In the second part of our update from chief executive Nigel Clibbens he talks about the potential for salary capping going forward and how CV19 issues directly impact Carlisle United.
Salary caps
All League Two clubs gave the EFL their feedback on cost controls last month. The strong view from clubs (which we supported) was to be radical and restrict spending very significantly. The overall view supported a cap on total football spending in our division, and tighter rules on the funding of losses. These constraints could also be extended to restrictions on total player numbers in a squad. At the same time there could be concessions for spending on young players, to encourage player development.
Then at the last League Two meeting on 9 June, clubs were updated that the EFL would be bringing forward new rules for consideration, reflecting the wishes of the League Two clubs, to be implemented for the 20/21 season.
Currently, it appears the huge financial implications of CV19 will severely reduce many clubs’ spending capacity in 20/21 regardless of these new rules, as we face up to managing costs with so much uncertainty over income and testing.
A new lower spending cap of circa £1.25m will be higher than many can afford anyway in 20/21, and therefore will not impact them just yet. However, for some clubs the new rules will hit them straight away. Their plans will need to change now, affecting their recruitment now – even though the final rules are not set.
Compared with a ‘normal season’ the new rules would mean a 15-20% cut for us (around £250k) and move us much closer to cash break even.
Transition arrangements are planned, but I estimate in the end some League Two clubs will face spending cuts of 40-50% compared what with what they have spent before. The overall total spending in League Two on players could fall by 30% compared with pre-CV19 times.
The Academy system at Cat 1 is producing large numbers of U23 players who need playing opportunities. They don’t get sufficient opportunity at their parent clubs, but they can afford to subsidise them playing in the EFL. This pathway is fundamental for the system at the top level. More than ever before these young players will be attractive to cash strapped lower league clubs faced with CV19 problems, or wage cap problems, and favourable rules incentivising younger players.
We are already seeing club retained lists with very few offers being made, and few being accepted. Key players are being released on affordability grounds, even from clubs with the best resources.
Some clubs have the available financial resources to spend significantly, even in these times, but already have player spending commitments for 20/21 far greater than the likely new cap. Their recruitment will be determined by the transition rules, which are again still to be confirmed.
There will be a levelling of spending as the League Two clubs with large incomes, or those with major financial funders or benefactors, have their historic spending restricted very significantly. The biggest spenders will be hit hardest if this is implemented. For those who believe higher spending brings success, they will expect closer competitive balance and more even teams on the pitch. That should benefit the less well off. We will see.
I remain strongly of the view that there is far more to League Two success than the size of the football budget, and the prize from the changes is that we get a stronger game.
It is worth restating; these changes will not prevent losses or club insolvencies, or stop clubs being unable to pay players. It will not prevent clubs overspending. However, it will reduce the losses, financial risk and improve the viability and sustainability of clubs to reduce their fragility. This may in time attract new investors into the game, make fan ownership more viable and reduce the reliance of clubs on benefactors. All that has to be welcomed.
All clubs need to factor this major SCMP rule change into their recruitment plans right now – even though we don’t know what the final rules are, or for certain that they will be in place for 20/21. This is a very big factor in our recruitment planning at the moment.
Those clubs who have large existing contractual commitments and high numbers of contracted players, on contracts written in pre-CV19 ‘normal’ trading times, have major recruitment challenges ahead, to go with the financial challenges brought along by CV19.
You can see how those clubs under financial pressure from CV19 will be forced to cut back, and those with financial power will be squeezed by the rules. This will mean we see two shocks to the recruitment market at the same time. With player demand and wages squeezed the recruitment market in this window will be very difficult. Players and clubs will be reluctant to do deals, and we could be faced with a lull before a turbulent storm. Clearly, for many different reasons, clubs need any changes and uncertainties clarified as soon as possible.
What does that mean for Carlisle United?
As you would expect the chairman, shareholders and Holdings Board continue to seriously consider the implications on the club in the short-term, and for the 2020/21 season, and after.
While many critical things which will affect us remain to be decided, the longer we can wait to make decisions which could have lasting adverse effects on the club, the better. However, in doing so, we have to balance the costs of waiting against the benefits of acting now. Not easy.
The priority has to be to protect the club in the short-term, conserve our cash and take few risks as we take actions which mean we are well placed to recover.
Based on current information, our income in 20/21 due to CV19 is likely to mean we won’t have the cash to spend to reach the likely new cap next season. For us, income and costs in 20/21 along with BCD effects are the critical factors. We need those uncertainties to start to go away before we increase our future commitments.
Lots of recruitment work is going on to prepare deals in the background ready for when players and the club are ready to move. The shocks to the recruitment market will limit and delay new signings during the next few weeks, except in exceptional circumstances.
Off the field, we have reopened the Blues Store on Thursdays, Fridays and Saturdays, within CV19 regulations, and our online store is fully functioning. Next up after that will be the new kit launch. Separate announcements will be coming on that.
From June, our commercial manager Jenny Anderson has been making contact with commercial supporters about the 19/20 season end, and next season. This is again heavily dependent on resolving many of the unknowns about the immediate future, particularly when the season will start.
Work has commenced as part of the annual stadium recertification process, but because of the good work done on the Cumberland Community Stand roof last winter, and other work on the centre roof in the Spring, this is well advanced. The requirements of BCD games when finalised will also impact on what we need to do.
In the coming days work will take place on the training ground and main pitch grass. It is not the scope of work we would have planned, as we have to make economies, but it is necessary work.
The response from fans to the Season Ticket refund offer has been fantastic. If all fans who were eligible for a refund had taken cash or credit, the financial impact could have been as much as a £75,000 cash payment.
75% of fans who have replied have donated their refunds back to the club. That generosity is tremendous. Any fans who have not already done so please get in touch and tell us what you want to do with your refund.
There is a short survey, which will let us know your decision, HERE.
From July we will be taking advantage of the new part-time furlough rules to reopen the ticket office to complete the refund process, and to repay those fans who have asked for refunds in cash.
Those fans who purchased tickets for away games [mostly Grimsby and Northampton] can get refunds for those tickets, at that time, if they want them.
Currently, we don’t plan to put 20/21 season tickets on sale until we have far more reliable information about when we can open Brunton Park to our fans once again. I fully understand some supporters who wish to help and support us by purchasing anyway.
However, we feel that to take cash from supporters now - in the current circumstances, when we don’t know when or if we can let fans in to watch games - is simply not right. Every club is different.
The Carlisle REUnited fundraising campaign launched by CUOSC has been very well received, with over £5,500 either raised or pledged so far. As stated in the initial press release, the funds will be donated by CUOSC with guidelines and tracking of its use. Thank you to everybody who has donated and, if you want more information on the scheme, click HERE.
Finally, can I just say congratulations to Barrow. It’s fair to say that everyone at the club is delighted at the decision taken on Wednesday. Promotion as Champions is thoroughly deserved, and to play them again in league competition for the first time in close to 50 years is something we can all look forward to.
I will continue to explain the current issues for the wider game, League Two and our club, and how they affect our club and the decisions we are making. I hope you find these updates informative.
Best wishes, stay safe.