Impact assessment

Fact sheet - the Independent Football Regulator (IFR)

Updated 25 October 2024

Applies to England and Wales

The Football Governance Bill will establish a new Independent Football Regulator (IFR) for English men’s elite football. The IFR will be set up as a new public body to ensure its operational independence and accountability.

It will have three primary objectives. They are:

1. Club financial soundness- to protect and promote financial sustainability of regulated  clubs, ensuring that clubs take sensible financial decisions and consider the long-term when taking risks.

2. Systemic financial resilience- to protect and promote the financial resilience of English football as a whole, ensuring that systemic risks and structural issues like the distribution of revenue through the pyramid are managed appropriately.

3. Heritage- to safeguard the traditional features of English football that matter most to the fans and local communities of clubs.

The IFR will not lawfully be able to act outside its remit defined in the Bill and every action it takes must, so far as is reasonably practicable, advance one or more of these three objectives. 

The IFR has a duty to consider several ‘secondary’ outcomes that are important in the football industry but are not the direct responsibility of the IFR:

• sporting competition
• the competitiveness of regulated clubs (including against international rivals)
• investment into English football

The IFR will not act to directly influence these outcomes. While some indirect impacts will be unavoidable, the IFR will seek to avoid them where possible. This recognises that sustainability should not be pursued at the expense of all else.

The IFR must also have regard to seven ‘regulatory principles’ when operating. These principles are based on best practice from existing regulators, but tailored to the unique nature of the football industry:

1. Use its resources in the most efficient, expedient  time and economic way. 
2. Co-operate, and proactively and constructively engage, with clubs; owners, senior managers and other officers of clubs; and competition organisers.
3. Any requirement or restriction imposed on a person should be proportionate to the benefits which are expected to result from that requirement or restriction.
4. Act in a way that recognises the specific context of football and the fact that clubs are already subject to rules, restrictions and burdens by virtue of their membership of or participating in competitions.
5. Act consistently (subject to it recognising the differences between clubs and competitions and the differences between the circumstances affecting clubs and competitions).
6. Act in a way that recognises the responsibilities of owners, senior managers and other officers of clubs in relation to the requirements placed on clubs by the legislation.
7. Act as transparently as reasonably practicable.

The IFR will operate a licensing system where all clubs in scope will require a licence to operate. The intention is for the scope to cover all clubs in the top five tiers of men’s English football. Through the licensing system, the IFR will have powers to apply and enforce requirements related to financial regulation, fan engagement, and protection of club heritage, as well as improving governance standards by publishing a football club corporate governance code for clubs to report against. It will also have the power to prohibit clubs from joining unmeritocratic breakaway competitions, such as the European Super League.

Separately, the IFR will have the power to test the suitability of incumbent and prospective owners and directors, and operate a backstop mechanism to make sure there is sufficient distribution of finances across the professional game if football can’t reach an agreement on this itself.

The IFR will have the following powers, as set out in the Bill:

Statutory, strengthened owners’ and directors’ tests to make sure a club’s custodians are suitable and protect fans from irresponsible owners.

The tests will consist of three key elements:

• a fitness test (owners and directors)
• a source of wealth test (owners only)
• a requirement for financial plans and resources (owners only).

Prospective owners and directors of clubs will have to undertake and pass tests before buying or joining a club. Incumbent owners and directors will not automatically be tested, but the IFR will have powers to test and remove incumbents should they be found to be unsuitable. This allows the IFR to tackle concerns about unsuitable owners and directors responsible for the financial mismanagement of clubs.

Enhanced financial regulation to improve the financial resilience of clubs across the football pyramid, ensuring that clubs take sensible financial decisions and risks are mitigated so they do not jeopardise the club’s future.

The Bill ensures  the IFR will be sighted on  financial plans and step in with mitigations where it has concerns.

Clubs will be required to demonstrate sound basic financial practices; have appropriate financial resources to enable the club to meet cash flows, including in the event of a financial shock; and protect the core assets and value of the club - such as the stadium. This will prevent clubs facing cliff edge situations.

If there is a concerning level of financial risk, either at club or systemic level, the IFR will be able to place bespoke conditions on clubs to mitigate it.

Placing fan engagement requirements on clubs and protections on club heritage.

This will require clubs to have an effective framework in place to regularly meet a representative group of fans to discuss key strategic matters at the club, and other issues of interest to supporters, including club heritage and ticket prices.

Most clubs have a strong relationship with their fans, consciously engaging them in decisions about the club’s heritage. However there have been some notable exceptions.

Regulated clubs will be required to establish that the majority of their fanbase in England and Wales are in support of any proposed material changes to club crests and home shirt colours, as well as seeking the approval of the FA if they wish to change the club’s name.

This will ensure rules introduced by the FA which are already in place for clubs in the top five leagues are maintained and adhered to. Fan engagement requirements will now also continue to apply, as far as possible, in the event that a club enters into administration to ensure better transparency with fans during the insolvency process.

Require clubs to seek approval if they propose a sale or relocation of their home ground.

The stadium a club plays in not only has significant value to fans but is often a club’s most valuable asset. The 2021 administration at Derby County highlighted the issues caused by the decision to sell the club’s stadium to a separate company owned by the club’s owner. Approval of a stadium sale will be determined on the basis of financial considerations. However any relocation must also not significantly undermine the heritage of a club, with clubs being required to consult their supporters on any proposal prior to the Regulator giving approval.

Prevent English clubs from joining breakaway or unlicensed leagues.

Fans will no longer face the prospect of their clubs signing up to damaging breakaway competitions such as the European Super League, which several Premier League clubs tried to join in 2021. The proposals for the new competition were not meritocratic, did not have the support of the fans, and threatened the heritage and financial stability of English football. The IFR will be able to prohibit such competitions.

Introduce a backstop power to intervene in the distribution of broadcast revenue where necessary (subject to certain thresholds being met).

All parties accept the current distribution of revenue across the top five divisions is not fair or sustainable, contributing to problems of financial unsustainability and having a destabilising effect on English football.

The government’s strong preference is for an industry-led solution that works for all of football. However, given the importance of distributions to financial sustainability, the IFR will have targeted powers to intervene as a last resort if football fails to reach an agreement, subject to certain thresholds being met.

Establish a ‘Football Club Corporate Governance Code’

Clubs will be required to report on their corporate governance arrangements, setting out how they are applying the code of practice that the IFR will develop in partnership with stakeholders. As part of this reporting, clubs will now be required to publish what action they are taking on equality, diversity and inclusion. This is in line with other governance codes and it is anticipated it will help improve corporate decision-making and transparency at clubs.

The IFR will publish a range of documents, helping to instil a culture of openness and transparency in the industry. This includes a State of the Game report assessing the industry, guidance on its regulatory regime, and an annual report on its activities and performance.

State of the Game report

The IFR will need to publish a ‘State of the Game’ report as soon as possible (and no later than 18 months) after becoming operational, and then within every five years thereafter. The report will include, at a minimum, an overview of the main issues that the IFR considers to be affecting English football, and an assessment of whether any features of the market threaten the IFR’s ability to advance its objectives. It is expected to be a broad assessment of the financial health, market structure, and economic issues in the football industry.

Guidance published by the IFR

The IFR will publish detailed and practical guidance on its regulatory regime, to support industry understanding and compliance. This will ensure clubs, owners, directors, and competition organisers know what to expect and what is expected of them. For example, it is expected that guidance would include detail on how clubs should apply for a licence and how the IFR will reach a decision on a licence application.

Annual report

The IFR will need to submit to the Secretary of State a report outlining all of the activities it has undertaken in a year. The report will be laid in Parliament and available for the public to see. This is standard practice for all public bodies.

The IFR’s approach to regulation should be proportionate and adaptive. Rather than take a ‘one size fits all’ approach, the requirements on clubs will be tailored to their unique circumstances and the risks they face. Where clubs are lower risk or already well-run, the IFR will not look to intervene unless necessary. 

The IFR should also take a participative approach to regulation. This means it will aim to work constructively with the industry to improve standards, encouraging a culture of cooperation and compliance. This also includes taking an advocacy-first approach to enforcement wherever possible. Only where this has proven ineffective, or in more urgent or serious cases of non-compliance, will the IFR intervene more directly, up to and including the use of its sanction powers. Where appropriate, these sanctions will target the individuals making the decisions at clubs. This will better align the incentives of these decision makers with the best interests of clubs and their fans.

1. Shadow Football Regulator

A Shadow Football Regulator is working in parallel with the passage of the Football Governance Bill to ensure the new organisation can make an impact as quickly as possible. 

The shadow regulator is undertaking preparatory activity, which will include: 

• designing an agile and efficient organisation with the right governance, skills and corporate functions to enable effective and transparent regulation

• engaging football stakeholders on the implementation of the regime

• undertaking preparatory work in relation to the State of the Game report

An interim chief operating officer joined to head up the shadow football regulator in January 2024. Further appointments including an independent chair and chief executive officer, will be made in due course.

2. Funding

The IFR will eventually be funded through a levy on licensed clubs, once the licensing system is operational. Until this point, it will be funded by the government, with this initial funding eventually recouped through the levy. The Bill gives the IFR discretion to determine the methodology for charges, although it will be required to take into account clubs’ individual finances to ensure it is affordable and proportionate for each club. 

There are limits to its fee raising powers - the IFR’s budgets will be approved annually by His Majesty’s Treasury (HMT) and DCMS, and it will have a duty to consult with DCMS, HMT and the football industry ahead of setting charging levels. This ensures accountability and transparency, and ensures initial government funding is recouped within a reasonable timeframe. This consultation requirement is typical of other regulators including the Pensions Regulator and Ofcom’s online safety regime.

More details on the levy can be found in the subsequent factsheet Duties on clubs and competition organisers.