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We are not Cat 1 because when the system started Evans decided to settle for Cat 2 status to save a few quid! Once he realised this was a stupid decision he tried to apply for Cat 1 status but by that time those clubs who already had it had effectively pulled up the drawbridge and made it almost impossible to obtain.
As for the advantages it gives a club, it almost seems that a Cat 1 Academy can swoop in and take your best potential players for minimal compensation.