I am pleased to have secured this Adjournment debate on the governance and financial sustainability of English football clubs. I am very lucky that Birmingham, Ladywood is home to both Birmingham City football club and Aston Villa. It is a privilege to advocate for both sets of fans, although it occasionally calls on all my skills of diplomacy—local football rivalries are very passionate things, after all.
My interest in the regulation of English football, or more accurately the lack thereof, has been engaged primarily because of the position in which Birmingham City fans find themselves. Like many in this House, I take the view that the only way to deal with financial and governance issues like those that have plagued Birmingham City over the past decade or so is for the Government to bring forward legislation for a new independent regulator of English football. The Government, of course, commissioned the fan-led review of English football. That review was undertaken by Tracey Crouch, and I pay tribute to her detailed work and advocacy on behalf of football fans all over the country. Many other Members across the House have also long campaigned for changes to be made to protect our national game. The Digital, Culture, Media and Sport Committee has done important work, as have the Football Supporters’ Association, the all-party group for football supporters, and campaign groups such as Our Beautiful Game. All of that campaigning has provided the background to the breakthrough of the fan-led review’s findings.
The Government were pushed into that review after the quickly aborted plan for a breakaway super league, which would have destroyed club football in our country. Those plans threw into sharp relief many of the issues in the game that, before then, were too easy to ignore and to leave to the clubs to sort out. We all know that things simply cannot carry on as they are. The current system incentivises teams in the premier league to spend unsustainably to remain in the premier league, and it incentivises teams in the championship to spend up to the hilt to get there because the financial rewards are so great. However, that is destabilising clubs and the whole football pyramid in our country. Too often, there are question marks over ownership and the potential motivations of those who buy English football clubs.
Does the hon. Lady agree that, although clubs may feel that they are owned by us fans, who buy the gear, attend the matches and use pay-per-view, the fact is that these clubs are big businesses and like any big business, they must be appropriately regulated and managed? I therefore fully agree that the House must do more to protect clubs from bottom-line share price profit as the driving force, as opposed to the love of the game, which we all have, and the desire for a club to perform as best as it should and could.
The hon. Member is absolutely right. We learned through covid that fans are the lifeblood of the game. If we take away fans, it destroys not only the business model but the spirit of football.
I congratulate the hon. Lady on securing this very important debate. As ever, it is wonderful to be in the Chamber at the same time as Jim Shannon. However, his point was very much about the premier league. Many clubs are not on the stock market. Clubs like Bury football club in my constituency are small businesses that are the centre of their community. I know exactly what Birmingham City is going through. My team, Huddersfield Town, where I am a season-ticket holder, is going through something similar, although hopefully it will be not as bad as it is for Birmingham. However, there is no regulation in the game. The English Football League and the Football Association do not regulate football teams. That is the problem and it is why we need a regulator.
The hon. Gentleman is absolutely right, and I will come to that point. Without regulation, none of football can thrive. The premier league cannot thrive, nor can all the other teams that are not in that league. It is a pyramid, an ecosystem, that depends on every part of it being well regulated to make sure that some of the smaller clubs—I hate calling them smaller clubs actually, because they mean a lot to their communities—have just as much to offer our national game as the big clubs at the top, which have much more money.
On ownership and how that can change across football clubs, too often, there are question marks over the potential motivations of those who buy English football clubs, which can become vehicles for bolstering the reputations of foreign leaders, politicians and businessmen close to politicians whose interests may run counter to our national interest. Sometimes we know who those people are, but sometimes the true ownership is disguised—a sure sign that there is something to hide. However, in those cases, and this goes to the hon. Gentleman’s point, the club, its fanbase and its value as a community and national heritage asset becomes a plaything of those who have no stake and no commitment to the community, and who do not care for the heritage value—which I consider to be the real value of football clubs—and see it only as a tool of commercial interest.
I understand the hon. Lady’s point about foreign Governments, and so on. However, we have to understand that a lot of people with malevolent intent take over a football club by borrowing from exotic lenders to then, essentially, take every penny out of that club. These are people with malevolent and often dishonest intent. That is not about the big-picture, wider geopolitical issue that she mentions—I am talking about pure and utter greed by people who are dishonest.
The hon. Gentleman is absolutely right. There is an issue at the bigger end of the spectrum, with the involvement of potentially hostile foreign Governments, but right underneath that there are a number of individuals going to great lengths to disguise where the money ultimately comes from and to disguise their identities. I will come on to that issue in relation to Birmingham City football club. The business model that that creates for football is not sustainable and should not be tolerated in something so vital to the fabric of our national life.
In the end, as the fan-led review found, it is the regulatory underlaps and overlaps in the current system that are allowing bad behaviour to fall through the cracks, meaning that some clubs are left in severe financial distress. The Premier League and the English Football League have their own owners and directors tests, but given that there are several examples of unsuitable owners passing these tests—including those with a history of bankruptcy, those engaged in legal disputes with other football clubs, and even those with serious criminal convictions—let us just say that the tests do not fill anyone with any confidence whatsoever. The fan-led review laid bare all of those issues and the need for an independent regulator and a complete overhaul of the current system in order to prevent the collapse of football clubs across the country.
I am desperate to make sure that Birmingham City football club can be rescued from its current predicament and put on a sustainable footing. It is one of the oldest football clubs in the country. It was founded in 1875 in Small Heath, which much of the country will know as peak “Peaky Blinders” territory, and which is also the part of Birmingham that I was born and raised in. It acted as a rifle range for training soldiers in world war one, and like much of Small Heath it was bombed during world war two. It is steeped in history and has a heritage that Brummies across the city are proud of, but for many years Blues fans have watched with devastation as financial and professional mismanagement has driven their beloved club to the brink.
In 2009 the club was bought by Hong Kong-based businessman Carson Yeung, who was sentenced to six years in prison on money laundering charges just two years later. The club was then bought out of administration in 2016 by the current owners, Birmingham Sports Holders Ltd, a company that is backed up by a convoluted network of shell companies and overseas stakeholders. With a crumbling stadium and a far removed invisible ownership, points deductions and crippling debts, the club continues to swing from crisis to crisis. The once premier league team has not finished higher than 17th for six years in a row.
How did our beloved club get to this point? The first issue is debt, which James Daly has also raised, which has put the club’s finances under significant strain. The 2021 accounts reveal that the Blues spent £37 million more cash than they generated from day-to-day activities and that they are grappling with over £120 million of debt.
It is well known why and how clubs can get themselves into such eye-watering levels of debt. As the fan-led review notes, our current system creates misaligned incentives, with clubs spending to the hilt to get promoted to higher leagues in order to secure bigger TV deals and financial rewards. This creates an incredibly destructive cycle. The current lack of regulation also means that football clubs can find themselves hostage to malevolent forces acting with intent other than the sustainability of the football club that they have acquired.
What compounds those issues in the case of Birmingham City is its significant reliance on parent companies to bail it out of financial trouble. Birmingham City’s loss would have been much higher had it not been compensated by major shareholder and chief executive officer of Oriental Rainbow Investments, Vong Pech. The club now owes his company more than £22 million, raising serious questions about its financial position. The club’s own accounts state that there is
“a material uncertainty casting significant doubt about company’s ability to continue”,
“the directors remain in the view the company can obtain required funding from parent or ultimate parent.”
The fan-led review evidences how it was that these exact practices led to the collapse of Bury football club. As soon as an owner is no longer interested or able to invest, the club faces ruin. This is the worst-case scenario that Blues fans dread, but it shows that across English football a completely unsuitable business model has been allowed to take hold, and it is not sustainable.
I thank the hon. Lady for what she is saying about Birmingham City. When football clubs fail or are badly mismanaged, it is to the detriment of the whole community. I wonder whether she is aware of Birmingham’s tie-up with a crypto firm, Ultimo GG, earlier this year, which it promoted to its fans in February. Only two weeks later it collapsed, taking advantage of the fans’ love for the club. Does she share my concern that too many football clubs, and indeed the Premier League itself, are getting involved in crypto-promotions to their fans that can only end in tears? If she does, perhaps she would like to come to Westminster Hall tomorrow and join my debate on that?
I thank the hon. Member for his invitation. I will certainly try to make time to get to his debate—I feel that there is a quid pro quo going on here; we are certainly keeping the Minister busy. He raises an important point that goes to the ethics with which football clubs are run. Fans turn up because they love their football club, and nothing should be promoted to them that results in their being duped by financial practices that might ultimately be found wanting. They should not be put in a position where they trust their football owners and their football leaderships and then end up losing money. Fans should not be taken advantage of, and everybody who is involved in football should be able to sign up to that.
In addition to financial uncertainty, Blues fans are contending with a home stadium that is in a dilapidated and sorry state. The Kop and Tilton Road stands have been closed for two years because their steelwork is badly corroded, meaning that significant works are needed to make them safe again. That would cost upwards of £2.5 million to complete. Despite being repeatedly assured that the stands would be fully operational again by the start of this year’s season, the works remain incomplete. The latest update from the club states that work will resume during the World Cup break in November and December, with an aim to finally complete all works in the summer of 2023. In the meantime, stadium capacity remains significantly reduced, slashing the number of tickets that can be sold and further depressing the club’s revenue.
The saga of the stadium gets worse. Following the club’s points deductions for recording excessive losses, Birmingham Sports Holdings sold its 75% stake in St Andrew’s stadium, the home of the Blues football club, to a British Virgin Islands-based company called Achiever Global in June 2021 to try to improve its accounts. The deal generated £10.8 million, but a news report at the time stated that most of that would be used to repay external Birmingham Sports Holdings debts, leaving a working capital of only £2 million.
According to the Football Supporters’ Association, more than 60 clubs have lost ownership of their stadium, their training ground or other property in the last 25 years. Clubs that lose ownership of their ground have also often been forced to relocate away from their home town, which was a serious concern for Blues fans when they learned of their stadium sale. In Birmingham City’s case, it complicates the offshore ownership structure further, making accountability about stadium repairs even harder to assign.
The hon. Lady is giving a quite interesting talk, and I will intervene on the Minister in relation to Torquay United at some point. She will appreciate the slight irony in talking about St Andrew’s, because that is where, due to stadium dispute, Coventry City football club ended up playing for a number of seasons. That was a real wrench for many fans, and it just shows why there is a desperate need to reform the system of football regulation.
The hon. Member is absolutely right. I well remember having to mediate between the competing views of the different fans as well as the residents in the area who suddenly had more traffic to content with and so on. This speaks to the point that football is at the heart of our communities. It is part of the fabric of our national life and it is very much tied to the places in which those clubs were born, where they have grown, and where they are part of the history and the heritage. You cannot just pick a football club up and move it somewhere else and retain the same thing you had to begin with, and matters relating to stadiums make fans fearful about what might happen to the places they call home. I would be devastated if anything happened to St Andrew’s or Villa Park, because they are so much a part of the fabric of our great city and our region.
In the normal run of things, when these sorts of problems arise, the football club would sit down with the owners—the ultimate source of the money—and work out how to resolve them, but working out who is the ultimate owner is a huge task in itself. To say that it is complicated is an understatement. Within Birmingham City’s ownership structure, Birmingham Sports Holdings Ltd has a 75% stake in the club, but BSHL itself is owned by a total of five other companies, all with shares ranging from 2% to 28%. This structure of shell companies creates murkiness, confusion and a complete lack of transparency, and makes it impossible to track down the ultimate owner and to establish who bears responsibility for resolving problems at the club.
That came to a head earlier this year when it emerged that an individual who Birmingham City had not declared to the English Football League was actually the beneficial owner of a company called Dragon Villa—one of the companies that owns 17% of Birmingham Sports Holdings and therefore 12% of the football club. That individual goes by the name of Wang Yaohui but is also, according to press reports, known as Mr King.
Wang is a Chinese-Cambodian national who has served as an adviser to the Cambodian Prime Minister and as a diplomat in Cambodia’s embassy in Singapore. He was previously detained by the Chinese Communist party’s anti-corruption watchdog on allegations of bribery and money laundering regarding a state-owned Chinese bank. Although he went uncharged, his associate was hit with corruption charges and sentenced to life imprisonment.
It appears that Wang has gone to great lengths to conceal his undeclared commercial footprint. Documents uncovered by Radio Free Asia show that Wang was the beneficial owner of Dragon Villa and concealed from the Hong Kong stock exchange and the English Football League his substantial stake in Birmingham City football club. That is a potentially criminal offence, punishable by up to two years in prison.
The EFL is now investigating these claims. It told me that it is a complex matter and that it has made applications for the disclosure of documents, from not only the club but individuals linked to the club. It confirmed that an investigation is taking place but told me on the eve of this debate that, as the investigation remains ongoing, it is unable to comment further.
The fact that the club failed to declare Wang as an owner demonstrates how easy it is for individuals to avoid scrutiny and bypass the current owners’ and directors’ test, which in my view—a view that I know is shared by hon. Members on both sides of the House—is completely unfit for purpose. Takeovers of the Birmingham City football club have previously been mooted and come to nothing, but it is now subject to an ongoing takeover.
A consortium led by Maxi López and Paul Richardson is looking to acquire a 21.64% stake in the club after paying a £1.5 million deposit. That takeover went to the English Football League for approval in July 2022, and as part of the process the EFL is now investigating whether the club breached its rules after it emerged that it has been receiving funding from the prospective owners without EFL approval. I must say that I truly sympathise with the Blues fans—whenever they have a little bit of hope, it is quickly dashed with yet more regulatory and governance concerns.
If Maxi López and Paul Richardson are as they say they are, and wish to acquire the club and run it in the way that such things should be run, of course I wish them well and hope that they are transparent and open about their funding source and what they intend to do with the club. Although I am keen not to prejudge the outcome of that process—we all wish to see Birmingham City thrive—I would have more confidence in the English Football League’s investigations and approvals process if its tests were up to scratch.
Regardless of where we stand on potential takeovers of the club, or any other club in a similar position, we can all agree on the absolute need for transparency. When someone is looking to buy such an important community asset, they should not be hiding their financial sources or income streams. They should be open and transparent about them, so that we can be sure that our football clubs will be protected. As one Blues fan told me:
“hidden in the dark, these owners need to understand they’re guardians/guests of the club. 147 years of history, it isn’t just a pop up throw away company”.
I could not have put it better myself.
I pay tribute to the Blues fans, who have shown such commitment and dedication to their club. As much as I love to hear from them, I also dread it, because they get in touch with yet more problems at the club. I despair that unless and until we have an independent regulator of English football, we will not be able to solve the problems that we see at Birmingham City football club.
As we have heard in some of the interventions, the issues at Blues are not unique; they are happening in stadiums and clubs across our country, and in proud towns and cities such as Derby, Oldham, Bury, Wigan and many more. All of those fantastic clubs—all those amazing heritage and cultural assets—could face ruin unless we see decisive action and a regulatory overhaul from the Government, exactly as we were promised earlier this year.
Will the Minister, in his response, explain what he thinks about the predicament of the Blues fans, and what he would say to fans across the country about club ownership structures and stadium difficulties? We all know that there is no overnight solution to the problems at the Blues, but the long-term future of the club and many others like it can be secured only if the Government implement the recommendations of the fan-led review in full. They have long promised a White Paper, which would pave the way for legislation to create an independent regulator for English football.
The time for delay is over. The Government agree that there is a problem, and the fan-led review has given us the solution. The Government say that they agree with that solution, and I say to the Minister that this is literally an open goal.
I am pleased to respond to this debate and I am grateful to Shabana Mahmood for securing it. She opened her speech by discussing the challenge of representing two football clubs, and I imagine that that is quite a tightrope to walk. She rightly highlighted the long history of concerns that many of the fans she represents have expressed. I, too, want to pay tribute to their commitment. It must be incredibly difficult for them at times. She rightly pointed out, too, many of the complexities of the structures of some of those football clubs.
The interest and passion shown in this evening’s debate—and, in fact, since I took on this role only a few weeks ago—is testament to the huge importance that the House attaches to securing the long-term sustainability and governance of English football. I, too, want to pay tribute to my hon. Friend Tracey Crouch for the amazing amount of work that she did, along with many other fans, in delivering that report.
Football clubs have an enduring importance in the lives of the people of this country. Many Members have spoken in this debate, and to me personally, of historic and local clubs woven into the fabric of their communities that have simply ceased to exist or have been relegated because of reckless decisions made by owners and appalling financial mismanagement.
We have heard—I have heard about this endlessly in recent weeks—of the poor or non-existent governance practices in some of our clubs, with fans locked out of key decisions that affect them, which threatens clubs’ long-term health and sustainability. Others have spoken of the clear need for a fundamental change in how money is distributed throughout the football pyramid to ensure the long-term health and competitiveness of our national game.
We have heard how English football clubs make significant contributions to all the local communities in which they are based. They are at the heart of local communities, but they also provide many jobs and support for local businesses that rely on them. Fans are the lifeblood of those clubs: they bear the brunt of the fallout of bad ownership decisions; they see where the structures are not working for the good of the game; and they can articulate most clearly how to set that right.
One of my urgent priorities when I became Minister for sport was to hear first hand from fans—I wanted to hear from them first—about where the problems lay in our national game and how we could address them, to ensure a sustainable and thriving future for football in this country.
I will certainly come to that in a moment; I am sure that is the bit everybody is waiting for—do not hold your breath. [Laughter.]
As I said, one of the first things I wanted to do was to meet the fans. They are the ones who are most invested in their clubs and who go and support them day in, day out, whatever the results, the weather or their fortunes. Without them, football in this country would simply not be the fantastic game that it is.
Football is obviously all about its fans; does the Minister agree that it has a potential that is untapped by the state? What with the delivery of frontline services at community stadiums, the groupings and support and everything else that goes with that, the added social value is immense.
Does the Minister also agree that it has been an absolute pleasure to sit in the Chamber with the hon. Member for Birmingham, Ladywood? She should be incredibly proud of the passion she has shown for her community and her football team, and every single Birmingham City fan should be proud of what she has done today because it really does matter. Does the Minister agree?
How could I possibly not agree with my hon. Friend? He is absolutely right. In the short few weeks I have been in this job I have really noticed the passion that everybody has for the sport. Fans sometimes get frustrated with their club’s performance, but their passion and loyalty are to be admired. My hon. Friend is absolutely right to praise the hon. Member for Birmingham, Ladywood for securing this debate.
As I said, I was keen to hear from the fans first, which is why they were the first people I met when I took on this role. I met representatives from the Football Supporters’ Association, Fulham Supporters’ Trust, Charlton Athletic Supporters’ Trust and Blackpool Supporters Trust to hear their stories. All those clubs had suffered at the hands of owners who used and abused their stewardship. This relates to the point made by Jim Shannon. Some of the stories I heard were frankly shocking, and some of the sacrifices that the fans had to make to make their point were astounding. The fact that Blackpool supporters boycotted their own club for four or five years really does show the strength of their feeling.
Too many clubs have been lost to the cycle of unsuitable owners taking over clubs, stripping them of their assets, as the hon. Member for Birmingham, Ladywood said, and leaving them as empty shells, as my hon. Friend James Daly said. Too many clubs have been brought to the brink, with owners refusing to fund them any more. We are committed to breaking the cycle of inappropriate ownership, financial instability and poor governance practices. I look forward to the debate that my hon. Friend Aaron Bell has secured for tomorrow. He mentioned the issue of cryptoassets; I am sure we will be having that conversation for a good few months.
Since my meetings with fans, both the Secretary of State and I have met representatives from the football authorities—the FA, the Premier League and the English Football League—to understand their perspectives on reform, too. The policy is complex and it is important that we get it right. We are talking about matters of finance and governance, and I make no apology for taking the time to ensure that I have properly considered all the issues before me. That is why we continue to engage and hear views from a wide range of stakeholders, including the football authorities and, most importantly, the fans’ groups.
I totally understand that when we are trying to build a totally new regulatory regime, we have to make sure we have thought of every possibility and any unintended consequences, but will the Minister confirm that the end position he is trying to get to is an independent regulator and that he is trying to make sure that the regulatory regime is fit for purpose? The end state we must have is an independent regulator of English football.
The hon. Lady tempts me to go a bit further than I can at this stage, but I can tell her that I am currently doing all the deep work on the White Paper because I want that to address many of the points she has raised.
Football can take forward some of the reform measures—such as financial redistribution throughout the leagues—now, and I strongly urge the relevant authorities to act and to do so quickly. Meanwhile, we have a new set of Ministers so we are taking a little time. We recognise that clubs are at the heart of many of our communities. Were I not to do the due diligence, I am sure that clubs would not be happy with me for not double-checking that everything is right. We are taking the time to consider the policy and consult the numerous stakeholders. We remain committed to publishing a White Paper setting out our detailed response to the fan-led review of football governance, but let me make it clear: the case for reform is not in doubt.
Question put and agreed to.