Charlie Methven issues a stark warning about his boyhood club Oxford United, who are under a temporary transfer embargo.
He joins Adrian Goldberg on an episode of the ‘Football Smash’ which analyses football ownership, finance and governance.
The embargo prevents the registration of new players until the issue is resolved, relating to League One’s Salary Cost Management Protocol (SCMP).
Under the rules, clubs must demonstrate at the start of the season they can fund their planned player expenditure and afford their playing budget.
The U’s said their shareholders remain committed to the club and expect to become compliant ahead of the January transfer window.
Football Smash add: “The figures discussed in this video are Charlie Methven’s estimates based on his experience and knowledge of the EFL.”
Time-stamps:
00:00-01:03 – Oxford’s transfer embargo leaves a depleted squad
01:03-02:32 – Could Oxford become the biggest club ever to disappear?
02:32-04:50 – How League One’s new spending rules work
04:50-06:57 – Why the missing owner funding is a warning sign
06:57-09:22 – Oxford’s stadium problem and spiralling costs
09:22-10:22 – Why the threat could become existential
10:22-11:51 – The comparison with Bury’s collapse
11:51-13:29 – Could Oxford become impossible to buy?
Adrian Goldberg: “Let’s talk about some clubs outside the Premier League then. One of them very close to your heart, Charlie, Oxford United. And Oxford United have become the first club to fall victim to the new squad cost ratio rules I think which means that they are forbidden to buy any players in this summer transfer window. The club has said, “Fear not, we will be buying players again when the transfer embargo lifts in the January window”. You’re skeptical.
Charlie Methven: So, it’s not buying players, it’s signing players. So that includes free transfers and free agents that they’re not allowed to add any players to their squad, and just bear in mind that since the end of last season, they’ve dropped out nine players from their squad already. So they currently have one striker and two centre backs, so you can’t put this in context of saying, well, they, you know, they’re sort of now in a position where they should be okay. This is… Why is this relevant? Why would we mention that relevant? I’ll tell you why mention that’s relevant is because it demonstrates that the reason that has led to this breach is a serious serious serious worry. And it’s a serious worry to me, but I think I want to paint it in broader terms and say I really hope that my boyhood club, the club which my family has been involved in for a hundred years, does not end up having to be the straw that breaks the camel’s back in persuading the morons who contest the idea of strict spending controls to be sort of wrong. But I fear it may be the case. It’s been long said at EFL level, if we’re going to make the omelet, proper cost controls, unfortunately, at one point a more prominent club may have to go go. And there are whispers in EFL circles that could be my boyhood club, which obviously would be tragic and would be the biggest club ever to disappear. So what’s happened here? Okay, so what’s happened? The new protocols are. The new protocols are quite straightforward, you are a club is only allowed to spend 50% of its revenues on its first team playing the squad’s wages, including its manager.
Adrian Goldberg: That’s in League One because the ratios are different depending on which level you’re at.
Charlie Methven: Now, the club and this is a compromise made because of the aforementioned morons who refused to sign up to a proper cost control. The compromise was made to say that if an owner wanted his club to overshoot their allowance then he would be allowed to top up the revenue which would then be judged at 50% of his top up. So let’s say that you’re Oxford United and you’ve got a revenue this coming season of 10 million quid which is about right including their Championship to League One parachute payment of 800 grand. That would be about right. Their allowance for their playing squad and their manager would be 5 million quid of which let’s say it would be 4.5 million quid on the playing squad and 500,000 quid on the manager. Oxford United were planning to go into this season with a wages budget of 13 million quid.
Adrian Goldberg: Wow.
Charlie Methven: So effectively they are 9 million quid over on their allowance, let’s say, and I must stress all these numbers are estimated by me using my experience of the Football League and my personal knowledge of Oxford United but there may well be some small discrepancies in there. Oxford might come back and say, “Well, actually, our intended budget was 12.5 million, blah, blah, okay, whatever.” Effectively, they let’s call it £8 million over their budget. That then requires the current owner to put into the club £16 million in additional revenue of which 50% can be used and that’s eight that’s the 8 million. But the other 8 million has to stay in the club and be used for other means, right? whether it be your academy or whether it be capital expenditure or whatever, but it has to stay in the club. You can’t put it in then take it back out again. So the Football League and the Independent Football Regulator then want to see that 16 million pounds appear in the club a little bit before July the 1st actually. I think it’s June the 20th or something like that, otherwise you are subject to an embargo because it means that you have not provided the means and it also then means that you are in breach if your current wages budget not just your desired wages budget also overshoots. So, let’s just say that having got rid of a whole bunch of players, um the Oxford’s actual wages budget is, I don’t know, more like 11 million or something like that prior to signing a whole bunch of new players, then their overshoot might be something like, I don’t know, he might have needed to put in 14 million or something like that. Anyway, the bottom line is that Oxford United’s owner has failed to do that, and has not failed to do it as an oversight, has literally failed to do it. So, he was informed in May that he would need to do this. He then didn’t do it. He was then re-informed by the Football League, if you don’t do this, then we will have no option but to place your club under embargo. And he still didn’t do it. Right. So, this is a red light and a warning signal in and of itself because Oxford United this season on their current cost based levels might be expected to lose, wait for it, somewhere between 15 and 20 million on revenues of 9.5 million. Right? So, it’s already the worst model in the entire pyramid pretty much, right? Where your costs are, you know, three times of your revenues, but then you also then don’t have an owner who’s would… now, if you’re willing, if your if your club is predicted to be losing 15-16 million pounds during the season, you’re going to have to put that money into the club anyway. So, why not put it in up front, right? Of all the owners who might have no reason not to comply with this latest judgment is Oxford United because the guy is going to have to put the money in anyway. He knows what his cost base is. He knows what his revenues are. He’s should be putting that money in. Furthermore, and this is where it gets really murky and really difficult and where I think it’ll start to interest you, Adrian, is Oxford United currently play at a three-sided abomination of a stadium called the Kassam Stadium.
Adrian Goldberg: Which I visited last season. I can vouch for the fact that it’s an abomination. It’s incredibly difficult to get to, for one thing, from the centre of Oxford. Half hourly bus service. Rubbish.
Charlie Methven: That’s just one of its many defects, having only three sides is another.
Adrian Goldberg: Yeah, the big car park at the end.
Charlie Methven: One of its key problems from Oxford United’s perspective is that Oxford United’s former owner, Firoz Kassam, who then put them in this new three-sided stadium and has for the last 25 years forced them to pay a million quid a year rent on it, right, which is a terrible arrangement. He even keeps all the food and beverage and hospitality revenue for himself as well. I mean, it’s a horrific arrangement. However, it’s worse than that, which is that that license, it’s not even a lease, it’s a license, is coming to an end. It was extended briefly, but it’s coming to an end in May 28. So at the end of not this coming season but the following season and the entire area has been zoned for residential planning, on the basis that Oxford United have got planning permission for a new stadium towards the north of the city in a much better location. And this is on a site which I found when I was there but has taken a long time to get planning permission on as these things often do particularly in historic cities like Oxford. The problem is over the last three to four years since the new owners took over, the costs of that project have spiralled from 70 to 80 million to £170 million. And frankly unless whoever your current owner is is fundamentally just a benefactor philanthropist or something like that it is impossible to make financial sense out of building a stadium for Oxford United for £170 million. It just, the only way in which you will ever not lose a lot of money on that is if Oxford United go to the Premier League and then you sell the club when they are in the Premier League.
Adrian Goldberg: Well, let me just say Charlie, uh Oxford United are owned by a group based in Indonesia led by a businessman called Erick Thohir. If they have anything to say to us, please get in touch. Just email goldbergradio@gmail.com and we’ll happily take your side of the story. And it is a story that I would dearly love to hear. We’ll give them free voice on this podcast. But from what you’re saying, Charlie, this is an existential threat to the longestablished football league team Oxford United.
Charlie Methven: Yeah, exactly. because it’s a unique set of circumstances where the club doesn’t own a stadium and where the stadium it currently plays in it runs out of its permission to play in in 18 months or a bit over 18 months time and where the cost of building a new stadium and even the time frame of building a new stadium is becoming has become prohibitive on the one hand and very tight in times of time scale on the other hand. Now the problem is, this is to do with what I regard as being insolvency is in football is when the extent of your liabilities outstrips the value of the actual club itself. This is when Bury went bust. Bury went bust because the amount of money that they owed and the amount of money liability it had in terms of its football cost base because you can’t get rid of that in administration, it was deemed by the market that’s the investment market to be greater than the value of the club. From memory, its liabilities, and its debt / ongoing football liabilities and to HMRC, were about 8 million quid, and at the time the market value of Bury would have been about 5 million quid. So basically they couldn’t find anyone to take in administration they could not find anyone to take the club on because effectively the new owner would be booking an immediate large loss. Now if you look at Oxford’s situation losing around 15 million pounds a year and let’s be charitable, and say that in year two let’s say that somebody new took over the club right now and they the 15 million pounds this year and next year let’s say they managed to do some cost cutting and whatever it might be and in the in the final season at the Kassam Stadium they lost let’s say 10 million so over the course of two seasons they would have lost £25 million. But what is Oxford United actually worth in League One without a stadium to play in? I mean not much. What I mean someone somebody said to me the other day, you know, £1. I’m like, ‘well, no, you’d have to pay me to take it because I’m about to take on a massive liability for something which is currently worth’. There are clubs in League One of Oxford United’s size who do have long-term stadium security that are going for 89 million. And yet you’re looking here at something which is going to cost 30 million in the next two years. So what’s your alternative? Your alternative then is to actually build the new stadium. Well, even assuming you can knock some of the vanity project edges offered and get that price down to 150 million, the amount of equity that you’re going to need to inject, that’s before you take into account the mortgage is 70 to 80 million. So, you’re going to be in for a hundred million on Oxford United in League One to play in its new stadium in two years time. Well, that’s around about the going price for a club at the top of the Championship. So effectively the entire future of the club is in Erick Thohir’s hands and that is why when he refuses to put the money into the club to meet the new protocols, even though that’s money which is going to have to go into club anyway in the next few months, the red light starts flashing furiously on the dashboard because that club is very very vulnerable right now.
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