Brad Galinson has a warning for anyone looking to invest in English football’s lower leagues. “Almost every single club in the EFL is about seven days away from suffering the same fate as Sheffield Wednesday,” the Gillingham owner says. “Everyone is chasing dreams.”
Many have blamed the “Wrexham effect” for spiralling costs as investors from all over the world have flocked to buy clubs down the pyramid. Only two in League One have a playing budget of less than £3.5m this season compared with 13 two years ago, and several are thought to be operating on more than £10m.
In a division where the median loss among the 24 clubs last season was £5.2m, the majority of that money is being spent on player salaries. Galinson, an American who has provided an interest-free loan of almost £7m to help cover Gillingham’s £13m in losses since he bought a majority stake in the Kent club in 2022, says there has been similarly rapid inflation in League Two budgets over the past five years.
“What ends up happening is every single club in the EFL, including the Championship, [where] there’s probably some exceptions with some parachute payments, is functionally bankrupt,” Galinson says. “If the owner just decides that they’re sick of it, immediate administration. It’s actually quite irresponsible. No one is worrying about sustainability. So everyone has to be unsustainable unless you throw in the towel and just get relegated. These football clubs in the UK mean everything to their communities. What you’re doing is you’re literally bankrupting these community assets.”
The independent football regulator says one of its core objectives is to “protect and promote the financial soundness” of clubs, and under its published timeline EFL clubs will be licensed for the 2027-28 season.
The EFL has opposed a proposal from 18 League One clubs to introduce a £4.7m salary cap and a luxury tax for clubs who overspend. Galinson has been working on a similar plan for League Two and is hopeful that they can persuade the league that the change is necessary to safeguard clubs’ futures.
“It keeps these community assets sustainable,” he argues. “No matter how irresponsible, responsible, smart or dumb an owner is, it keeps the league highly competitive, which is really important. When you get promoted or relegated, it also allows you to be able to survive and not get stuck with either very high wages or very low wages, where you’re just going to come right back down and go back up.”
Although Galinson remains committed to “fixing the league”, he is confident he could sell up “any time” given the continued interest in owning an English football club in the United States and beyond. All but three Premier League clubs – Brighton, Brentford and Tottenham – have some form of overseas ownership, and American investors are present at more than a third of clubs in the EFL.
They include the former NFL quarterback Tom Brady, part of his compatriot Tom Wagner’s ownership group at Birmingham, and the rapper Snoop Dogg at Swansea, who joined the US owners Brett Cravatt and Jason Cohen there last July, and more than 20 in the bottom two divisions. A consortium led by the American businessman David Storch was this week given preferred bidder status by the administrators trying to sell Sheffield Wednesday.
Yet there are signs that some American investors are being put off by the growing expense of chasing the dream. UNA Sports Group told the Guardian that it looked seriously at teams in the Premier League and Championship before settling on a club competing in this season’s Champions League that is based outside the UK. The deal is due to be announced by the middle of April.
“There was a study a few weeks ago that said 90% of clubs in the UK are cashflow negative and we just think that’s unsustainable,” says David Rader, the president of UNA. “The numbers have gone crazy and that’s why they’re not profitable.”
Were they not tempted to try to follow Wrexham’s example by investing in a club lower down the pyramid? “If everyone’s trying to do that and everyone thinks that’s the move then how are you going to differentiate? Unless you have Ryan Reynolds and Rob Mac behind it, you’re not. It’s hard to envision that success of that kind of continuing but the next level across Europe is very investable.
“Sophisticated investors are starting to look beyond the shine of the EPL and saying: ‘The valuation multiples are really high for teams that are very inconsistent at best in terms of making profits.’ So we’re looking at teams that are profitable and consistent and are still making the Champions League and competing in big-time European football.”
However, dwindling television rights on the continent as the Premier League continues to dominate the landscape means that reaching the promised land of England’s top flight remains a more attractive proposition for many investors. That is despite parachute payments to relegated clubs being reviewed by the independent regulator as part of a wide-ranging report that will be published next year.
There is also expected to be a settlement in the long-running saga over solidarity payments from the Premier League to EFL clubs that, excluding parachute payments, were at the last count worth about £140m a year – about £5m for each Championship club not in receipt of parachute payments, £1m for each League One club and about £600,000 for each League Two team. Galinson is wary that increasing the payments could exacerbate the problem of spiralling salaries.
“If I’m the Premier League, there’s no way I’m giving more money to the EFL,” he says. “Clubs will just immediately put it all on wages. The Premier League has said: ‘Fix your house so that you guys actually have viable clubs. Then we’ll talk about redistributing the money.’”
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