Blues completed one of their busiest and most successful transfer windows last week, with the late capture of Jay Stansfield bringing the total number of new recruits to 17. Chris Davies seemingly got what he wanted in having cover and competition for each position, with the surprising acquisition of Stansfield being the icing on the cake that most Blues fans wanted.

According to the respected blogger on football financial issues Swiss Ramble, Blues net spend of £31m was the highest in the EFL. It was also greater than 11 Premier League clubs, demonstrating that our new owners really do appear to mean business. Blues had the six highest transfers in League One this summer, and the three highest ever deals in England’s third tier.

The transfer activity was on a scale unprecedented in the recent history of the club, and it has generated tremendous excitement and anticipation amongst Blues supporters. It has also reinforced the belief that the club is, at last, in very good hands and that the future is bright.

But a number of fans have queried how this significant expenditure fits into Profitability and Sustainability (P&S) rules, and whether the level of activity might be problematic for the club in future years.

The first thing to say in response is that this ownership appears to be on top of the rules in a way that was not always the case under the previous regime. Nevertheless, given the past history of the club and also the problems that have befallen others which have embarked on major expenditure that could not be sustained, it is not unreasonable for some Blues fans to seek understanding and reassurance that problems are not being stacked up for another day.

In League One the Championship Profitability and Sustainability rules don’t actually apply. Instead, in their place is the League One Salary Cost Management Protocol (SCMP). This provides that for clubs relegated from the Championship, Player Related Expenditure (basically the total remuneration paid to players plus agent fees) should not exceed the sum of 75% of a club’s “relevant turnover” in year one plus 100% of a club’s “football fortune income” in that year.

Let’s look at both of these components in turn. Relevant turnover is match revenue, monies distributed from the league, net commercial revenue etc. For Blues this number is going to be much larger than in previous years. Firstly, Blues income is likely to be one of the best in the EFL. With more than 18,000 season tickets sold and crowds likely to average around 25,000, gate receipts are expected to be well in excess of previous years. Similarly, hospitality takings from the new amenities should also be significantly increased as will commercial income. Additionally, there is also Knighthead’s sponsorship deal for the stadium.

Football fortune income includes cup prize money, parachute payments, net transfer income during the year and, significantly, cash injections by the club’s owners. Although net transfer income will be negative this year it won’t be the full £31 million as transfer fees are paid in instalments so only some it will be paid out this year. However, the crucial thing is that the SCMP rules allows the owners to inject non-returnable cash into the club which can be used to address any potential shortfall here should there be one.

So, Blues should not have any issues this year due to greatly increased revenues and being able to offset any transfer losses through the owners’ cash injections.

If the club is promoted back to the Championship and the current system is retained, then it would be judged over the current P&S mechanism of, effectively, not losing more than £39 million over three seasons – 23/24, 24/25 and 25/26 – for the relevant measure. So, any losses this season would be taken into account, as would next year’s financial performance.

However, it is worth bearing in mind several factors. Firstly, as previously covered, the club’s income is massively increased on what it was under BSHL and this will cushion the impacts of the expenditure and reduce any losses. Secondly, the largest fee paid for Jay Stansfield will be spread over several years due to the seven-year contract he has been given. This helps P&S calculations because only a portion of the fee will be included. Thirdly, there would be increased TV money in the Championship compared to last season. And, finally, at some point soon it is expected that there will be agreement on the redistribution of income from the Premier League to the EFL, which would also help.

So, whilst P&S always provides restrictions there are a number of factors that should help mitigate this and it bears repeating that the club will, almost certainly, have thought this through based on previous statements.

However, one final point worth bearing in mind is that EFL clubs have previously agreed to look at revising both SCMP and P&S calculations, with proposals possibly expected by the end of the year. It remains to be seen what these are and how quickly they will be phased in.

After the barren and difficult years before Tom Wagner and Knighthead appeared on the scene, it is completely understandable that some Blues fans are left scratching their heads at the turnover in the squad during the summer transfer window and wondering if things are really too good to be true. Time alone will tell of course, but there is every reason to have confidence that the new owners, with their stated long-term vision for the club, have taken full advantage of the new financial landscape presented by relegation to firmly push the reset button in an appropriate and manageable way.

Neil Cottrell
Chair, Blues Trust