The new EFL season begins against the backdrop of an increasingly serious financial debate, with league chief executive Trevor Birch warning that the level of losses being sustained by clubs has created a “systemic insolvency risk” across the football pyramid.
The warning comes after the Professional Footballers’ Association (PFA) began legal proceedings against the EFL over changes to financial regulations in League One.
The dispute centres on new Squad Cost Rules (SCR), which replace the previous Profitability and Sustainability framework from the 2026-27 season.
While the PFA argues that the changes could restrict squad spending and suppress player wages, the EFL insists that stronger financial controls are necessary to protect clubs from a cycle of unsustainable losses.
EFL Financial Situation at a Glance
| Statistic | Figure |
|---|---|
| League One player expenditure five seasons ago | £3.8m average |
| Current League One player expenditure | £8.0m average |
| League One average losses five seasons ago | £2.3m |
| Current League One average losses | £7.3m |
| Championship average losses last season | £21.6m |
| New League One squad spending limit | 50% of turnover |
| Previous League One limit | 60% of turnover |
| New financial rules | Squad Cost Rules |
Why Are EFL Clubs Losing So Much Money?
The central issue is the growing amount clubs are spending in pursuit of success.
According to Birch, average player expenditure in League One has more than doubled over the past five seasons, rising from £3.8 million to £8 million.
However, losses have increased at an equally concerning rate.
Average League One losses have climbed from £2.3 million to £7.3 million over the same period.
The situation is even more serious in the Championship, where average losses reached £21.6 million last season.
For the EFL, those figures demonstrate why financial regulation has become increasingly important.
What Are the New Squad Cost Rules?
The EFL announced that Squad Cost Rules would replace the previous Profitability and Sustainability framework from the 2026-27 campaign.
One of the most significant changes affects League One.
The percentage of turnover that clubs can spend on wages has been reduced from 60% to 50%.
The objective is to prevent clubs from continually increasing expenditure without the revenue to support it.
However, the PFA believes the changes could have a direct impact on professional footballers.
Why Is the PFA Taking Legal Action?
The Professional Footballers’ Association has challenged the EFL’s implementation of the new regulations.
The union argues that the EFL could not introduce the changes without full agreement from the Professional Football Negotiating and Consultative Committee (PFNCC).
The PFA is also concerned that restrictions on squad spending could ultimately suppress player wages.
That creates a difficult balancing act.
Footballers have relatively short professional careers, meaning players understandably want to maximize their earning potential while they can.
The EFL, meanwhile, is attempting to ensure clubs remain financially viable for decades rather than chasing short-term success through increasingly large losses.
EFL Chief Trevor Birch: “Litigation Isn’t the Answer”
Birch acknowledged the concerns raised by the PFA but argued that simply maintaining the existing financial model would not solve the underlying problem.
His argument is that financial stability and player protection are connected.
A financially secure club is more likely to:
- Pay wages on time.
- Honour player contracts.
- Invest in training facilities.
- Provide long-term employment opportunities.
- Remain part of its local community.
- Continue operating beyond changes in ownership.
The EFL therefore sees financial controls as a form of protection rather than simply a restriction on ambition.
Oxford United Already Feeling the Impact
The debate is not purely theoretical.
League One club Oxford United were placed under a temporary registration embargo after failing to comply with the new financial requirements.
The restriction means the club cannot currently register new players, including loan signings and free transfers.
Oxford have indicated that it could take months before they are able to meet the necessary obligations.
The situation illustrates the immediate consequences that stricter financial controls can have on clubs.
Sheffield Wednesday Shows the Other Side of the Problem
The EFL’s concerns are also reflected in what happened at Sheffield Wednesday.
The club spent much of the previous season in administration after owner Dejphon Chansiri withdrew funding.
Wednesday were subsequently deducted 18 points for financial breaches and came close to going out of business.
For the EFL, situations such as this demonstrate the risks of allowing clubs to depend heavily on owners continuing to cover substantial losses.
A club may be competitive in the short term, but if that financial support disappears, the consequences can be devastating.
The Bigger Problem: Chasing Promotion
Promotion creates enormous financial incentives.
Clubs can be tempted to spend beyond their natural means in an attempt to reach a higher division.
The problem is that not every club can succeed.
For every team that wins promotion, others are left carrying the financial consequences of unsuccessful spending.
This can create a cycle:
Spend more → chase promotion → fail to go up → absorb losses → require owner funding → repeat.
Birch believes this model cannot continue indefinitely.
The Championship Problem Is Even Bigger
League One has attracted most of the attention because of the new 50% squad cost limit, but Birch stressed that the Championship faces an even more significant financial challenge.
Average Championship losses reached £21.6 million last season.
That figure highlights the enormous financial pressure created by competing in one of the most expensive leagues in world football.
Clubs are attempting to reach the Premier League because of the huge increase in revenue that promotion can bring.
But the race for promotion can encourage spending levels that are difficult to sustain for clubs that remain in the Championship.
The Premier League’s Role
One of Birch’s other major arguments concerns the distribution of money between the Premier League and the EFL.
He believes a fairer and more equitable distribution model will be crucial to improving the financial health of clubs outside the top flight.
The solidarity agreement between the Premier League and EFL has remained unchanged since 2019.
If EFL clubs are expected to operate under tighter financial restrictions, increasing the amount of predictable revenue flowing down the football pyramid could become an important part of the solution.
Financial Sustainability vs Player Protection
The dispute ultimately comes down to two competing concerns.
| EFL Argument | PFA Concern |
|---|---|
| Clubs are losing too much money | Players could see wages restricted |
| Financial controls protect clubs | Squad spending could be reduced |
| Owners cannot fund losses forever | Players have short careers |
| Regulations improve long-term stability | Clubs need flexibility to compete |
| Sustainable clubs protect jobs | Lower spending could affect contracts |
Neither side is arguing that financial stability is unimportant.
The disagreement is about how that stability should be achieved and who should bear the consequences.
What Happens Next?
The legal proceedings could determine how the EFL’s new financial framework develops.
For now, the league remains committed to the Squad Cost Rules and believes stronger controls are essential.
The PFA, meanwhile, continues to challenge the way the regulations were introduced and their potential impact on players.
With the new EFL season beginning, the dispute will remain one of the most important off-field stories in English football.
Key Takeaways
- EFL chief executive Trevor Birch has warned that current levels of club losses are creating a “systemic insolvency risk.”
- Average League One losses have increased from £2.3m to £7.3m over five seasons.
- Average Championship losses reached £21.6m last season.
- Squad Cost Rules have replaced the previous Profitability and Sustainability framework.
- League One’s permitted wage spending has fallen from 60% to 50% of turnover.
- The PFA has begun legal proceedings against the EFL over the new rules.
- Oxford United have already faced a temporary registration embargo.
- Sheffield Wednesday’s financial problems highlight the dangers of relying heavily on owner funding.
- Trevor Birch believes a fairer distribution of revenue from the Premier League will be important for the EFL’s future.
Final Thoughts
The EFL’s financial debate has reached a critical point.
Clubs want the freedom to compete, players want to protect their earning potential, and supporters want ambitious teams capable of challenging for promotion. But the numbers increasingly suggest that the current model is placing too many clubs under financial pressure.
The rise in average League One losses from £2.3 million to £7.3 million, combined with Championship losses averaging £21.6 million, provides a stark warning.
The challenge for the EFL is finding a system that prevents reckless spending without destroying competition or limiting clubs’ ambitions.
For the PFA, protecting players must remain central to any new financial framework. For the EFL, ensuring clubs actually survive long enough to employ those players is equally important.
The legal battle may determine the immediate future of the regulations, but the bigger question is much harder: how can English football remain competitive without requiring clubs to continually lose money in order to chase success?
