“Systemic Insolvency Risk”: EFL Warns on Club Losses After PFA Legal Action

The English Football League (EFL) has warned that ongoing club losses have created "a systemic insolvency risk" across the football pyramid after legal action by the Professional Footballers’ Association (PFA) over proposed financial rules.

EFL chief executive Trevor Birch addressed the issue in an open letter, highlighting unsustainable growth in club expenditure and losses. The PFA has begun legal proceedings against the EFL over the introduction of new Squad Cost Rules (SCR) in League One.

Wage Caps and Spiralling Losses Spark Clash

From the 2026-27 season, the EFL plans to replace its Profitability and Sustainability (P&S) framework with Squad Cost Rules. The central change would cut the proportion of club turnover permitted for wage expenditure in League One from 60 percent to 50 percent. Designed to control spending, the adjustment has become the main dispute between the EFL and the PFA.

Representing professional footballers, the PFA argues that the EFL cannot introduce the controls without full agreement from the Professional Football Negotiating and Consultative Committee (PFNCC). The union says the rules could suppress player wages and restrict squad investment, affecting members’ earnings and contractual terms. Its resistance follows a previous episode in 2021, when plans for salary caps in League One and League Two were withdrawn after being challenged as “unlawful and unenforceable.”

Birch acknowledged the short career span in professional football but said clubs face an increasingly dire financial position. EFL data shows average player expenditure in League One has more than doubled in five seasons, rising from £3.8 million to £8.0 million. Average club losses over the same period rose from £2.3 million to £7.3 million in League One, while average losses in the Championship reached £21.6 million per club last season.

Financial Sustainability Versus Player Earnings

Birch’s open letter describes financial sustainability and player protection as “inseparable.” Clubs in a stable financial position, he argues, are better able to honour contracts, pay wages reliably, invest in facilities and provide long-term career opportunities for players. He stated, “A club that is financially secure is more likely to honour contracts, pay wages on time, invest in facilities and provide long-term career opportunities.” The EFL chief added, “In the Championship it is even starker.”

Escalating club losses sit behind the EFL’s case for tighter wage controls. Birch wrote, “There is also a legitimate concern that doing nothing only perpetuates the challenges our clubs face, with owners unwilling or unable to provide increased funding requirements.” The league says the revised rules are intended to allow responsible investment and effective competition while preventing overspending that endangers clubs’ financial future.

The PFA maintains that its concerns over wage suppression and restricted squad spending must be heard. The EFL argues that inaction risks deeper financial distress, including unpaid wages, defaulted contracts and erosion of long-term value in club assets.

Legal proceedings have begun as the new EFL season starts and clubs face heightened scrutiny of their balance sheets. Transfer budgets, contract negotiations and clubs’ ability to attract and retain top talent under tighter spending limits are at issue.