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Financial Fair Play – What Next?

Football clubs are overspending. Crazy money is being paid for players and it seems like transfer records are being broken every year. Spending vast amounts on new signings inevitably leads to wage inflation. Michel Platini has vowed to stop the overspending and curb wage inflation with the introduction of Financial Fair Play (FFP). Many have criticised the new rules and regulations and argue that it will only increase the dispersion between rich and poor clubs within the European leagues. However, UEFA are certain that the rules will force spending to be more sustainable and the effects can already be seen.

It should be noted FFP is only regulated by UEFA on clubs participating in the Europa League and the Champions League.

The 3 main rules that a club must follow to comply with FFP

– Clubs must pay players on time

– Clubs keeping up to date with taxes

– Clubs must break-even (over a 3-year period)

The last bullet point is the most concerning for clubs. Often, ‘rich’ clubs would have poured money into the club from its owners to buy a player or cover up losses. Nowadays, for clubs to adhere to the FFP regulations, they must increase revenue for transfers to cover losses. Remember in 2004/2005 season when Chelsea posted a loss of €140m – evidently this would not be allowed under FFP without heavy sanctions imposed.

It should be noted that FFP does not take into account costs which are essential for youth development, community development and infrastructure development. UEFA have looked at this issue and it is expected that clubs will be allowed €10m for this.

Why is FFP coming up so much recently?

For the past 18 months, UEFA accountants (Club Financial Control Body –CFCB) have been tucked away in a meeting room auditing the accounts and books of European Clubs. Out of 76 clubs audited, ‘fewer than 20’ were deemed to require further investigation. This week the CFCB were apparently in negotiations with many clubs on what sanction would be put in place on them because they have broken the rules. The apparent broken rule was that more than €45m was injected into the club by the owners over the space of 2 seasons.

Do Clubs care about FFP?

Evidence suggests clubs are finely in tune with the requirements of FFP. Many would argue that if FFP was not in place, then Chelsea would not have sold Juan Mata last winter to rivals Manchester United.

Manchester City’s accounts (Deloitte) for 2012/2013 outlined a massive 31% increase in commercial income from €121m to €151m. Let’s put this increase into perspective; Manchester City’s commercial income for 2009/2010 season was €55m.

Sources this week have indicated that Manchester City and Paris St Germain will be two of the clubs sanctioned within the next two weeks. Many expect these to be a mix of financial and sporting sanctions. The sporting sanction is expected to be a value cap on the size of their European squad meaning that big-money players would have to be excluded so that home grown talent would be included in the matchday squad.

 

Sanctions

–         Reprimands

–         Fines

–         Withholding of prize money

–         Points deduction

–         Refusal to register players for UEFA competitions

–         Reducing a Club’s squad size

–         Disqualification from UEFA competitions in progress

–         Exclusion from competitions

 

The final bullet point is obviously the harshest action to be sanctioned on a club if the regulations were to be broken. However, in saying that, this week Michel Platini noted that it would be very doubtful that any exclusion sanctions would be implemented this year.

Appeals

Appeals can be made by both the clubs sanctioned, and clubs who are indirectly affected. Such as, say, Arsenal or Everton (whoever missed out on 4th). These clubs might feel that the sanctions have been too lenient on Manchester City and they should be excluded which in turn would include the 5th place club in the Champions League.

Should be noted that all appeals and cases put forward to the Court of Arbitration fo Sport would be finalised before the start of next season

Summary

FFP is still in its infancy, and this writer has no doubt clubs will find loopholes in the rules and regulations. So to exclude, say, Manchester City this year would appear harsh when the aim of FFP is to ‘help’ clubs to move in the right direction. However, if clubs became repeat offenders, one would imagine the sanctions would get tougher on a year-on-year basis. Plus, one would imagine UEFA wish to keep credibility with the FFP sanctions too and not go crazy in its infancy and start excluding all the top clubs.

Over the next week, expect updates as clubs are currently negotiating the financial and sporting sanctions with UEFA.

Chris Herlihy, Pundit Arena.

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Author: The PA Team

This article was written by a member of The PA Team.