American Investor Issues Stark Warning Over EFL Financial Crisis
Brad Galinson, the American businessman who purchased a majority stake in League Two club Gillingham in 2022, has issued a dire warning about the financial health of English football's lower leagues. The investor, who has provided an interest-free loan of nearly £7 million to help cover Gillingham's £13 million in losses since his acquisition, claims that "almost every single club in the EFL is about seven days away from suffering the same fate as Sheffield Wednesday."
The Wrexham Effect and Spiraling Costs
Galinson points to what many are calling "the Wrexham effect" as a primary driver of financial instability throughout the English Football League. The remarkable transformation of Wrexham AFC under Hollywood owners Rob McElhenney and Ryan Reynolds has inspired investors from around the world to pursue similar dreams with clubs further down the pyramid.
This influx of investment has created unsustainable financial pressures across the leagues. In League One, only two clubs now operate with playing budgets below £3.5 million this season, compared to thirteen clubs just two years ago. Several teams are believed to be operating on budgets exceeding £10 million, creating a competitive environment where financial prudence has been abandoned in pursuit of success.
Functionally Bankrupt Clubs
"What ends up happening is every single club in the EFL, including the Championship, is functionally bankrupt," Galinson states bluntly. "If the owner just decides that they're sick of it, immediate administration. It's actually quite irresponsible. No one is worrying about sustainability."
The median loss among the 24 clubs in League One last season reached £5.2 million, with the majority of that money being spent on player salaries. Galinson reports similar rapid inflation in League Two budgets over the past five years, creating a system where clubs must either spend unsustainably or accept relegation.
"These football clubs in the UK mean everything to their communities," Galinson emphasizes. "What you're doing is you're literally bankrupting these community assets."
Proposed Solutions and Regulatory Response
Galinson has been working on a proposal for League Two that would introduce financial controls similar to those rejected by the EFL for League One. Eighteen League One clubs had previously proposed a £4.7 million salary cap with a luxury tax for overspending clubs, but the EFL opposed the measure.
The independent football regulator, which will begin licensing EFL clubs for the 2027-28 season, has identified protecting and promoting financial soundness as one of its core objectives. Galinson argues that proper financial controls would maintain league competitiveness while ensuring clubs can survive promotion and relegation without being burdened by unsustainable wage structures.
American Investment and Growing Concerns
Despite the financial challenges, American interest in English football clubs remains strong. All but three Premier League clubs now have some form of overseas ownership, with American investors present at more than a third of EFL clubs. Notable examples include former NFL quarterback Tom Brady at Birmingham City and rapper Snoop Dogg at Swansea City.
However, some sophisticated investors are beginning to look elsewhere. David Rader, president of UNA Sports Group, revealed that his organization considered English clubs before settling on a Champions League team outside the UK. "There was a study a few weeks ago that said 90% of clubs in the UK are cashflow negative and we just think that's unsustainable," Rader explains. "The numbers have gone crazy and that's why they're not profitable."
Television Rights and Financial Redistribution
The Premier League's dominance of television rights continues to make reaching England's top flight an attractive proposition for investors, despite the financial risks. The independent regulator is currently reviewing parachute payments to relegated clubs as part of a comprehensive report due next year.
A settlement is also expected in the long-running dispute over solidarity payments from the Premier League to EFL clubs. Currently, these payments (excluding parachute payments) amount to approximately £140 million annually, distributed as £5 million to Championship clubs not receiving parachute payments, £1 million to League One clubs, and £600,000 to League Two teams.
Galinson expresses concern that increasing these payments without proper financial controls would simply exacerbate the wage inflation problem. "If I'm the Premier League, there's no way I'm giving more money to the EFL," he argues. "Clubs will just immediately put it all on wages. The Premier League has said: 'Fix your house so that you guys actually have viable clubs. Then we'll talk about redistributing the money.'"
Despite the challenges, Galinson remains committed to finding solutions for League Two's financial problems, though he acknowledges he could sell his stake "any time" given continued international interest in English football clubs.
