The sad plight of Reading

Reading's old Elm Park ground could be gloomy in midwinter, but maybe fans were happier

Of all its 72 clubs, Reading have gradually become the EFL’s greatest and most pressing concern. There are uncomfortable parallels with the still raw demise of their fellow third-tier side Derby County, another club who overspent in pursuit of a return to the Premier League and lived to regret their complete reliance on an owner who first would lose millions and then all interest.

Dai Yongge, a Chinese businessman has owned Reading since May 2017.  Dai arrived with ambitions to lead Reading back to the Premier League, a level they fell from in 2012-13, but has instead left them hamstrung in the third tier following relegation in May, bound by financial constraints brought on by his folly. Reading’s total losses now stand at £191million ($232m) after five consecutive years where wages have eclipsed income. The club’s women’s team has been sacrificed, being downgraded 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 deadline for an overdue tax bill was missed last week, heightening the danger of Reading facing a winding-up petition — a request to close down a company — from His Majesty’s Revenue and Customs (HMRC), the UK tax authority, in the coming weeks, which is the first step towards the liquidation of a company. Reading faced one of those in June, before it was eventually cleared a month later.

Possible purchasers

According to numerous sources, speaking on the grounds of anonymity to protect relationships, a number of groups have held talks with the representatives of Dai but, to date, have been unable to strike a deal to buy the club.

It is thought that Dai values Reading in the region of £70million to £80million. Any takeover would need to include ownership of the stadium, sold to Prestige Fortune Asia Limited, a holding company owned by Dai, for £24.5m during the 2017-18 season, and the state-of-the-art training ground at Bearwood, south of the town.

Dai is seldom seen around the Select Car Leasing Stadium anymore. He has attended home games this season but was absent for that visit of Bolton that brought the most visible protest to date. He has a home in central London — regularly attending the exclusive Les Ambassadeurs Club in the posh Mayfair district — but still speaks little or no English.

Meetings with Reading managers tend to come casually over dinner, with Dai flanked by a translator and demonstrating a limited knowledge of the squad assembled on his watch.

Reading have been unravelling ever since their historic overspending first brought EFL punishments in the 2021-22 season.  Breaching the EFL’s permitted loss limit between the period of 2017-18 to 2020-21, with a deficit of £57.8million comfortably exceeding the permitted threshold of £39m, brought the first six-point deduction, before the club’s failure to abide by a budget agreed with the EFL resulted in that far-more damaging six-point fine last April.

Wages exceed income

In every season since 2017-18, Dai’s first as owner, more has been spent on wages than the club has generated. And not just narrowly, either. For three of those seasons, when the dice were rolled on returning to the Premier League, the wages-to-turnover ratio stood at a shuddering 226 per cent (2018-19), 222 per cent (2019-20) and 243 per cent (2020-21).

That imbalance was finally addressed, under duress, in the 2021-22 season, with EFL measures enforced change via a transfer embargo and spending limits. Even then, though, the club’s historic excess meant a wage bill of £25.3million still dwarfed the modest turnover of £16.9m in the Championship.

The outlays tumbled again last season on the way to relegation from that second tier of the English game, as the EFL imposed another reduced budget of £16million but only this summer, when the last of the lucrative contracts expired, have Reading been able to rid themselves of the costly mistakes.

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.

Reading’s supporters  face a worst-case scenario planning under an ownership group that has already taken two clubs to the wall.  KSV Roeselare, who were in the Belgian top flight as recently as 2010, and Beijing Renhe, a Chinese Super League club who won China’s FA Cup in 2013 and competed in the Asian Champions League the following year, both fell into huge financial trouble under the Dai ownership umbrella before eventually going under after misguided gambles led to greater troubles. Reading are now the last of the three Dai clubs to exist.

It says something about the EFL that its tests authorised these owners although they had failed the equivalent Premier League test.