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What on earth is going on at Reading?

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By on Championship, EFL, Reading, Stoke City

Reading’s 3-2 defeat away at Stoke City on the opening day of the Championship season wasn’t a disaster, but behind the scenes, things are going from bad to worse.

A five-goal thriller at the Bet365 Stadium marked a rather fiery opening to the new Championship campaign for both Reading and Stoke. The Potters’ £5 million signing Sam Surridge immediately returned some of the sizeable investment that Stoke poured into him when he smashed their winning goal in the 85th minute, with the ball flying past Rafael Cabral into the top right corner of the Reading net.

The acquisition of Surridge seems like a good piece of business by Stoke, judging by yesterday’s performance. However, for Reading fans, his late winner may have been a little more prickly. Not solely because it condemned the Royals to their fourth opening day defeat in the last five seasons, but because, whilst the Potters had splashed millions on a brand new striker, the Royals failed to name a full squad.

When Veljko Paunovic’s starting 11 was announced on Saturday afternoon, fans and pundits were quick to turn their attention to Reading’s bench. Paunovic had named only five substitutes, a damning indication of the issues that the Royals find themselves embroiled in, but what exactly are these ‘issues’?

A combined pre-tax loss of around £93 million over the 2017/18, 2018/19 and 2019/20 seasons have pushed Reading into the EFL’s financial red zone, meaning they’ve breached the league’s profit and sustainability rules under the Financial Fair Play regulations. This has placed the Royals under a transfer embargo, officially announced in late June.

However, it was originally thought that the Berkshire outfit were allowed to make signings under strict criteria. These were believed to be free agents or loan signings with a wage cap of £8,500 a week. Recent developments have indicated that this may not be the case.

The Royals missed out on the signings of ex-West Brom winger Kyle Edwards and ex-Watford defender Achraf Lazaar after the pair spent some time on trial with the club. Although, in truth, Reading have dodged a bullet in the case of the latter. Kadeem Harris was handed a run out in the Royals’ last pre-season friendly against Crystal Palace on July 31st and is thought to still be training with Reading. Yet, there has been radio silence on whether the club can actually sign him.

Reading are finally feeling the full force of years of poor ownership and it’s really rather uncomfortable.

Reading’s financial issues go far, far back and ironically go back to their promotion to the Premier League in 2012.

Honorary Life President of the club Sir John Madejski had called time on his financial backing of the Royals, and, despite reportedly being in the market for a new owner for some years, the man for the job was confirmed as Russian businessman Anton Zingarevich upon the culmination of the Royals’ Championship-winning campaign.

Madejski famously uttered in 2006:

“If there is a billionaire who wants a nice accessory down the M4 then come and talk to me. Apart from Manchester United, unless you’ve got a sugar daddy with really deep pockets, you’re wasting your time”.

In Zingarevich, he seemed to have found that man.

Now, Zingarevich didn’t seem to be a ‘villain’ from the off. He was local to the area and attended school at Bearwood College, now home to Reading’s training ground. He and then-manager Brian McDermott didn’t seem to have an openly rocky relationship, although his decision to sack McDermott wasn’t the correct one in hindsight. Reading were in trouble from the minute they returned to life in the Championship, despite parachute payments.

New manager Nigel Adkins was restricted to free transfers, and when Reading missed out on the play-offs on the final day of the 2013/14 season, the Royals were publicly verging on falling into administration. By this point, Zingarevich’s trust fund had run dry and his father, Boris Zingarevich, refused to continue bankrolling him.

The Russian’s departure from Reading was confirmed on 2nd June 2014 and with it came a new Thai era. Under the stewardship of Narin Niruttinanon, along with co-chairwoman Khunying Sasima Srivikorn and Sumrith ‘Tiger’ Thanakarnjanasuth, who now owns Oxford United, Reading stuttered for two years whilst financial stability was somewhat restored.

Jaap Stam’s appointment in the summer of 2016 was a surprise, but very nearly a resounding success. The Royals’ defeat at Wembley around 11 months later against Huddersfield Town in the 2016/17 play-off final marked the end of the Thai’s reign at the then-Madejski Stadium, but Thanakarnjanasuth and his colleagues left Reading in a fairly good position.

They simply didn’t have the money to continue funding the club, and it was therefore a good decision to step away.

That’s how Reading met their current owners, Chinese businessman Dai Yongge and his sister Dai Xiu Lu.

Yongge is difficult to decipher. Little of what has happened in terms of Reading’s financial issues have been his ‘fault’ in the sense that it is generally believed amongst Royals fans that he was, and continues to, act in the best interests of the club. Much of Reading’s woes lies solely at the feet of another, however, ex-Chelsea CEO Ron Gourlay, whom the Chinese pair appointed in 2017 as CEO of the club.

There is little point going into detail about the two worst seasons Reading have endured this century, both under Gourlay.

A shocking three transfer windows where the Royals paid megabucks for average Championship players all approaching the wrong side of their careers, as well as a mass exodus of lifelong staff members and academy coaches saw Reading facing relegation to League One until Jose Gomes was appointed in December 2018, turning things around at the death.

With Gourlay leaving the club that November and ex-CEO Nigel Howe returning to attempt to tie up Reading’s plethora of loose ends, Yongge splashed the cash towards the end of the summer transfer window in 2019. The arrivals of Lucas Joao, Rafael Cabral and George Puscas on deadline day came at a sizeable cost. However, we can’t attribute Reading’s financial issues solely to those signings.

The signings of Sone Aluko and Sam Baldock added huge numbers to Reading’s wage bill. A massively inflated squad during the 2018/19 and 2019/20 seasons compounded these issues. COVID-19 has hit Reading hard, although attendances were low before the pandemic, but the Royals have taken multiple measures to balance the books.

Baldock and Aluko were both released, and Chris Gunter and Garath McCleary’s departures likely helped in this respect last summer. Reading have agreed on a stadium and principal sponsor deal with local company Select Car Leasing which, although not lucrative, is another portrayal of the club’s intent to temper their losses. Michael Olise’s £8 million move to Crystal Palace is another example, as well as smaller commercial ventures.

None of this seems to have satisfied the EFL.

It was reported that Reading had received some clarity from the EFL to sign a selection of players on limited wages. Paunovic confirmed before and after the Stoke defeat that this wasn’t the case.

Whilst Derby County, who can’t afford to pay their players, have signed four, albeit on small wages, Reading seem to still be completely in the dark. Midfielder Josh Laurent was linked with a move to Nottingham Forest, and this split fans’ opinions, but in reality, a few million pounds is not going to change the Royals’ fortunes financially in the long run, only damn them on the pitch further.

Given they could only select five substitutes against Stoke, selling more players simply is not an option unless the club are happy fielding a totally uncompetitive squad. Throw a few injuries into the mix, something that nearly happened to Lucas Joao yesterday, and there will only appear to be one outcome.

EFL Embargo clauses state that clubs are allowed to sign players where there are less than 24 ‘established’ players available at the club. This means players who have played five or more first-team games. Reading have 15, or 16 if you include Yakou Meite, who will be out for much of the season.

Some are arguing that fans are overreacting, and to an extent this is true. Reading didn’t play particularly badly yesterday and didn’t deserve to lose, but the Royals simply can’t afford to throw away points this season. Defensive errors seemed rife over pre-season, and don’t appear to have been fixed.

Fans aren’t angry at the team, or at manager Veljko Paunovic. In his post-match interview with BBC Radio Berkshire on Saturday, Paunovic sounded particularly irate. His hands are tied, and he hardly has a squad to work with. Commentator Tim Dellor needed to push the questions, and so he did, but Paunovic didn’t sound impressed.

When asked why Paunovic didn’t include long-term outcast Mark McNulty in the squad to add a player to the bench, Reading’s manager explained that he’d chosen the squad he’d like to work with and McNulty wasn’t in it for ‘technical’ reasons. When Dellor inquired as to whether Paunovic simply didn’t think he was any good, the boss’s negative answer was less than convincing.

That being said, it is possible Paunovic has never actually seen McNulty play live.

Some fans are now speculating that the EFL has given the club clarity over the embargo, but the owners are simply failing to be transparent. Naturally, it is presumed that this clarity is, in essence, a transfer ban. Fans have called on larger social media fan pages and websites to push the club, and STAR, the Reading Supporters’ Trust, have responded saying they will attempt to raise the issue with the club.

The sources that reported Reading’s embargo being lightened only weeks ago included Alan Nixon. The reliability of his information is arguably debatable but not un-credible. He seems to allude to the fact that Reading’s relationship with the EFL has actually gone backwards in recent days, leading some fans to wonder whether Dai Yongge’s intentions are not necessarily in the right place.

Reading’s only true way out of their FFP issues is promotion to the Premier League.

This was rumoured to be Yongge’s intentions with the sacking of Mark Bowen and the appointment of Paunovic last summer.

Yet Reading are stuck between a rock and a hard place. They can’t spend to be competitive to get out of their financial troubles via promotion, but there is also little else the club can do to cut costs without mass player sales which would naturally condemn them to relegation.

The losses incurred by Reading that have created this situation are the club’s fault, or rather that of Ron Gourlay to a rather large extent. However, loss and debt are part of any long term business project. As said, the club can’t go back in time and change its actions. They’ve arguably done as much as they could viably do to improve their finances, but the EFL is not ‘protecting’ Reading.

They are forcing them into a corner, one which could easily lead to disaster, and it can even be argued they are hardly ‘protecting’ the Royals from Dai Yongge himself should he get fed up and decide to walk. Enforcing continuous difficulty is only going to worsen the situation for Reading, and it won’t allow them to reach a point where they can begin to battle their financial issues. The Royals’ debts are not going to clear ‘naturally’ for some years.

In the meantime, they are stuck with a squad that’s a few injuries from half an under-23 side, a manager who seems more on edge by the day, and an owner who remains silent. Things are going from bad to worse at Reading, and there seems to be little let up.

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