We all thought that it was very likely that a transfer embargo was on the way, and now it’s been confirmed that Leeds will suffer this penalty in the next transfer window, along with Blackburn Rovers and Nottingham Forest.

Under the new rules, clubs were permitted to lose no more than £3m in the 2013-14 season, with a maximum of £5m of shareholder investment. Apart from the three penalties already confirmed, the Football League is in discussion with several other clubs, and further embargoes could follow. They haven’t named names, but Bolton Wanderers and Middlesbrough are believed to be among those whose losses are in danger of exceeding the limit.

As soon as Leeds’ latest annual accounts were released, showing a loss of £23 million for the year to June, it was inevitable that we would have our wings clipped during the January transfer window. The purpose of the regulations is to prevent clubs getting into financial trouble and to stop clubs overspending and getting promotion at the expense of rivals who were more sensible with their money.

The underlying assumption behind the regulations is that losses can only happen as a result of clubs improving their playing squads. So they don’t take account of revenues having to be diverted to pay for a previous chairman’s dubious property schemes, or excessive wages being paid to a clutch of signings whose performances on the field have been rather disappointing.

On the face of it this penalty couldn’t have come at a worse time for Leeds, with Neil Redfearn saying after Saturday’s abysmal defeat by Fulham that his squad needs four more players. With most of the first team regulars being youngsters or foreigners who aren’t used to the English game, we could do with a few experienced players who can battle against some of the more physical sides we have to compete with in the Championship.

But if you go through the exact wording of the regulations, you can see that we will still have some scope for a little bit of trading in the transfer market. Where clubs have 24 or fewer players over the age of 21 who have made at least five starting appearances in total, they can sign players on a free transfer, provided their salary is less than £600,000 per year. As Leeds have several younger players and most of the squad has only been at the club since the start of the season we could well be under that limit.

For loan players, we can’t pay a loan fee to the parent club but we can make a contribution to that players wages. This will obviously limit the quality of player we can bring in, but we may be able to pick up a few Premiership players who are surplus to requirements at their current club, but who could still do a job one division lower.

Although Cellino has said he only wants to take loan players if there is a prospect of signing them permanently, a few short-term signings could be a useful stop-gap for a year or two while our home-grown youngsters mature. We will have the opportunity to have the embargo lifted in June, but only if our operating loss (which is before transfer fees are taken into account) of no more than £3m, with a maximum of £3m of shareholder investment for the 2014-15 season.

We might manage to achieve this, but it could be difficult with such a large squad, even though we’ve managed to offload some of the biggest earners. The problem is that Cellino stockpiled players at the start of the season because he knew that the embargo was coming, but in turn this has increased the wage bill and could lead to the embargo being extended.

In the longer term it will get even more difficult to stay within the limits. In 2015-16 the losses can be no more than £2m, though this can be as high as £13m if the owner makes up the difference, but from the start of the 2016-17 season clubs can only lose a maximum of £15m in total across a period of three seasons, even with shareholder investment.

All of this will be quite a challenge for the owners of Leeds United over the next few years, whoever they turn out to be. It’s clear that to get out of this mess and make progress we are going to have to get value for money from whatever signings we are able to make, offload those who don’t perform and give the younger players every opportunity. Let’s hope that the current head coach is given the time he needs in the job to do just that.

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