In the middle of winter, Reading’s historic Elm Park stadium may be dark, but perhaps fans were happier.
Reading has progressively grown to be the EFL’s biggest and most urgent concern out of all its 72 clubs. There are unsettling similarities with their fellow third-tier team Derby County’s very recent demise. Derby County was another club that overspent in an effort to return to the Premier League and afterwards regretted their entire reliance on an owner who lost millions of dollars before losing all interest.
Reading has been owned by Chinese entrepreneur Dai Yongge since May 2017. Reading was relegated from the Premier League in May, defeating Dai’s plans to take them back there. Instead, Reading is stuck in the third division, constrained by financial hardships brought on by his foolishness. After five years in which wages have exceeded income, Reading’s cumulative losses now total £191 million ($232 million). The women’s team of the club has suffered by being reduced to a part-time operation this summer.
Reading have now been deducted 16 points by the English Football League (EFL) inside the last two years, punishments that have dragged them out of the Championship and into their current position in League One’s relegation zone.
Meeting last month’s payroll was dependent on a short-term loan from the owners of Select Car Leasing, a local firm run by two lifelong Reading supporters, James O’Malley and Mark Tongue, which also sponsors the club’s shirts and their stadium. That, along with an academy funding grant from the Premier League, meant wages could be paid.
The English Football League (EFL) has now docked Reading 16 points over the past two years, dragging them out of the Championship and into their present spot in League One’s relegation zone.
A short-term loan from the proprietors of Select Car Leasing, a local business managed by two lifetime Reading supporters, James O’Malley and Mark Tongue, which also sponsors the club’s uniforms and stadium, was necessary to pay last month’s salary. Payroll was therefore possible thanks to that and a Premier League award for academy finance.
Prospective buyers
Several groups have reportedly held discussions with the representatives of Dai, but to date have been unable to reach an agreement to purchase the club, according to numerous sources who requested anonymity to protect their connections.
Reading is estimated to be worth between £70 million and £80 million to Dai. Any acquisition would need to involve control of the modern training facility at Bearwood, south of the town, as well as the stadium, which Dai’s holding company Prestige Fortune Asia Limited purchased for £24.5 million during the 2017–18 season.
Dai is no longer frequently spotted in the vicinity of Select Car Leasing Stadium. He has been to home games this season, but he was not present when Bolton visited, which sparked the most overt demonstration to yet. He lives in the heart of London and frequents the upscale Les Ambassadeurs Club in Mayfair, but his English is still rudimentary at best.
Meetings with Reading managers typically take place over dinner, with Dai being accompanied by a translator and displaying a limited understanding of the team put together under his supervision.
Reading has been in disarray ever since their catastrophic overspending in the 2021–22 season led to the first EFL sanctions. The first six points were deducted for violating the EFL’s permitted loss cap between 2017–18 and 2020–21, with a deficit of £57.8 million comfortably exceeding the permitted threshold of £39 million. The second six points were deducted in April for the club’s failure to adhere to a budget that was agreed upon with the EFL.
Pay is higher than income
Since Dai’s first season as owner in 2017–18, more has been spent on salaries than the team has made. Additionally, not just narrowly. The wages-to-turnover ratio was a quaking 226 percent for three of four seasons when the dice were thrown on returning to the Premier League (2018-19), 222 percent (2019-20), and 243 percent (2020-21).
Finally, under pressure, the imbalance was corrected in the 2021–22 season when EFL measures imposed change via a transfer embargo and spending caps. Even so, the club’s historical excess meant that a wage cost of £25.3 million still surpassed the Championship’s small turnover of £16.9 million.
The EFL enforced another reduced budget of £16 million last season on the route to Reading’s relegation from that second division of the English game, but it wasn’t until this summer, when the last of the lucrative contracts ended, that they were able to correct the costly errors.
The gravity of Reading’s short-term financial situation may yet see some players sold in the coming weeks. Staff have been braced for assets to be off-loaded at a reduced cost in return for the player remaining with Reading until the January transfer window, so the club could receive the money immediately but not lose their services until the new year.
Under ownership that has already driven two clubs to bankruptcy, Reading’s supporters must prepare for the worst. Beijing Renhe, a Chinese Super League club that won China’s FA Cup in 2013 and participated in the Asian Champions League the following year, and KSV Roeselare, a club that was in the Belgian top division as recently as 2010, both experienced severe financial difficulties under the Dai ownership umbrella before ultimately failing as a result of poor decisions that caused even more problems. The last of the three Dai clubs to still survive is Reading.
The fact that the EFL’s testing approved these owners despite the fact that they had failed the comparable Premier League test says something about the EFL.
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