Financial Fair Play - Premier League Clubs Playing

Financial Fair Play - Premier League Clubs Playing "Fair"?

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.

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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.

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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.

by

Aspiring sports journalist from Birmingham. West Bromwich Albion fan (for my sins). Twitter: @Jamirackay

Comments

16 responses to “Financial Fair Play – Premier League Clubs Playing “Fair”?”

  1. Colin Barton says:

    There is almost as much bullshit in this article as there is in the FFP model altogether.

    You fail to mention that FFP was really to protect the status quo of the established Eurpean cartel.

    How do clubs with massive debts escape attention, when the so-called intention of FFP was to stop clubs getting into financial difficulties ?

    How come David Gill of MUFC have so much input when his own club are one of the clubs with massive debts ?

    Back to the drawing board James and perhaps look at the true offenders – UEFA and Platini !

  2. Dodgy Wenger says:

    Absolute moronic nonsense. So called FFP aims to maintain the status quo and do nothing about massive debts while blocking real investment. Only an idiot would fail to see that. You are that idiot.

  3. Paul Donohue says:

    What a strange piece of work. You do realize that the day you published this article UEFA are in the process of rewriting the FFP rules ahead of the 1st July meeting at UEFA.

    The reason the rules are being changed is in no small part due to them being illegal and no less than 15 court cases (mostly linked to Dupont) currently being heard in the court of first instance. One has had a ruling and is being handed to the ECJ (UEFA have already broke traditional protocol by refusing to accept the initial ruling, which could actually lead to massive compensation claims against them) where the expectation is it will be classed as illegal.

    One of the early changes suggested by UEFA (on the day you wrote this article) was to alter the structure of investment (the lifeblood of any business!) and major changes to the break even requirement both of which in legal terms are are anti competitive and as is the buzz word of this case “seek to fossilize” the status quo of the current elite.

    In simple terms this is the actions of a greedy few attempting to cement their place at the top to the exclusion of others or in even simpler terms..the actions of a cartel(Highly illegal!).

    Perhaps you knew all this already and realized this could well be your last opportunity to do a hatchet job on Man City before the true crooks in this whole sorry mess are called out for what they are.

    Some suggested reading for you

    “http://www.dailymail.co.uk/sport/football/article-2329745/Martin-Samuel-meets-Michel-Platini–read-FULL-transcript-interview-UEFA-president.html”

    A google search will also bring up the famous letter on Arsenal letterhead paper signed by the “big 4” giving specific reference to FFP. This is the actions of a cartel which has been outlawed as the most dubious of practice in any business sector.

    If you think the quote about compensation was bluster too… I’ll leave you with mr Duponts quote after the hearing in the Brussels court of first instance.

    “UEFA’s refusal to voluntarily enforce judge’s decision is risky choice, exposes it to considerable financial risk.”

    I could go on, your clear ignorance would not warrant it.

  4. John treacy says:

    UEFA has a choice,either drop this illegal policy or the European courts will do it for them.they have lost. To DuPont before and will do again

  5. Dukinfield Blue says:

    What a tool you are Mackay, yes, Manchester City invested heavily in the team whilst also taking their turnover from £65 million on takeover in 2008 to over £320 million today, making their future financial position secure and sustainable.
    The problem with muppets like you writing woefully badly researched articles like this is your rambling are clouded by your jealous hatred of seeing a club like Manchester City or PSG grow and challenge the current status quo.
    As for related party transactions you mention in your joke blog, UEFA ruled they were fine and acceptable so you couldn’t even get that journalistically correct, in addition even if they decreed they was not, who are UEFA to tell any company irrespective of what it does or where it is based, who they can and cannot sponsor and what value that sponsorship should or should not be.

    For your information, as it’s clear you are so devoid of correct information, FFP is dead. The current legal challenges have already stopped UEFA from implementing the €30 loss rule and when the challenge moves to European restrictive practice areas of EU law, the whole thing will collapse and UEFA will face massive compensation claim from all clubs who were restricted by the unlawful practice.
    I can’t wait to see the corrupt head of UEFA losing everything when this gets squashed.

  6. Naz says:

    I think Financial Fair Play is a misnomer. Everyone wants fair play but which club has been targeted? Manchester City and they don’t need protecting from their owners. I bet most fans dream of being taken over by Billionaires who want to pump money into your football club.

    City are now profitable so it’s no surprise that the regulations are being watered down now that City have escaped the net. If UEFA and the Premier League want to regulate football, then how about they look at debt, or if they have any interest in the fans, what about ticket pricing?

    Manchester Utd fans must look on and wonder where they would be had their millions not been spent on paying off the Glazer’s takeover of their club. It’s issues like that that need looking at, not partisan attempts by those in the game to restrict competition.

  7. Blue Mancunian says:

    Poorly written and devoid of fact (More fiction). Embarrassing article
    Manchester City are spending big money to develop a future for the club and will have no problem in meeting FFP although I suspect that by the time the new season starts, it will have been proven to be illegal and rightly so
    Imagine a business being told that they can’t invest.
    Imagine a millionaire being told that he can only spend £ 50 a day of his fortune
    FFP was invented not to protect clubs from themselves like Portsmouth and Leeds United, it was invented to protect the ‘Cartel’ of big clubs with their cosy gravy train. City and Chelsea and PSG have blown the cartel apart so much that the milan clubs are now complaining that they can’t compete.
    And United get away with an owner borrowing over £ 700m to buy the club and are still massively in debt. But thats OK because United are one of the cartel.
    Learn to write something factual James Mackay

  8. Hong Kong Bluey says:

    That should read ‘Financial Fair Play – UEFA Playing “Fair”?’

  9. Ronan Lee says:

    The ignorance displayed in regards to Manchester City in this article is astounding. Making assumptions and passing them off as facts is journalism at its very worst.

  10. Ste Woods says:

    You cannot see the real agenda for FFP and this makes this whole article a waste of cyber ink.

    In relation to MCFC and what happened you are so far off the mark its untrue. City worked closely with UEFA to try and meet the guidelines and then at the last minute the goalposts were moved.

    If City did know the implications of their “disregard”, they have taken their punishment (which was to be fined a whacking great chunk of this “evil oil money”) on the chin.

    The fact is that It matters not one jot now what happens with FFP as City are in a position to be self-sustaining, which was always the plan btw even before UEFA stuck their oar in.

    What FFP has done is strangle competition and deny the potential of investment not only here in England, but clubs like Milan and Inter who are currently flailing Giants, cannot compete.

    Maybe we should have a “fair” system like in Germany, where one club has the league won every year by the end of March?

  11. Ian Vesey says:

    Time won’t tell on this in the manner that the author suggests. The FFP was clearly (in my view) in breach of the EU Charter and likely to be struck down in full or part by the Court. So it has been already and UEFA have been injunctedd from imposing part 2 of the sanctions. FFP as never designed to do anything other than protect the established players. It did that last season as City were hamstrung in Europe and their spending was affected by the £49mlimit and salary cap. If FFP was a credible instrument to stop debt it would have included debt in the calculations. Abromovich had plenty of time to spend big and then put things in place, Cities owners didn’t. Nor disgracefully, do other new owners if this had continued.

  12. HeavyRiffs says:

    Eh gads, what utter piffle, what a way to manipulate figures, tug at heartstrings and build an article around half truths and no truths.

    ‘As a result, in line with FFP sanctions, MCFC were fined £49 million’
    Technically incorrect, £49m of future CL income was withheld and split over three seasons. However only the first £16m will be applicable as City are now breaking even and actually in profit, sub-par research #1.

    ‘The regulatory body was also suspicious of a number Abu Dhabi sponsorship deals worth an estimated £25m’
    The alleged ‘suspicions’ you assert are based on what exactly? Have you been chatting with a member of the UEFA compliance committee, or as I suspect, just reading newspaper articles? Ultimately any ‘suspicion’s you allude to, were deemed perfectly OK by UEFA, so that’s sour grapes case #1.

    ‘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.’
    Regardless of the stage that you dismiss a Manager, if he is due a severance package then that will be reflected in the books. City were confident of passing FFP at that time, so why would they include extra losses and potentially derail that, straw clutching #1.

    ‘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.’
    So having World Class players is not a necessity, so I can only imagine that you believe keeping inferior players is a good business model. Plus he cost £34m, not £38m as is oft repeated by the ill advised and poorly informed, so sub-par research #2.

    As for Wenger and Mourinho’s lack of understanding of it, well then that says it all. It’s quite a basic concept and City were deemed to have broken the rules the first year and received a punishment. I see you don’t really go into City’s finances that much, or touch on their revenue. Maybe as a result of it being one of the highest in World football and outstripping all in the PL bar United. Perhaps that’s why they can’t understand it? As for why it seems that you understand very little of anything, God only knows.

  13. mike says:

    Last season wasnt woeful you idiot, scoring 10 goals at home all season is woeful but city were the leagues top scorers again with our players winning the golden boot and glove, woeful isnt it? How did the fans not despair? Pathetic. Also your solution to the not only unlawful but illegal ffp is to make their unlawful and illegal rules stricter? You are a clown mate.

  14. mike says:

    Top scorers in the league again, woeful. Would rather be relegated lol. Clown

  15. Ian Lowe says:

    So maybe the EU is good for something!

  16. Paul Donohue says:

    Nice to see you got a “fair” response to your article. It is surely “fair” that this was ridiculed and treated with the utter contempt this pile of drivel deserved. Please tell me you didn’t get paid for this? If you did ,do you have any positions available? If i thought I could get paid to write while taking my morning constitutions (about the level of time spent researching this,no?) then clearly I’d like to come on board!

    Never thought I’d read something that would make Adrian Durham sound sensible and even handed, you must have done this for a bet!

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Published by EPL Index
Updated: 2015-06-30 07:00:13
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