Birmingham City deducted nine points by EFL for financial breaches

Birmingham City have been hit with a nine-point penalty by the Football League for breaching financial regulations. The deduction leaves the club five points above the Championship relegation zone.

The rules state that if clubs exceed losses of £39m over a three-year period they will face a penalty from the EFL of up to a 12-point deduction.

Birmingham’s punishment, decided by an independent disciplinary commission, relates to the three seasons from 2015-16. The club, who pleaded guilty, have 14 days to appeal but are thought unlikely to do so.

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The penalty drops Birmingham from 13th to 18th. Garry Monk’s side, like most in the division, have eight games remaining.

“The profitability and sustainability rules, aligned with those in the Premier League, became effective in 2015-16,” an EFL spokesperson said. “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 £48.787m, £9.787m 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.”

Birmingham’s losses grew over the three seasons, from £1.982m in 2015-16, to £12.944m the following season and then £33.861m in 2017-18.

The club attributed that largely to the cost of sacking and appointing the managers Gianfranco Zola and Harry Redknapp and to signings made in 2017.

Birmingham said that in January 2017 Gianfranco Zola signed four players for £7.45m and that the following summer Harry Redknapp brought in 14 players at a total cost of £23.75m. Player expenses, they said, nearly doubled to £22.45m in 2017-18.

The EFL’s financial controller said Birmingham’s wages as a percentage of turnover reached 195% in 2017-18.

The commission said in its findings: “It is clear that the spending decisions made by the club in 2017 in recruiting managers and players were made without regard to the restraints imposed.”

Initially Birmingham told the EFL: “The managers overspent on transfer fees, loan fees, signing on fees and player wages, having no or no adequate regard to the P&S rules or the club’s financial health generally.”

But they subsequently accepted the blame, with the chief executive, Xuandong Ren, saying in his witness statement: “We ought to have ensured that we did not sign any new player if doing so would put us in breach of the P&S rules or create a serious risk of a breach. We failed to do that. The club accepts responsibility for that failure, and for the breach.”

Ren accepted that the owner, Paul Suen, agreed transfer budgets of £10m for Zola and £22m for Redknapp, with no control on salary terms for new players.

Birmingham said in mitigation that this was a first offence, that they deeply regretted the breach and that they had taken steps to avoid a repeat. The club also said they were not trying to gain a competitive advantage.

Birmingham ignored a transfer embargo to sign Kristian Pedersen for £2m last year but this was not treated as an aggravating factor.

They said in a statement: “The club has put measures in place to ensure future spending is within acceptable limits and since August we have adhered to an EFL business plan, which imposed transfer restrictions upon us.

“When the club’s owners took over, Birmingham City Football Club was in a dire position and investment was critical across many aspects of the business, including the first team, women’s team, academy and the infrastructure.

“Then, as now, decisions by the owners and the board of directors were taken with the club’s best interests at heart and a determination to halt a cycle of decline and stagnation, with the intention of pushing on to fulfil our and our fans’ ambitions.”