumably to the owners. The debt is still rising but has come down year on year, which suggests that Reading have been trying to get their house in order.

Stalling on the Pitch

However, Reading’s problems don’t stop there. As I see it, the EFL’s policy is to, in effect, banish benefactors. Reading’s £140 million debt to the owners is a permanent and growing overhead because Reading are failing on the pitch. They can’t pay competitive wages and they can’t buy players, so they tumble down the league. Attendances and sponsorship income drops, so the debt can’t be managed. It’s a spiral they can’t get out of.

For as long as the owners are there, Reading are solvent. They have the debt on the balance sheet and have yet to walk away or call in the loans. However, if they look at the practices the EFL are putting in place, they may wonder what the point in it is. If they call in the debt or walk away, Reading will go bust, more or less overnight. No one will buy Reading as they won’t be able to invest.

Rules are Rules Unless you Can Bend Them

I might be biased as I am a Reading fan, but I will say this anyway. It looks to me that the days of a small clubs getting lucky courtesy of a wealthy owner, are over. In the modern game, teams like Blackburn Rovers, Chelsea, Manchester City and Leicester, would never have been allowed to move up the table and upset the big boys. Their debt of income would have stalled their progress.

Reading, like many others, chased the dream and fucked it up. However, wages have been paid and all inland revenue requirements have been met. They haven’t broken any laws of business. They are like any other business that has tried to speculate to accumulate. Rich people invest in business every day, knowing that they will incur short to medium term losses. If a chartered account looked at Reading’s debt graph, it would would see it going in the right direction. The EFL apparently know better.

In summary, It appears to me that the laws of football mean the elite can no longer be challenged and that’s just the way they like it.