The Long Read: Quite a lot of reading about Reading
Reading FC have drifted into the EFL's worse financial crisis. How did it come to this?
It’s been quite a year for Ruben Selles. A month and a day ago, he was in charge of the Southampton team for their 4-4 draw against Liverpool, a carefree sort of send-off to their Premier League season, with relegation already confirmed. Less than a month later he was agreeing terms to become the new head coach at Reading, in League One.
It was less than a year since he’d made the leap from being the assistant manager at FC Copenhagen to Southampton, and he was coming to the end of his second spell as manager of the club. The first, in November, had only been for one game as a forgotten warm-up act for The Failed Nathan Jones Experiment, but the second had been for longer and if he had been looking to stake his claim for that job on a permanent basis, things couldn’t have gone much worse. Relegation came with acres to spare. Selles left having won just two of his 18 matches in charge of Southampton.
But Reading is a fall, even from where Southampton have found themselves this year, and although a job’s a job it certainly does not seem unreasonable to ask… does Selles even know what he might be getting himself into, here? Because Reading Football Club are not well, have not been well for quite some time, and have shown few signs of getting better, either.
Reading’s first period in the Premier League saw them catch a serious case of second season syndrome. Having finished 8th in 2007, they were relegated at the end of their second season, and they returned for a season before getting relegated back after a year in 2013. But at the end of last season ten consecutive years in the Championship came to an end with relegation, and the real sickener for fans was that ultimately they were relegated by something that happened off the pitch.
Reading finished in 22nd place in the Championship, five points adrift of 21st-placed Cardiff City. Just a few weeks from the end of the season they were been docked six points by the EFL over a failure to adhere to a business plan set up by the EFL relating to revenue and expenditure. At the time that they were docked the points, they were in 20th place in the table, two points above the relegation places. Were those six points to somehow have been given back to them they’d have been saved by a point.
Relegation comes with ramifications. They’ve already since been charged by the EFL over failing to pay their players and staff on time three times last season. Their women’s team has had to go part-time following their own relegation from the Women’s Super League. Redundancies haven’t been formally announced, but they’re certainly not uncommon at any relegated club, never mind one in the financial state in which this one has found itself. And in the latest instalment, a winding up petition has been raised against the club over unpaid taxes. There simply doesn’t seem to be any end in sight. Not yet, at the very least.
Dai Yongge and Dai Xiu Li bought a 75% shareholding in the club in May 2017. It must have seemed like quite an opportunity. Having finished third in the Championship Reading were in the play-offs, playing for a place in the Premier League. And when they beat Fulham over two legs in the semi-finals, they were close to hitting the jackpot. But the run didn’t last. Reading lost a penalty shootout following a goalless draw at Huddersfield Town.
It turned out to be an expensive defeat. Reading have spent four of the six seasons since in 20th place or lower in the Championship. Their pre-tax losses over the last three seasons have amounted to over £100m, and they’ve received a six point-deduction for the last two. Ruben Selles replaced Noel Hunt, who’d seen the team through to the end of the season following Paul Ince’s sacking in April. Selles is the ninth manager or managerial combo to have taken charge of the team for five games or more since 2017.
And there really is little alternative but to blame outright bad management for this. Spending has spiralled out of all control, which would have been bad enough without having been spent as badly as it has been. They paid Fulham £7m for striker Sone Aluko, but he scored just six goals for the club in 102 appearances over four years. Another, striker Sam Baldock cost £3m Brighton, then only scored 11 goals for Reading in three years and left, as Aluko had, on a free transfer. Aluko was promoted last season with Ipswich Town. Baldock now plays for Oxford United.
The list goes on, and this pattern of bad recruitment has been repeated time and time again in recent years, all of which resulted in the club’s overall wage bill having shot up to more than twice their income. The family poured money into the club. Total debts owed to Reading’s owners stood at £87m by the end of June 2020 and have continued to rise since then.
Flicking back through the headlines of the years since Dai Yongge and Dai Xiu Li bought the club, what has been most striking has been the breadth of ways in which they’ve got wrong. They were paying too much in transfer fees on the wrong players and paying them too much on contracts that were too long, with little apparent thought having been given to their ongoing value–or otherwise.
But all the levers have been pulled. Reading have already sold their ground to a company owned by the owner as an FFP swerve. They’ve done the same with their training ground. Any perceived benefits from this separation were washed away long ago amid a torrent of ill-spent money, and all the club has to show for it is that it doesn’t own its own ground or training ground any more. The Madejski Stadium was sold to Prestige Fortune Asia Limited, a holding company owned by Dai Yongge, for £24.5m during their first season of his ownership. They have been paying up to £1.5m a year since, just to continue to play there.
And the signals from around the owners’ other ventures have been equally bleak. KSV Roeselare, a Belgian second division club owned by the same family, who’d been founded in 1921, folded a year short of their centenary. Just as with Reading, they lost a play-off for a place in the top flight in 2017. The team that beat them, Royal Antwerp, became the champions of Belgium this year.
On the other side of the world, meanwhile, Beijing Renhe, their Chinese club, went the same way as Roeselare in 2021. The family had also been interested in Hull City just months before they bought into Reading, but there were whispers that an extremely advanced deal ended up not progressing because issues over the Owners & Directors Test. That deal was called off at the very last minute, and the reasons were never made fully clear.
So what, exactly, is going on at Reading? How is so much money being lost, and how can the club pull out of a slump that is threatening to turn into a tailspin? The involvement of the agent Kia Joorabchian is an obvious place to start. Joorabchian seems to have no official title beyond being an ‘advisor’, but it seems that practically all of the club’s transfer business has been going through him.
Considering Reading’s recent finishes in the league, it could justifiably be argued that he hasn’t been very successful, though some might postulate that this is dependent on him putting the best interests of the football club ahead of his own. The club’s recruitment team is led by Seb Ewen, who’d previously spent three years working at Sport Invest UK, Joorabchian’s agency, before joining the club in December 2018.
The glace cherry on this Shit Forest Gateau of a situation is that, on top of everything else, a winding up petition has now been issued against the club by HMRC over the non-payment of taxes. They have 21 days to respond, but the options at any court hearing will be limited to four; pay it in full, agree a payment schedule that HMRC will be agreeable to, get the hearing deferred upon production of confirmation that this matter is to be resolved, whether through paying the amount in full or selling the club, or choosing not challenge the petition and seeing it converted into a winding up order.
The club doesn’t appear to be up for sale, so it appears unlikely that Reading will be paying HMRC in full, and if this isn’t happening, then what are their intentions? Because winding up petitions are a serious business, a nuclear option of a debt recovery method from which survival can never be considered guaranteed until the demand in question has been fully dismissed by the court. The Dais are certainly wealthy enough to wipe out any reasonably-sized debt should they choose to do so, but are they invested enough to want to do so?
This is the fourth winding up petition that has been issued against the club. It has be considered possible that Reading could end up in administration over this, and a ten point deduction over this coupled with any further points deductions over all those other issues–it wouldn’t be surprising in the slightest to see them get one over their failure to pay player and staff wages on time three times last season, for example–could easily prove ruinous to a League One season that hasn’t even started yet.
There might even be those of the opinion that placing the club into administration could be something approaching the best option, at the moment. It would stave off the threat of the winding up petition immediately and take the club out of the control of the Dais, in some sense. But it comes with risks and drawbacks. An administrator can only keep the club alive as a going concern for so long as someone is meeting the running costs, and without an obvious buyer—the cost of borrowing is higher than it’s been for years, at the moment—putting the club into administration doesn’t really solve anything much apart from wiping out the winding up petition. Dai would remain the stadium and training ground owner, as well as the club’s biggest creditor. He would hold a very strong hand in negotiations, should the club end up in administration. And who knows what fresh horrors any administrator might find lurking deep in the club’s accounts, making them even more difficult to sell? At this stage in proceedings, there do not seem to be any ‘easy’ options to their woes.
Supporters are obviously unhappy and worried. The Twitter account for the new protest group Sell Before We Dai has picked up more than 3,500 followers since launching just eight days ago with an open letter which set their case out fairly succinctly. Presuming that the team makes it through to the start of the new season, it seems likely that The Madejski Stadium–or, to give it it’s sponsorship-friendly name, The Select Car Leasing Stadium–will be a fractious place to watch football this season unless the owners either definitively sort out the mess they’ve made of all this–and there seem few signs to indicate that this will happen–or sell out to somebody who can. But with the financial mismanagement at this club having been on an epic scale over the last six years, does such a person even exist?
That Reading are in this state is a damning indictment of the Championship, a division driven by desperation and fuelled by an arms race of spending which has come about because of the vast inequalities between the Premier League and the rest. The Dais have security over their debts. They own the stadium now. All the insecurity belongs to the supporters of the club, the players and staff, who’ve already had enough issues with getting paid on time, and ultimately the town of Reading itself.
It’s a tragedy for English football that a club now more than 150 years old should have found itself in this position in the first place, further evidence of the pressing need for an independent regulator for football to be put in position as soon as possible. But this won’t help Reading FC in the here and now. They need an intervention, if the new season isn’t just going to be a continuation of the last. Even if we assume that Ruben Selles has done his homework and is fully cognisant of the issues behind the scenes at the club, it’s difficult to imagine that he will–or even can–turn out to be anything like their saviour. The problems at this football club seem far greater than any manager would be able to fix on their own.