Pompey chief executive Mark Catlin recently sat down to answer questions from fans in his latest video update.
One of the topics up for discussion was the new salary cap, which was recently voted for by a majority of League One clubs.
Following the Q&A – and as promised – we spoke to Mark in more detail about the consequences of the vote and why it is bad news for Pompey and, we believe, football in general.
Q: We have argued strongly for financial self-sustainability in football since exiting administration seven years ago, so isn’t the salary cap a positive move?
MC: Absolutely not and without any profit and sustainability rules behind it, this is a step backwards in terms of achieving sustainability. The previous mechanism to control spending, SCMP (Salary Cost Management Protocol), was based on salaries being a percentage of a club’s turnover and has been removed. All the salary cap will achieve is a levelling of the playing field, enabling the smallest club in the league to compete with the largest for the same players – it has nothing to do with sustainability in its current form.
Q: But surely limiting players’ salaries to a level clubs can afford is a good thing?
MC: Yes, of course it is, and what we have been arguing for is that players’ salaries should be linked to the size of the club and what they can afford. With a ‘one size fits all’ budget of £2.5 million, there are plenty of clubs who can now overspend by millions and accumulate unsecured debt getting to this figure. Meanwhile, a club like Portsmouth can afford, approximately, double this figure and can’t even spend the money on players we are self-generating. It makes no sense.
How can it be right that a club with an average attendance of, say, 2,000 can have the same player budget as one with 30,000? It is even worse for us because accommodation is included in the cap and to rent or buy a property here is much more expensive than in many other areas of the country. I keep being told that players will still choose us over most other clubs in this league, but at the salary levels proposed, a significant percentage of their salary is going to be lost because of the cost of living down here – and yet we can only offer the same salary.
It is also important to remember that at the divisional average per player is £113k a year (approximately 2k per week), but included in this is national insurance, medical insurance costs, accommodation, bonuses, appearance money, agents’ fees, etc – so the actual figure a player receives is actually far less.
We are in a competitive business and, as we have already seen, are now disadvantaged when competing with clubs from other countries, including Scotland. We even risk losing players to non-league, where clubs often pay more. In my opinion, we are devaluing our own product and should be aspiring to get the best players we can at every level of the EFL, not risk losing them to other countries or even non-league.
Q: To say you are annoyed with this would be an understatement then?
MC: Since the club’s exit from administration, we have practised what we have preached. Both under fan and Tornante ownership, the model has been clear – all operating profits would be reinvested back into the playing budget and, year-on-year, the plan has always been to increase this. This has been achieved through a lot of hard work and discipline from everyone at the club. It included continued commercial growth and the support of our amazing fans, who ensured, incredibly, the need to cap season ticket sales last season.
As we exited administration, our playing budget was in the bottom half of League Two. However, we were disciplined and budgeted within our means and have continuously increased to a point where it is now in the top six of League One. Owners of other clubs are literally pumping in, often via debt or loans, millions to get to the size of budget we can now sustainably afford and continue to remain debt-free. Yes, the owners can invest in capital projects such as the stadium, training ground, property acquisitions, etc, but the operating side of the business remains either break even or slightly in profit.
If the club had been allowed to continue along this path – and given the facts of our financial and on-field progress over the past seven season – we are confident we would eventually arrive in the Championship in a unique position of being self-sustainable and with a competitive budget for that league.
The salary cap has undermined everything we have built over seven years of financial discipline, hard work and support from everyone – not least the fans who have consistently backed our strategy.
Q: How will the salary cap affect that day-to-day running of the club?
MC: It is already a difficult task to retain talented players at your club, but these new rules make it virtually impossible. Relatively recently, we extended the contacts of Alex Bass and Ronan Curtis. All players signed before the salary cap vote are treated as being at the divisional average – no matter what wages they are earning. If we now try to get any of our existing squad to extend their deals, it will result in them having to take a pay cut, which is just bizarre and virtually impossible. It’s just crazy.
Q: So why did clubs vote for the salary cap?
MC: We have argued for a flexing of the budget to what a club can sustainably afford without owners inflating it artificially. We also proposed being able to extend existing contracts and the players remaining at the divisional average. Both of these are, in my opinion, sensible suggestions and would lead to us supporting the principle of the salary cap, but these were rejected by the EFL, along with other elements that we believe would fix the anti-competitive elements of the salary cap.
Many owners and CEOs in our league sympathise with our views, but – and this has been said to me openly – there is an attitude of ‘why should I have to keep putting money in to compete with Pompey?’. My answer is that nobody forces you to do that. It’s not us who are artificially inflating player salaries, it’s the owners pumping money in to cover huge losses!
I appreciate the honesty of those telling me that this is all about levelling the playing field. Clubs voted in self-interest and I have no problem with that, but don’t hide behind the illusion that this is all about sustainability.
Q: How does this impact on the gap between the Championship and League One?
MC: By going from a cap of £2.5 million to what I believe may be £15-£20 million in the Championship, you have created a chasm that is going to be almost impossible to breach. Add to that you could get a club being relegated from the Championship and arriving in League One with a budget of £20 million+ – losing £20m+ – which would be perfectly fine with the regulations. I thought this was about sustainability? The more I speak about this, the more frustrated I get!
Q: Can money generated from cup runs be added to the salary cap?
Q: Can the profit from transfer fees be added to the salary cap?
Q: Are players under the age of 21 excluded from the salary cap?
MC: Yes, but how fair is that? An experienced pro with a great record, who is married with kids, has to take a pay cut to £1,300 per week to remain at a club. Sat next to him in the changing room, meanwhile, is a 17-year-old lad who has just been released by another club and is on £5k+ a week. That can be funded by an owner, who can still run his club into millions of pounds of debt. You couldn’t make it up!
Q: What is the next step – have you or others considered legal action?
MC: It’s tough. We are part of the EFL and while I don’t agree with the current situation, it was voted on and we have to accept and respect democratic decisions, with one caveat – that they are legal. Governing bodies can, of course, vote and agree on various rules and regulations, but in regards of equality, competitiveness and restriction of trade, no decisions can legally override statute or company law. The PFA believe that the new rules in their current state to be ‘unlawful’, while the professional advice I have received strongly supports this view.
Our strategy at the moment is to work towards some adjustments that protect our players as employees and allow clubs to spend what they can operationally afford. Both of these are, in our opinion, no-brainers and keep us legal. I understand that the PFA are not too far away from our views on this in terms of reaching a compromise, rather than embarking on costly legal action, and are shortly due to go to arbitration with the EFL.
We hope that an agreement can be reached between the PFA and EFL, but if it can’t, then we will have to take a view on whether the new rules force us to break the law. If we are convinced this is the case, then naturally we have an obligation to both the business and our employees to not allow ourselves to be put into that position. We will continue to discuss with all relevant parties, while also considering our options moving forward.
Q: Could this run on for a while yet?
MC: I sincerely hope not and want to finish by stressing that we remain 100 per cent committed to clubs being self-sustainable, but this does not equate to ‘levelling the playing field’, which in turn potentially exposes us to legal action.
I can assure you that we will remain transparent with this issue and keep supporters as updated as possible.
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