In a nutshell, Financial Fair Play is chiefly concerned with improving the overall financial health of European club football. After its inception in 2011, clubs that qualified for any UEFA competition were required to prove that they did not have any overdue payables towards any other clubs, players, or authorities throughout the season. As of the 2013/14 season onwards, it was also a necessity for clubs to ensure that they complied with break-even requirements. Per assessment period, clubs can spend up to €5 million more than they earn. Any club that is deemed to have failed to comply with this break-even requirement will be liable to various sanctions.
The initiative aims to encourage teams to build for long-term success as opposed to seeking short-term solutions to problems. Football clubs need to operate in an environment where investing in the future is better rewarded, especially in the Premier League. This is likely to result in more clubs becoming credible, long-term investment prospects. Smaller and medium-sized clubs will have potential to grow over time, with the break-even assessment structured to be less restrictive to these clubs.
The main concern for Premier League clubs is the ‘Break-Even’ aspect of the Financial Fair Play regulatory framework. Per UEFA, Monitoring Periods have been introduced as it is unfair to asses a club’s Break Even results over just one season. Initially clubs were assessed over two seasons (2011/12 and 2012/13) combined to determine if they had made an acceptable level of loss. All further Monitoring Periods are to last three seasons. The regulatory body has introduced a concept called the ‘permitted Break-Even deficit’ so that clubs who make a small loss are not automatically deemed to have failed to comply with regulation. Clubs can make a loss up to a certain level but will fail the FFP Break Even test if they exceed certain thresholds. As players are often on long contracts and clubs cannot reduce their spending quickly, UEFA has set the Break-Even deficit at a fairly high level (€45m) for the first Monitoring Period, and is then reduced in future Periods. The permitted loss falls to €30m for the three year period that covers 2013/14, 2014/15, 2015/16.
Right, sorry about all that. At least we’ve dealt with the jargon now. The problem with the initiative is that it’s too damn easy to get around, with sanctions not strict enough to encourage compliance. Let’s take Manchester City as a prime example.
In 2014, City was found to be in breach of Financial Fair Play protocol, with UEFA questioning a number of figures used in the club’s break-even calculation. The regulatory body was also suspicious of a number Abu Dhabi sponsorship deals worth an estimated £25m. As a result, in line with FFP sanctions, MCFC were fined £49 million and forced to limit its Champions League squad to only 21 players. However, there are suggestions that the club chose to overspend and breach protocol. This is best illustrated by the decision to relieve manager Roberto Mancini of his duties in May 2013, only three weeks before the account period-end and the cut-off for the FFP break-even test. The club’s accounts would not have included the pay-off for Mancini had the club delayed his dismissal by a month. Rather than missing out on their preferred replacement and delaying preparation for the coming season, the club may have deemed it appropriate to overspend. The £38 million outlay for Sergio Aguero was also not a necessity, but the merits of the on-field successes appear to outweigh the consequences of non-compliance. The extra goals from Aguero were enough to secure the club two Premier League titles, as well as the financial benefits that come with that success. The club knew the rules, and have been aware of them since 2009, and exceeded the threshold by choice. As a sophisticated, multi-million pound business, the club has a team of accountants employed to understand the company’s financial position at any given moment in time. They would have been aware of their financial situation well in advance of the deadline for the FFP break-even calculation. It is possible that the club evaluated the benefits of compliance with regulation and the benefits of spending heavily to compete in domestic and international competitions.
If they were happy to breach regulation because the sanctions did not outweigh the merits of non-compliance, then the framework has failed. Following criticism from managers across the top European leagues, including Arsene Wenger and Jose Mourinho, UEFA chief Michel Platini has vowed to ban repeat offenders from the Champions League; the ultimate sanction. There is no evidence to suggest that this is to come into fruition.
With Financial Fair Play a relatively new concept, it is very much still in its embryonic stages, with little clarity. Arsenal manager Arsene Wenger admits even he has been left perplexed by Financial Fair Play regulations despite holding a degree in economics. It may be the case that the framework’s clarity, as well as its ability to impose stricter sanctions improves in due course. However, unless UEFA toughen up, Premier League clubs will continue to take liberties. Time will tell.