Sunderland's financial challenges explained after Stewart Donald opens up on potential January issues
Sunderland supporters will have noticed something of a pattern to the club's business this summer.
Incoming transfers often happened in clusters and shortly after a significant outgoing.
The Black Cats faced a difficult balancing act throughout the summer, with the EFL keeping a close eye on their business. Like many clubs across the leagues, Sunderland had to work hard to show they were keeping their wage bill under control and that any signings were sustainable.
Sunderland faced particular scrutiny partly because of Stewart Donald’s takeover and partly because of the obvious legacy issues they were still dealing with from the Premier League era.
Top of the list was a wage bill running well over 60% of the club’s projected revenue, an EFL stipulation under the Salary Cost Management Protocol rules.
The new owners also had to reach an FFI (Future Financial Information) agreement with the league, which holds them to a degree of financial efficiency.
Essentially, Donald put forward a business plan to prove he could run Sunderland sustainably, with the EFL deciding that his plans and visions were broadly reasonable and achievable.
While the club were able to do some significant summer business regardless, the issue remains relevant as it already looks set to define Sunderland’s January window.
Donald spoke openly on the challenges he will face while appearing on the Roker Report podcast at the weekend, admitting that he has virtually ‘no wriggle room’.
At the heart of that is the deeply disappointing end to the window that saw neither Papy Djilobodji nor Didier Ndong secure moves.
Sunderland had expected them to leave and budgeted for it. Replacements were signed and by Donald’s own admission, it now leaves well above where they need to be in terms of the wage bill.
Donald’s words also made it relatively clear that at least one of Bryan Oviedo or Lee Cattermole could still leave in January, despite their strong starts to the season.
A significant drive for extra income has raised Sunderland’s projected revenues to around £18 million, which has given them some much-needed leeway in terms of their wages.
To that end, the club’s supporters have been vital, particularly in the surge of season ticket sales that followed the takeover and the arrival of Jack Ross.
As Charlie Methven wrote in May, “For our part, we are determined that the money committed by fans will be treated with great care, and that as much of it as possible will go to enable Jack Ross to build as strong a squad as possible over the next few weeks.
“In short, more season cards sold will equal better players on the pitch.”
With Sunderland’s current wage bill now at around £14million – not accounting for Djilobodji and Ndong, who haven’t been paid this summer after going AWOL – however, even rough calculations make clear that they are sailing close to the wind.
During their first year in the third tier they are given some grace and can spend 75% of expected turnover on wages, but even then it is a close call.
Should Sunderland’s likely legal action regarding Djilobodji and Ndong not work in their favour, their wages will have obvious consequences and push the wage spend even close to turnover.
Jack Ross was keen to add Ryan Christie in his squad in the final days of the summer window but once it became clear that the wantaway pair would not leave, his efforts never got off the ground.
As it transpired, Celtic had a disappointing end to the window themselves and Christie has returned to the first-team fold.
Should Sunderland look to do any January business, however, then they have much work to do.
Whether it is because they have been stung by criticism of their perceived laissez-faire approach to ownership issues in recent years, or whether it is becaue they are wising up to financial issues in the game, the EFL are taking a tougher stance and it is set to play out with a number of clubs in the coming months.
QPR’s severe penalty for FFP breaches will likely hamper that club for years to come.
Birmingham City, meanwhile, have incurred their wrath for breaking a ‘soft embargo’ by signing Danish full-back Kristian Pedersen.
There is talk of a possible 12-point deduction.
Championship clubs, of course, operate under slightly different rules than those in League One but the approach is nevertheless telling.
The threat of a soft embargo, while never overly severe, was one that Sunderland were conscious of throughout the summer and would be again in January while the likes of Ndong and Djilobodji remain on the books.
Sunderland of course receive a significant parachute payment this season but the EFL have been keen to ensure that the club can show tangile signs of financial progress regardless, particularly when those payments have helped finance a number of legacy transfer fees.
Put bluntly, Sunderland’s parachute payments will run out before the likes of Oviedo, Cattermole, Ndong and Djilbodji come to the end of their contracts.
That is a concern for the EFL.
Of even greater concern to Sunderland supporters is perhaps Donald’s admission that the financial restrictions could hamper contract talks for Lynden Gooch, George Honeyman, Josh Maja and Bali Mumba.
That situation, though, neatly surmises the ongoing challenges Sunderland face.
They would certainly hope that the EFL would see tying four talented youngsters to new deals as sound business, protecting them financially. Certainly, it would cost a significant amount to replace them given their contributions so far this season.
Again, it will be about dialogue with the EFL and showing that any spending is sensible.
The situation is manageable but challenging.
Both Donald and fellow director Juan Sartori are aware that they will have to plug some losses this year and possibly beyond.
In an ideal world, promotion will be secured this year, with the last of the Premier League excess curtailed.
With most legacy payments dealt with, the final (albeit significantly reduced) parachute payment would give Sunderland some room to press ahead in the market.
That remains some way off in the distance, however, and Donald’s honest assessment of the financial situation only underlines how much work is left to be done.
Parachute payments have been a lifeline for the club and Ellis Short’s decision to clear the debt has clearly given Sunderland a fighting chance of rebirth.
The legacy of his tenure goes far deeper than that debt, however, and the EFL will continue to cast a keen eye over proceedings as Donald deals with the rest.