New Restrictions on Owner Investment in EFL Leagues One and Two

Clubs in Leagues One and Two will face restrictions on the amount of money contributed by owners that can be spent on player wages and transfer fees, effective from the 2025-26 season. This development occurs as high-profile new owners, such as Wrexham co-owner Rob McElhenney and Birmingham City investor Tom Brady, have joined EFL sides. Under the new regulations, clubs will only be permitted to spend a proportion of any investment exceeding £500,000. Owners in League One who invest £1m or more into a club will be limited to spending 60% on player-related expenditure, while League Two sides will only be allowed to spend 50%. The English Football League (EFL) hopes these changes will help reduce the financial losses incurred by some clubs in the third and fourth tiers. These rules aim to align equity investment, where owners acquire shares in a club, with the EFL’s Salary Cost Management Protocol (SCMP). The SCMP is part of the Financial Fair Play regulations designed to help control clubs’ financial losses. Currently, under SCMP rules, League One teams can allocate 60% of their turnover to wages and transfer fees, and League Two teams 50%, but 100% of any equity investment is permitted. An additional rule change specifies that only 60% of extra football income for League One clubs and 50% for League Two clubs – including prize money, cup earnings, or transfer fees received – may be spent on player-related expenditure. Previously, all of this money could be spent on the squad. This means that if a League One owner invests £100m in their club, they could only spend just over £60m on players. However, owners retain the ability to spend an unlimited amount on non-player related costs, such as infrastructure improvements or community projects. These measures are being introduced as an increasing number of new owners have taken over EFL clubs, most notably in League One with the high-profile acquisitions of Birmingham City and Wrexham. Birmingham City, known as “Blues,” reportedly spent a League One record fee of £15m on Fulham’s Jay Stansfield in the summer. Their ownership group, which includes NFL legend Tom Brady, recruited 13 new players, including Lyndon Dykes, Alfie May, Bailey Peacock-Farrell, and Tomoki Iwata. Wrexham, under the Hollywood partnership of owners Rob McElhenney and Ryan Reynolds, has also invested millions, enabling the club to progress from the National League to League One in consecutive seasons. “In agreeing to the amendments, clubs recognise that decisions to invest have to address all areas of club operations, not just on field matters, and these rule changes will help ensure they can work to that objective,” an EFL statement read. These changes do not impact clubs in the Championship, which are governed by different financial rules that restrict them to cumulative losses of £39m over a three-year period. The EFL added: “Separately, clubs in the Championship are continuing their discussion in respect of potential changes to Financial Control rules for the division, with further updates expected in the early part of 2025.”