UEFA Financial Fair Play Rules & Regulations
This is a breakdown of all the financial fair play rules coming into soccer.
I have broken down all the rules in parts for you to read.
The UEFA Financial Fair Play Regulations
First agreed in principle in September 2009 by the Financial Control Panel of football’s governing body in Europe (Union of European Football Associations – UEFA), were brought in to prevent professional football clubs spending more than they earn in the pursuit of success and in so doing getting into financial problems which might threaten their long term survival.
Introduced amid concern at the heavy spending of a number of professional clubs across Europe, it was hoped that the regulations would eventually lead to a more ‘level playing field’ by preventing clubs with very wealthy owners who make substantial cash gifts to their club from gaining an unfair advantage over other clubs who are run on a more sustainable business model, and in so doing encourage lower levels of spending. The FFP Regulations provide for sanctions to be taken against clubs who do not spend within a set budgetary framework over several seasons.
The 2011–12 football season is the first during which the regulations apply; The ultimate penalty is disqualification from European competitions. Other possible penalties originally included fines, the withholding of prize money, and transfer bans. As of early 2012, however, UEFA has had to shelve plans to ban player transfers following legal advice, and it remains to be seen if other threatened sanctions will be taken in practice.
On announcing the new legislation, UEFA President Michel Platini said,
Fifty per cent of clubs are losing money and this is an increasing trend. We needed to stop this downward spiral. They have spent more than they have earned in the past and haven't paid their debts. We don't want to kill or hurt the clubs; on the contrary, we want to help them in the market. The teams who play in our tournaments have unanimously agreed to our principles…living within your means is the basis of accounting but it hasn't been the basis of football for years now. The owners are asking for rules because they can't implement them themselves - many of them have had it with shovelling money into clubs and the more money you put into clubs, the harder it is to sell at a profit.
Platini went on to say that the measures were backed by the majority of football club owners, and that an independent panel would be set up to judge whether clubs had broken the rules.
A UEFA review in 2009 showed that more than half of 655 European clubs made a loss over the previous year, and although a small proportion were able to sustain heavy losses year-on-year as a result of the wealth of their owners, at least 20% of clubs surveyed were believed to be in actual financial peril. The reasons for this are well summarised in the 2010–12 House of Commons report on Football Governance:
Club owners are generally over optimistic about their management abilities and vision for a club. With ample academic evidence that there is a clear correlation between squad wages and points won - something which is obvious to owners - there is a natural tendency to borrow in the pursuit of success, although not all teams can be successful. There are many examples of clubs where the directors (true fans) have "chased the dream" - gambling short-term investment (or borrowing) in the hope of long-term success. The pressure on the directors of a club to invest, to sign a star player…is often immense from ordinary supporters.
Even among Europe's elite sides, continued excessive spending has often been justified by club executives as being "necessary to keep the club competitive". As Christian Müller, CFO of the Bundesliga told the European Commission: "...we learn by experience all over the world [that] most club executives tend to operate riskily, tend to overestimate their chances in the Championship. This may result in disproportionate spending relative to the income some clubs generate... club executives have somehow to be protected from themselves.
The vast majority of the overall European football debt is owed by only three of the biggest leagues: the English Premier League, the Italian Serie A and the Spanish Primera División, commonly known as La Liga.
The English, Italian & Spanish leagues
A report by the accountants Deloitte indicated that total debt among the 20 Premier League clubs for the year 2008-09 was around £3.1 billion.
At the time of the introduction FFP, several Premier League clubs were known to be spending considerably above their income. For example, between 2005 and 2010 West Ham United recorded an aggregate net loss of £90.2 million, with equity of £13.063 million on 31 May 2010 following a re-capitalization, while Everton, whose manager David Moyes had long received praise for his continued ability to keep the club among the top Premiership sides despite an extremely tight transfer budget, had a negative equity (in group accounts) of £29.774 million on 31 May 2010, making a net loss of £3.093 million in consolidated accounts.
Worst of all though were the finances of Portsmouth, who had a shortfall of £59,458,603 to the creditor in February 2010 (after deducting the book value of the asset) Having invested heavily on players over previous seasons, (the previous year's net loss was covered by Alexandre Gaydamak), Portsmouth won the 2009–10 FA Cup in 2010, but as the season wore on the financial situation deteriorated, leaving players unpaid and the club with an outstanding bill for income tax which in turn led to a winding-up petition from HM Inland Revenue. There then followed administration to avoid the club being liquidated, a nine-point deduction from the Premier League, and finally relegation into the lower division. A similar train of events had affected another English club, Leeds United, some years previously.
The problem of debt was not confined to the top division, with a number of clubs in the second tier of English football, the Football League Championship seemingly gambling their futures in an effort to gain promotion into the Premiership. The 2010 - 2012 parliamentary report into English football noted that; "much of the overspending (by non Premier league clubs)is as a result of the desire to get into the ‘promised land’ of the Premier League or indeed to simply stay there... the prevailing reasoning amongst Football League sides seems to be that excessive levels of spending can be sustained for a few years within which time promotion must be achieved. After that, Premier League revenues can be used to pay off all the debts accrued"
In the Italian Serie A most clubs also reported a net loss over the previous season: A.C. Milan (group) €69.751 million on 31 December 2010; Genoa C.F.C. €16,964,706 on 31 December 2010; ACF Fiorentina €9,604,353 on 31 December 2010; Bologna F.C. 1909€4,166,419 on 30 June 2011; Chievo €527,661 on 30 June 2011, etc. Only a few Italian clubs made a net profit, these included Udinese Calcio, Calcio Catania, S.S.C. Napoli (€4,197,829 on 30 June 2011) and S.S. Lazio (€9,982,408 on the group account on 30 June 2011).
Some of the Italian clubs had been losing money for a number of years; for example Internazionale have accumulated losses of around €1.3 billion over the last 16 years, while on 20 May 2005 S.S. Lazio agreed a 23-year repayment plan to pay back a €140 million overdue tax bill. The club recovered however, showing a net asset/equity of €10,500,666 in its consolidated accounts on 30 June 2011, while net financial debt of the group (Italian: Posizione finanziaria netta) was €9.01 million. Its city rival A.S. Roma SpA, from its ultimate holding company Italpetroli, intermediate holding company "Roma 2000" (the holding company or the head of Roma larger group of companies, holding company of "ASR Real Estate S.r.l." and "Brand Management S.r.l.") to AS Roma SpA (or AS Roma [smaller] group), owed considerable money to banks, including UniCredit. On 30 June 2010, AS Roma SpA had a negative equity (total liability greater than total asset) of €13.2 million on the consolidated balance sheet, which ultimately led to the group ("Roma 2000") being sold to group of investor lead by American billionaire Thomas R. DiBenedetto (25%). Before the formal handover on 30 June 2011, the club had a net financial debt of €53.831 million, with a negative equity of €43.984 million.
Despite the most recent report showing 8% growth in the Spanish La Liga’s revenues, the highest of any European league, the overwhelming majority of the extra money went to the two dominant clubs, Real Madrid and Barcelona, primarily due to their ability to negotiate separate TV deals. During the summer of 2009, Real Madrid paid a world record transfer fee of £80 million for Cristiano Ronaldo. Despite being the world’s second richest club according to the Forbes' List, heavy spending on two other players, Kaká, andKarim Benzema with their associated high wages trebled Real’s net financial debt from €130M on 30 June 2008 to €326.7M on 30 June 2009, as the signing Albiol, Benzema, Kaká, Ronaldo and some minor players to 2009–10 squad were included in the 2008–09 financial year. Madrid signed one more big name, Xabi Alonso in August 2009, made the net financial debt only dropped from €326.7 million to €244.6 million on 30 June 2010, still higher than previous 8 seasons (2000–2008). However, the net asset/equity was increased from €195.9M to €219.7M. Their main rivals Barcelona also continued to spend heavily on transfers and players wages, although in recent years, the level had been slightly reduced. On 30 June 2009 Barcelona's net asset/equity was just €20.844 million.
Total debt in La Liga was estimated at £2.5 billion, leaving many of the owners, as so often in the past, having to put more of their own money into the club. In the summer of 2010, Villarreal failed to pay their players because the ceramics industry from which their owner, Fernando Roig made his money was hit hard by the European credit crisis. At the end of the year, Deportivo de La Coruña were more than €120 million in debt, Atlético Madrid owed more than €300 million, while the total for Valencia at one point in 2009 was reported to be as high as €547m. In 2007, during a property boom, Valencia's management decided to build a new 70,000 capacity stadium, despite doubts that it could attract enough fans to regularly fill it. Construction of the 'Nou Mestalla' was to be funded by the sale of the existing ground, however two years into the project work ground to a halt when following the Spanish property crash the club could not find a buyer. Despite an impressive display on the field, Valencia was forced to temporarily halt work on a new stadium and delay players wages when its bank Bancaja denied it more credit, forcing management to sell some of their best players, including David Silva and David Villa.
In the lower Spanish leagues, at least six clubs, including second-tier sides Real Sociedad, Celta de Vigo, and Levante were in administration with more threatened as the recession worsened. In July 2008, the Spanish Government revealed that the clubs had a combined debt of £507 million to the tax authorities alone, with substantial amounts owed to a number of other state bodies, such as the social security system.
The French and German leagues
In France, The Direction Nationale du Contrôle de Gestion (DNCG) is responsible for administering, monitoring, and overseeing the accounts of all professional clubs to ensure that owners are being financially prudent. Sanctions for non-compliance include transfer embargoes, reduced playing squads, demotion, or even expulsion from the league. Despite lower incomes, French clubs do not carry the enormous multi-million euro debt of the English, Italian and Spanish leagues. A number of French clubs have produced small profits over a number of years, concentrating on developing young players in modern academies who then generate good profits when sold on to clubs in the Big Three leagues. For example, in the four years up to 2009 player trading by Lille, one of the leading clubs exceeded €164 million in profit.
OL Group, the holding company of the same name (Olympique Lyonnais), had a net profit of €5.1 million in 2008–09 season.
At the end of each season, clubs in the Bundesliga must apply to the German Football Federation (DFB) for a licence to participate again the following year; only when the DFB, who have access to all transfer documents and accounts, are satisfied that there is no threat of insolvency do they give approval. The DFB have a system of fines and points deductions for clubs who flout rules and those who go into the red can only buy a player after selling one for at least the same amount. In addition, no individual is allowed to own more than 49 percent of any Bundesliga club. Despite the good economic governance in the German league, there have still been some instances of clubs getting into difficulties. In 2004, Borussia Dortmund reported a debt of €118.8 million (£83 million). Having won the Champions League in 1997 and a number of Bundesliga titles, Dortmund had gambled to maintain their success with an expensive group of largely foreign players but failed, narrowly escaping liquidation in 2006. In subsequent years, the club went through extensive restructuring to return to financial health, largely with young home-grown players. In 2004 Hertha BSC reported debts of £24.7 million and were able to continue in the Bundesliga only after proving they had long term credit with their bank.
The leading German club FC Bayern Munich made a net profit of just €2.5 million in 2008–09 season (group accounts, while Schalke 04 made a net loss of €30.4 million in 2009 financial year. Borussia Dortmund GmbH & Co. KGaA, made a net loss of just €2.9 million in 2008–09 season.
Other European leagues include the Portuguese Primeira Liga, the Dutch Eredivisie and the Scottish Premier League. Mainly as a result of their lower populations and smaller economies, these and other leagues such as the Belgian, Danish and Scandinavian leagues generate less revenue than those of the bigger nations and there are currently no clubs in the Deloitte Top 20 from outside the big five leagues, although these are home to a number of extremely well run and successful clubs.
Despite earning only 1/6th of Real Madrid’s revenue for example, Portuguese club FC Porto regularly reach the last 16 of the Champions League and have been European champions twice - in 1986–87 and as recently as 2003 – 04 - whereas other much wealthier clubs e.g. Arsenal have never won the competition. Porto make use of third party deals and an extremely effective scouting network, particularly in South America to buy promising young players to develop and play in the first team for a few years before selling them on for a big profit. Since 2004 Porto has covered its large operating losses with a €190 million net profit in player sales. Another big Portuguese club, S.L. Benfica also regularly competes at the highest level, being crowned European champions twice and being beaten finalists another five times.
The three main Dutch clubs, Ajax, PSV Eindhoven and Feyenoord have each been crowned European champions at least once, however in recent years their dominance has been challenged by the emergence of other clubs such as FC Twente, meaning they can no longer always rely on annual infusions of Champions League cash. As in other countries, the Global Recession greatly diminished sponsorship and TV income in the Netherlands, turning an Eredivisie profit of €64m in 2007/08 into a €90m loss for 2009/10. PSV Eindhoven recorded a €17.5 million loss as their annual revenue dropped back 40% from €85 million to €50 million, while major rival Ajax - the only Dutch club listed on the stock exchange - lost €22.8 million.
After enjoying 11 consecutive years of CL qualification and reaching the CL semi-final in 2005, PSV found its regular profits turning into losses and began selling top players, includingHeurelho Gomes (Tottenham Hotspur), Mark van Bommel (Barcelona), Park Ji-Sung (Manchester United), Johann Vogel (Milan), Alex(Chelsea), and Jan Vennegoor of Hesselink (Celtic). Able to count only on the much lower revenues of the Europa League (less than €4 in 2010), the club took on a €10m loan from its long-standing benefactor, the electronic giant Phillips and in April 2012 was forced to sell its ground and training complex to the local council for €49 million, leasing it back for €2.3 million per year. A leading councillor said that the move was necessary because of ‘the idiocy of big money and the game played between millionaires and football agents’
Recognising the unique social and cultural important of its clubs, Dutch local authorities invested over €300 million in football between 2006 and 2011, mainly through indirect subsidies and loans to clubs such as FC Utrecht, FC Groningen, FC Twente, Vitesse Arnhemand ADO Den Haag, though it is possible that such aid may fall foul of EU rules which govern the use of unfair subsidies.
A 2011 report from accountants PriceWaterhouseCoopers expressed deep concern at the fragile financial state of Scottish football. Despite a modest profit in five of the previous six seasons, net indebtedness of SPL clubs had grown over the previous year to £109m, with half of clubs reporting a worsening position and only two clubs, Hamilton Academical and St. Johnstone debt free. Despite providing the first British team (Celtic in 1967) to become European champions, since the advent of pay-per-view TV Scottish football had failed to keep up with its English counterpart; in stark contrast to the Premier League's vast TV earnings, following the collapse of the Irish satellite broadcaster Setanta in June 2009 the joint Sky-ESPN TV rights to be shared among all SPL clubs now amounted to only £13m per year, a figure little changed from the £12m it had received under the Sky deal as long ago as 1998.
Following the global downturn, job insecurity and rising unemployment meant that a number of Scottish fans did not renew season tickets, leading to a 10% (or 100,000) fall in attendances over one year. The entire turnover of SPL champions Glasgow Rangers for the 2008 09 season dropped 38% to only £39.7m, a tiny fraction that of the English champions Manchester United’s earnings of €327m. As with other leagues, participation in the UEFA Champions League continued to make the crucial difference between profit and loss for the two ‘Old Firm’ clubs, however because of mediocre performances in recent years the SPL champions no longer qualify automatically for the CL group stages and are now largely confined to the much less lucrative Europa League.
There was also concern at the heavy debt being loaded onto some clubs as a result of new owners borrowing heavily to acquire the club and then using future earnings to pay the interest, a practice known as a leveraged buyout. The world’s richest club, Manchester United, was bought in this way by the Glazer family in 2005 after which the club, previously very profitable, remains several hundred millions of pounds in debt. Since 2005, more than £300m which might otherwise have been spent on players, improving facilities or simply kept as a contingency has been taken out of Manchester United and spent on interest, bank fees and derivative losses.(While Manchester United FC Limited was almost debt free, its ultimate holding company "Red Football Shareholder Limited" had a negative equity of £64.866 million in its consolidated balance sheet on 30 June 2010.)
Liverpool found itself in a similar position after being purchased by Americans Tom Hicks and George Gillett in February 2007. Although subjected to less leveraged debt than Manchester United, by 31 July 2010 the club was suffering a negative equity of £5.896 million while its holding company, KOP Football Limited - the entity which carried the debt - had a negative equity of £111.88 million, leaving the club tottering on the verge of bankruptcy, and had to be put up for sale. Hicks and Gillett placed what was widely believed to be an unrealistic value on the club in the hope of making a vast profit however, for which they were severely criticised in the House of Commons as "asset strippers draining the club with their greed. Eventually Liverpool was bought by a new American consortium, but because leveraged buyouts are permitted under normal stock market rules they will not be addressed by the FFP rules.
The Leveraged Buyout model is common for normal business ventures where - apart from the actual employees - the overall national impact of a firm (e.g. a chain of shoe shops) collapsing is not particularly significant since other companies will fill the gap in the market. LBO’s have sometimes been defended by those using them as mechanisms to bring greater efficiency and financial discipline to target companies, although there are also examples (e.g. The Readers Digest & EMI) where they have actually added to an existing problem of debt. To ordinary football fans who find themselves paying significantly higher ticket prices (around 50% at Manchester United in the first five years of the Glazer takeover) merely for the privilege of having a new owner, LBO’s are anathema, perhaps representing the complete opposite of the wealthy benefactor model, taking money out of the club and providing few or no positive changes to their club since no new players are purchased and no facilities or stadia (as in the case of Liverpool) are built or improved. As with debt taken on in an attempt to improve the team, unexpected failure (such as not qualifying for the Champions League) can cause significant financial problems for clubs loaded with LBO debt.
For these ‘emotional stakeholders’, their club is not a ‘normal business’, but an intrinsic part of their lives and often of great social and cultural importance to their local community. LBOs are also believed to have played at least a part role in takeovers at Portsmouth, Hull City, Chesterfield, Notts County and Derby County, and perhaps unsurprisingly, the main supporters groups of Manchester United and Liverpool, MUST and Spirit of Shankly called on the British government to legislate against future leveraged buyouts of football clubs, calling for an outright ban or a limit on the amount which can be borrowed against acquisition – perhaps along the German model where no individual can own more than 49% of the club. There have also been calls to restrict levels of dividend withdrawal and improvements in ‘proper person tests’ introduced after the earlier takeover of Manchester City by Thaksin Shinawatra. After being ousted as prime minister of Thailand in a military coup, Shinawatra was accused of human rights abuses, charged with three counts of corruption and had his financial assets in Thailand frozen, but eventually made a significant profit when selling the club to Sheik Mansour.
A number of clubs across Europe are able to spend substantially more than they earn as a result of the benevolence of their owners who make substantial financial gifts to the club, either by paying off existing debt, providing direct injections of cash, issuing extra shares, or giving loans which are later written off. This adversely affects the market by creating wage and transfer inflation as well encouraging other clubs to spend more than they can afford in an effort to remain competitive. For example, Internazionale's enormous losses since the mid-1990s have been largely underwritten by their president, energy company owner Massimo Moratti. Its archrival,A.C. Milan was also financially supported by Silvio Berlusconi (over €120 million between 2007 and 2010, prior to 2006 unknown, 2011 result not yet released) The Della Valle brothers also contributed €84.7 million to ACF Fiorentina from 2006 to 2009 (prior to 2005 unknown). Juventus had re-capitalized two times in recent years, by about €104.8 million after the 2006 Italian football scandal and in 2011 by €120 million. In Ligue 1, Paris Saint-Germain became the richest club in France and one of the richest clubs in the world afterQatar Investment Authority became the majority shareholder of PSG after buying a controlling 70% of the shares in 2011 by buying the club in a deal worth €50m, which covered an estimated €15-20m in debt and losses of €19m from the 2010–11 season. PSG splashed a French record €108m and were the biggest spenders in the world for the 2011–12 season. In the English Premier League, Chelsea's massive transfer spending since 2003 has been paid for by their owner, the Russian oil and gas billionaire Roman Abramovich, whileManchester City is owned by one of the world's richest men, Sheikh Mansour bin Zayed bin Sultan Al Nahyan. Since 2008 the owner has spent in excess of £600 million on players and infrastructure at the club, though this has drawn considerable criticism from other clubs and football figures. Arsenal manager Arsène Wenger, a major proponent of the FFP legislation, has referred to "transparent owner equity investment" as "financial doping.
Referring to the intention to reduce the plutocratic influence of the "Sugar Daddies," UEFA President Platini said, "If you buy a house, you have a debt but that doesn't mean someone is going to stop you from working. If you depend only on a rich benefactor however, then the financial model is too volatile."
Delay in implementing FFP Rules
Despite broad approval across Europe, in early 2010, the European Club Association succeeded in delaying the full introduction of the FFP Regulations to give clubs more time to adjust. The original timescale was lengthened, with a phased implementation over five years meaning that the full rules will apply in 2015 instead of 2012. The clubs also rejected a proposal by UEFA that the new rule should only apply to clubs with a turnover of more than €50 million, agreeing that all clubs should be treated the same. Also on the agenda was a proposal to limit squads to 25 players with unlimited under-21 players per team at national and European level, as well as plans to reduce fees paid to agents. Clubs also agreed that they will not be able to owe each other money, nor will they be allowed to compete in Europe if salaries have not been paid to players or non-playing staff.
Despite the delay, ECA chairman Karl-Heinz Rummenigge, representing Bayern Munich, called the new rules "a magnificent achievement," and pointed out that 93 clubs from 53 countries who attended the ECA's General Assembly in Manchester agreed with the proposals. He stated, "After only two years of existence, the European Club Association has managed, together with UEFA, to set measures that will shape the future of European club football into a more responsible business and ultimately a more sustainable one.
Manchester United Chief Executive David Gill, also a member of the ECA board, said that his club would meet the new rules, despite their reported debts of £716.5 million. He said, "We have seen what the proposals are and we would meet the financial break even rules. We as Manchester United have always been run professionally and will continue to be run professionally.
Summary of current FFP Regulations
Only a club’s outgoings in transfers and employee benefits (including wages) will be counted over income from gate receipts, TV revenue, advertising, merchandising, sales of players and prize money is included in the assessment. Any money spent on infrastructure, training facilities or youth development will not be included. The legislation currently allows for eight separate punishments to be taken against clubs transgressing the rules, based in order of severity;
Reprimand / Warning, fines, points deduction, withholding of Revenue from a UEFA competition, Prohibition to register new players for UEFA competitions, Restrictions on how many players a club can register for UEFA competitions, Disqualification from a competition in progress and Exclusion from future competitions
The full regulations are available to download from the UEFA official portal UEFA.com here; *"UEFA Club Licensing and Financial Fair Play Regulations Edition 2012". UEFA.com. 1 June 2012. Retrieved 10 December 2012
Criticism of FFP
Creation of a big club status quo
One of the major criticisms of FFP is the possibility of solidifying the so-called big clubs which generate largest revenue and profits, and can consequently spend more money on transfers. Martin Samuel of the Daily Mail has criticised FFP, believing they will create a procession instead of competition and has compared the regulations as a "a giant drawbridge that is being pulled up." Samuel believed Manchester City's £194m loss in 2010-11 was justified, with the club having to spend big to get lucrative Champions League football before the "door closes".
Qualification and participation in the UEFA Champions League is regarded as a lucrative affair and can earn clubs up to £60m in prize money and television rights a season if a club makes it to the final. A club only has to play thirteen matches from the group stages to reach the final. In comparison, winning the English Premier League earns the victorious club approximately £60m, but this is won over thirty-eight matches.
The financial gulf between the successful clubs in the top-tier of European league has had an impact domestically, most notably in the Premier League where historically there has been a 'Top Four' of clubs (Arsenal, Chelsea, Liverpool, Manchester United). The lack of competition for lucrative Champions League football in England was criticised, but the 'Top Four' grip on Champions League places has been eroded in recent seasons with the rise of Tottenham Hotspur and Manchester City.
Questionable sponsorship deals
Some forums have expressed concern at the potential risk that as clubs become ever desperate to raise ‘allowable’ revenue which will positively affect their balance sheet, they will indulge in questionable US style advertising and sponsorship practices from multiple backers which may eventually compromise the ethical composition of football. Some clubs are easily able to attract reputable sponsorship due to the willingness of companies to be associated with a successful brand. For example, in recent seasons Manchester United have been able to raise many £ millions from selling sponsorship not just for their playing kit but their away kit and even their training kit, as well as less obvious but perfectly legal deals such as ‘Official logistics partner’ (DHL), ‘Official snack partner’ (Mamee Double Mister Potato crisps), 'Official office equipment partner’ (Epson), ‘Official communications partner in Bulgaria’ (Globul) and 'Official marine engine partner' (Yanmar). Other top clubs do similar deals where they can, however there is the possibility that less successful clubs may eventually form deals with less reputable organisations and companies as time passes and the FFP rules bite.
Other commentators pointed to actual and possible loopholes in the legislation itself; for example, up until the end of the 2014–15 season, clubs will be allowed to exclude from the FFP calculation the wages of players signed before June 2010 as long as they can show an improved trend in their accounts. There is also the potential for legal action to overturn the legislation and for larger clubs to artificially raise their income from massive sponsorship deals or stadium naming rights via companies with a vested interest in the club’s success, or from the sales of "overseas rights" to consortiums without clearly identified investors.
There are claims that this has already started in the case of Manchester City, where four of the club's eight main sponsors - Etihad Airways, Abu Dhabi Tourism Authority, telecoms giant Etisalat and Aabar, a global investment company dealing in oil are ultimately owned by the United Arab Emirates government, of which Manchester City owner Sheikh Mansour is one of the Deputy Prime Ministers.
Differing tax rates
In addition, there remains the issue of widely differing tax rates and social security costs which the European leagues are subject to, meaning that some clubs have to pay a player much higher gross wages in order for him to be left with the same net salary as if he belonged to a club in another country.
In addition, the UEFA guidance states that each club's accounts must be audited under the national accountancy conditions applicable in their particular country - which may vary.
Third party ownership
One area of concern for English clubs is the practice of third-party ownership. Under this model, companies or wealthy individuals buy a percentage of a young player in the hope that if his value increases in the future they will make a profit based on their percentage. The advantage for clubs is that they can make big savings from not having to pay the full transfer value of a player and can also make other financial gains, that is, from selling on a player’s image rights. Following the problems caused by the sale of Carlos Tévez and Javier Mascherano to West Ham United in 2006, third party ownership was banned in the Premiership, although it is widely used in South America and Europe and is permissible under FFP. Following the introduction of FFP, the Premiership unsuccessfully lobbied UEFA to review the situation to avoid English clubs being disadvantaged, and in October 2011, the leading sports lawyer Jean-Louis Dupont told the BBC that the Premier League's third-party ownership rules were not legitimate and that a legal challenge to overturn them would have a "very, very good chance of succeeding.
Charity & solidarity payments
Another very big issue for English clubs is the substantial payments made to the lower leagues in the football "pyramid" and to other charities out of their joint Sky TV deal. In 2009 /2010, Premiership clubs paid a total of £167.2 million to various causes, including £62.2 million to recently relegated clubs in "parachute payments;" £56.4 million across the Football League in "solidarity payments;" £17.3 million to the Professional Footballers' Association,;£7.8 million domestically and £3 million internationally to the Creating Chances Trust ( a charity for children leaving care); £12 million to other charities such as the Football Foundation, which provides funding for grass roots sport; £2.9 million to Professional Games Match Officials (referees and assistant referees); £2 million to the Conference National; and £500,000 to the League Managers Association
These payments cannot be discounted from FFP. The German, Italian and Spanish leagues are not run along this model, with only France’s Lique 1 among the big European leagues having a similar system of voluntary payments to outside interests. The amounts paid by Premiership clubs, around £8.36 million per club or 14% of turnover could make a big difference to a smaller club in meeting FFP, yet could actually be stopped at any time by a 14-6 majority vote of the 20 club chairmen, and as of March 2012, the Premiership continues to lobby UEFA to request that these payments can be offset against the FFP calculations
Transfer spending across Europe’s top five leagues during the 2010 summer transfer window was nearly 40 percent down on the summer of 2009. This was partly due to the 2010 World Cup, meaning players were more concerned with the success of their country in the tournament than moving clubs. The drop, however, was seen more as a result of the worsening global financial situation than the impending FFP. Total spending in the English Premier League was significantly down on the previous season at £395 million, although all of the traditional big English clubs spent more than £50 million on players.
In Spain, Barcelona's finances up to 30 June 2010 revealed that the club’s shareholder equity was dropped to negative €59.109 million, from a positive of €20.844 million, despite awareness of the FFP rules. Around the same time, however, Real Madrid President Florentino Pérez told the club's general assembly that the net debt was reduced to €244.6 million by 30 June 2010 as a result of an increase in revenue over the previous season, while the net asset/equity was slightly increased to €219.7 million.
In Italy, where for some time there had been concern at the slow growth in football income and the lack of competitiveness among clubs - partly due to the inequality in TV income - pressure by a number of clubs finally led to the three biggest, Internazionale, Milan, andJuventus agreeing to end the long-standing system whereby clubs negotiated their own TV rights. During the 2009/10 season, each had earned at least €100 million from major broadcaster Mediaset, and the introduction of the "collective sale" model of distributing TV income immediately strengthened the smaller clubs by up to €10 million each more per season, leaving the big clubs much worse off; in the case of Juventus, by around €43 million per year. But the change, which left the Spanish league as the only major league where clubs still negotiated separate deals, led to a much more entertaining and competitive season with a number of clubs being in with a chance of winning the Scudetto. Despite the effect the change had by reducing the spending power of his own club, Inter PresidentMassimo Moratti indicated that he was actually looking forward to the changes, saying, "Some thought that FFP was against owners like me, but I say that at last it means that I can stop putting money into football every day. Inter are so expensive that I wouldn’t recommend it to anyone. I hope that FFP allows us to experience football in a different way."
January transfer window
In England, it was during the January transfer window that the most surprising business was done. Chelsea spent a reported £50 million on Fernando Torres and €25 million on David Luiz from Liverpool and Benfica, respectively.
Despite Chelsea FC's intermediate holding company "Chelsea FC plc" making a sight improvement in its accounts with a net loss of £67.7 million for the 2010–11 season, the effect of the increase in intangible assets led to a higher cost in the future. As transfer fee was considered as a purchase of a capital, the real effect of transfer fee was the amortization of the transfer fee, which is proportionally to the contract length. For example, Torres's £50 million transfer fee had to be amortized by about £9 million a season, which in the 2010–11 season amounted to only £4.5 million (due to half season). The club may lower the expense of amortization by selling players and extending the player contract.
Chelsea's transfer spending that season was the club’s biggest outlay since 2004 when they made losses of £87.8 million at the start of an eight-year period during which they won a number of trophies. Arsène Wenger, whose club Arsenal have been cited as an example of good financial governance by UEFA, questioned Chelsea’s behaviour after the signings, saying "Chelsea supported the financial fair play. In the morning they announce a £70 million loss, in the afternoon they buy £75 million worth of players. Where's the logic in that?
In Italy, Milan Vice-President Adriano Galliani criticised English teams for their transfer spending in the wake of the big money moves for Torres and the £35 million spent by Liverpool on Andy Carroll as Torres' replacement; "Everyone's talking about balancing the books, but then they spend like crazy people, Chelsea strengthened in an amazing way spending €80 million, I just don't know where financial sense will end up.
In response, Chelsea chief executive Ron Gourlay insisted that the club were in "a strong position" to meet UEFA's initiatives and were on course to halve their losses during the following financial year, having reduced their player’s bonus scheme, negotiated new sponsorship deals, raised ticket prices and were able to count on additional TV revenue from higher UEFA Champions League and SKY television rights.
Following news of Manchester City's interim financial results showing another huge deficit, Michel Platini said he had been given personal assurances from club management that they would abide by the new rules. UEFA’s Head of Licensing Andrea Traverso also stated, "We are in talks with the club, they are aware of the rules and they probably have a strategy to raise their income.
Despite Chelsea and Manchester City’s losses, Premier League Chief Executive Richard Scudamore said that he did not expect UEFA’s rules to lead to any English club being banned from European competition. He stated; "I don't see any circumstances where any of our clubs could get near to exclusion.... UEFA is too sensible, and it's not in its interests to do so. It's more about taking the steam out of the system and acting as a speed bump rather than about barring clubs.
In all, English clubs spent £225 million during the January 2011 transfer window, prompting UEFA to issue a reminder that the activity counted towards the 2012 to 2015 period over which they were only allowed to lose £39 million in total, and that it would affect the amount they could spend in later years. This was due to the principle of amortisation - whereby a players transfer fee must be divided out between the number of years in his contract (i.e. a player bought for £20m with a four-year contract must be represented on the club balance sheet as a £5m net paymant - or loss - over each of the four years of his contract) A UEFA statement said,
UEFA is aware of the recent transfer activity across Europe and is confident that clubs are increasingly aware of the nature of its financial fair play regulations which require them to balance their books. It must be noted, however, that the financial fair play rules do not prevent clubs from spending money on transfers themselves but rather require them to balance their books at the end of the season. It is therefore difficult to comment on any individual situation without knowing the long-term strategy of each club. The clubs know the rules and also know that UEFA is fully committed to implementing them with rigour.
"The last wake up call"
UEFA's club licensing report on top-flight clubs for 2010 (2009–10), the last full financial year before the regulations had been approved, showed annual losses in the main leagues topping €1.6 billion (£1.3 billion), a 36 percent rise on the previous year although the German the Bundesliga managed to produce an overall total gross profit of €130 million (£109 million/$171 million) for the 2009 -10 season
The survey of 665 clubs showed that 56 percent were in the red at the end of the 2010 financial year. Although UEFA pointed to some improvements in the situation such as the 6.6 percent rise in overall income, a small drop in the proportion of clubs' revenue going on players' wages, and an increase in the number of home-grown players in the Champions League these were the worst statistics on record. UEFA's head of legal affairs, Alistair Bell, said, "The system is not going to have much credibility if a big club that is in serious breach of the rules is not punished in an effective way. For me the sanctions need to be effective enough that people come into compliance with the system, otherwise clubs are going to become disillusioned rapidly."
The general secretary of European football's governing body Gianni Infantino said, "This is the last wake-up call. This trend has to change very quickly to safeguard European football. We must end this negative spiral and gamble for success, these losses cannot continue
Wider acceptance of FFP
In June 2011, the English Football League announced that clubs in the divisions lower than the Premiership had also agreed in principle to adopt the FFP Regulations at their annual meeting. Debt in the lower leagues stood at around £700 million, of which 80 percent applied to the second tier of English football, The Championship. FA chairman David Bernstein described the Football League's announcement as "very encouraging. Michel Platini also commented; "We are very happy to see that Football League clubs, under the umbrella of the Football Association, are again taking the initiative on good governance issues by introducing Financial Fair Play,
Later it was agreed by a majority of 21 to 3 that Championship losses were to be incrementally decreased season by season with clubs able to make a maximum loss of £6m for the 2012-13 season and £5m for 2013-14, while from the 2014-15 season clubs will be allowed to make only a £3m loss and can expect heavy fines or a transfer embargo if losses exceed £6m. From 2015-16 clubs can deliver a £2m operating loss on top of accepting £3m in investment from their owner, which combines to make a £5m overall loss. Teams that win promotion to the Premier League having failed to adhere to the rules must pay a ‘Fair Play Tax’ on their losses which ranges from 1% on the first £100,000 to 100% on anything over £10m.
Barnsley director Don Rowling said "There are people that want to put money into their clubs to chase the dream but they will have to face the nightmare at a later date. This will bring people into the game for the right reasons… now we have a model that is about being sustainable and being clever rather than how big your wallet is at a particular time" Acknowledging that some clubs would not abide by the rules, Rowling continued; "There is so much hype now from people including supporters who want you to chase this dream of getting into the Premiership. You look at the support base of some clubs and it is very, very difficult to realise their ambitions, that is why there are people who want to buy a club and push it forward.
Tom Glick, CEO of Derby County, whose wage bill was expected to land the club with a £7m loss that season, commented; "It is an indictment of the industry that we need to go to the length of regulations to try to tell us to be sensible in the way we spend. This is transformational for our business, it allows all of our clubs to work towards a business model that is sustainable. We are currently in a model that is not sustainable so we have clubs that go out of business or teeter on the edge.
Leagues One and Two of English football also made efforts to curb the spending of clubs by introducting salary capping.
During the summer, Arsenal reluctantly sold two players, Gaël Clichy and Samir Nasri, to Manchester City to avoid losing them for nothing the following year when their contracts ended. Both players refused to sign new contracts, preferring to go to Manchester City where they could command considerably higher wages. Following the publication of Manchester City’s end of season financial results which showed Premier League record losses of £197 million, with players wages of £174 million, £21 million more than turnover (Chelsea's previous record in 2005 was £141 million), Arsène Wenger questioned whether UEFA would go through with their threat to take action against clubs who broke the rules, believing that Europe’s wealthy clubs would use legal means to fight any attempt to ban them from European competition or from buying players. Wenger said,
We live in a world where any decision made is challenged. Europe (the European Union legal system) has created that and we see how far Europe has gone. The authority of the legal affairs is challengeable everywhere. UEFA want to create a situation where clubs with deficits cannot play in the Champions League but I question whether they will be able to force it through. Will they have the legal power to force that through today? I question that because you have as well Paris Saint-Germain and Málaga [other high spending clubs] in other countries. Once they represent a force together, it will be difficult to fight against.
At the time, the Swiss club Sion were fighting a UEFA decision to ban them from the Europa League for fielding ineligible players. Supporting Sion, Karl-Heinz Rummenigge, the ECA chairman, who is highly critical of English clubs’ spending stated: "FIFA and UEFA need the clubs for a World Cup or European Championship but the clubs don't need them.
Manchester City naming rights
In July 2011, Manchester City announced that the City of Manchester Stadium was to be renamed the Etihad Stadium after signing a ten-year rights deal with their existing shirt sponsor, the Abu Dhabi-based airline Etihad Airways. The deal was originally reported to be worth £400 million over ten years, but is now thought to be for rather less - probably around £340-350m over 10 years. Even so, the deal still worked out as almost double the previous all-time record of $300m (£187m) for the world-famous Madison Square Garden, and was several times the £90m, 15-year sponsorship deal which Arsenal had agreed with another Middle Eastern airline,Emirates in 2006.
A number of football figures immediately questioned the validity of the deal because the chairman of Etihad Airways, a company around a third the size of British Airwayswhich has never made a profit since it was launched in 2004 is Hamed bin Zayed Al Nahyanthe, the half brother of Manchester City owner Sheik Mansour.
Despite the size of the figures, a Manchester City official pointed out that the sponsorship deal was not just for the football stadium but for the whole 210 acre campus being developed around the ground. When complete, this will comprise an expanded football academy and training ground, sports science centre, office and retail space and a 7,000-seat stadium for youth games.
As infrastructure, the cost of building the Etihad Campus does not count towards the FFP financial calculation because it is not considered to be football-related, however any income generated will, and therefore will greatly assist Manchester City in meeting the UEFA requirements and providing a vital new revenue stream which could create millions a year for the club. Manchester City are in the unique position of having acres of vacant land adjacent to their stadium and this potential was quickly recognised by Sheikh Mansour and Khaldoon Al Mubarak just weeks after taking over City in September 2008. Some have speculated that City will maximise regeneration; football finance expert Tom Cannon has stated that the plans are "probably the most exciting of any ground in Europe."
In August 2011, UEFA confirmed their intention to examine the deal to ensure it was not an attempt to unfairly circumvent the FFP regulations. The head of UEFA’s Financial Control Panel, Jean-Luc Dehaene, said they would benchmark all deals to make sure they represented fair value. He said,
If we see clubs that are looking for loopholes we will act. It is not enough to say 'we've got a sponsorship contract and that's OK' if the contract is out of line. You know where the problems are and you know you will have to confirm them. But on the other hand they are all members of the ECA (European Club Association) and if they don't follow the rules they won't have the support of the other clubs.
Arsene Wenger immediately demanded that UEFA should block the deal, believing that it was an attempt to circumvent FFP; "It raises the real question about the credibility of Financial Fair Play. They give us the message that can get around it by doing what they want. The sponsorship cannot be doubled, tripled or quadrupled because that means it is better if we leave everybody free. He (Michel Platini) is not stupid, he knows as well that some clubs will try to get around that and at the moment I believe they are studying, behind closed doors, how they can really check it. That is where Financial Fair Play is at stake".
A number of other English clubs had already negotiated naming rights for when they had redeveloped their grounds, including Bolton Wanderers (Reebok Stadium), Stoke City (Britannia Stadium), and Swansea City (Liberty Stadium), however commentators expressed their surprise that Manchester City had been able to generate such a large sum to re-brand an existing ground which they themselves did not even own. Liverpool's managing director, Ian Ayre said that although naming rights were common for new stadiums, there was no precedent for the lucrative re-branding of existing grounds; “It hasn't happened in Europe that a football club has renamed an existing stadium and it's had real value. It was the City of Manchester Stadium or Eastlands for the last nine years and now it's going to be called something different and someone has attached a huge amount of value to that. I find that odd because it has never been done before. There is no benchmark that says you can rename your stadium and generate that amount of value. Mike Ashley tried it at Newcastle but nobody called it Sports Direct@St James' Park and it certainly didn't have that kind of value” (In fact, the Newcastle deal had not involved the exchange of any money, merely being a device to showcase existing sponsors)
At the Global Sports Forum in Barcelona in early March 2012 it was revealed that UEFA had banned its senior executives from talking about the Manchester City situation, for fear of prejudicing any future legal action against the club. When asked to comment on the Manchester City losses of £197million over 2010-11, Philippe Rasmussen, UEFA FFP manager stated; I am not authorised to talk about this. I am not allowed to talk about it.
In March 2012, the Council of Europe produced a report which described the deal as an "improper transaction", recommending that; "UEFA should prohibit clubs from sponsoring themselves or using associated bodies to do so…UEFA will have to take care to ensure their financial fair play rules are not circumvented, and that clubs should not overpay for the rights they acquire. Clubs will no doubt try to supplement their income if possible. They could for example call on sponsors to invest more so as to reduce or eliminate their deficits…care will have to be taken to prevent any circumvention of the financial fair play rules in this way"
UEFA drop threatened transfer embargo
On 24 November 2011, Arsène Wenger's fear that UEFA would ultimately back down from taking punitive action against clubs when pressure was applied appeared at least partly justified when UEFA announced that following legal advice, proposals to impose player transfer embargoes on clubs failing to meet the FFP rules had been dropped amid fears that they may be legally unenforceable or might cause legal challenges from individual players. Lawyers advised UEFA that they may be open to restraint-of-trade civil actions brought by individual players who had joined a particular club on the basis that they were involved in Champions League football, but were now excluded from the competition because of the FFP regulations, which they themselves had not signed up to.
Reduced spending but further losses
At the beginning of 2012, Manchester City manager Roberto Mancini, faced with a number of injuries and players absent at the African Cup of Nations admitted for the first time that because of FFP he had been told by club management that he would be unable to buy any new players during the January transfer window unless he first moved on existing players, and perhaps not even then.
Premiership spending in the 2012 January transfer window was down 70% compared to the same period the previous year. Across Europe a number of other clubs confirmed that they were not planning to buy players outright during the transfer window, preferring to rely on loan deals. The 2012 Deloitte report stated, "Financial fair play has definitely had an impact", while Arsène Wenger remarked; "it looks like economically the whole of Europe is being a bit more cautious."
Shortly afterwards however, the new Premier League accounts for the 2010-11 season - the first since FFP came into being - showed that even with record annual revenues of £2.3bn, the 20 PL clubs lost a combined total of £361m, a large proportion due to Manchester City's £197m loss - the biggest in football history, followed by Chelsea’s £68m loss. In the first 8 months since taking over, Liverpools’s new Fenway Sports Group consortium also posted a £49.6m loss – £35m of which was as a result of having scrapped Hicks & Gillett’s earlier Stanley Park stadium development in favour of returning to an original scheme.
Commenting on the losses, CEO Richard Scudamore refused to introduce break-even legislation into Premier League rules, as had the Bundesliga who in complete contrast now record profits of nearly €2 billion (£1.7 billion) for 2010-11, with an overall profit of €52.5 million (£44 million). The Bundesliga had also generated record revenues over the previous 12 months, bringing in almost €2 billion (£1.67 million) and retained its spot as the world’s best attended league, with an average attendance of 42,101. Bundesliga CEO Christian Seifert said, "The measures for an improved cost control approved by the clubs in August 2010 have borne fruit. The Bundesliga is as popular as never before with fans, sponsors and media partners."
According to the 2012 UEFA Licensing Report, only 6 clubs (among the 665 clubs) which competed in 2011-12 European competitions were out of the UEFA standard of an €45 million aggregate net loss, (reduced to 5 clubs in group stage), plus an additional 7 clubs which did not compete in the Europe theatre. 12 out of 13 clubs were covered the net loss with re-capitalization or decrease in shareholder capital.
Moreover, among all top division club, 53% were exempt from FFP (344), while among the rest of 47% (306), about half of them made a profit 28% (179 clubs), with additional 9% (60 clubs) the net loss was within acceptable deviation (below €5M), while 8% clubs (54 clubs) had a net loss greater than €5 million but below €45 million, which these clubs may only pass if the net loss was covered by equity, instead of increase in debt. Lastly the 13 clubs were only accounted for 2%, made the passing rate may up to 98%. But, among the clubs with net loss between €45M and €5M, only 20 of them received equity contributions, made 47 in total failed to FFP simulation (34+13), with a passing rate of 92.7% (47 over 650 clubs sampled).
All the big-5 leagues had at least one club which did not break-even (>€5M), with other clubs in leagues such as Ireland, Wales and Finland exempt from FFP due to their size.
Italian clubs 'unable to comply with FFP'
On 29 March 2012 FIGC announced the annual report for Italian football, which showed that only eight clubs produced a profit during the 2010–11 season with an aggregate net loss of €428 million and negative equity of €204 million Among the Serie A clubs, the total value of production dropped to €2.031 billion with the cost of production increased to €2.306 billion; net asset (net equity) decreased to €150 million, with equity ratio dropped to a very low ratio of 5%. The total debt was also increased to €2.658 billion, up from €2.332 billion in 2009–10 season.
The big Italian clubs continued to rely heavily on TV money from the Champions League, however one qualifying place had been lost to the German Bundesliga for the 2011-12 season due to the recent poor performances of their sides in the competition and there was now increasing concern at the stagnant growth of Serie A club's match-day income, sponsorship and merchandising. Certainly the Italian league appeared to be falling way behind their major rivals; A decade previously, the total €0.9 billion revenue of Serie A had been not far behind the English Premier League’s €1.1 billion, with the income of the Bundesliga, La Liga and French Ligue 1 trailing a long way behind at around €500 million each. Now, while Premier League revenues had surged to €2.4 billion, the Bundesliga and La Liga's earnings had now both caught up with Serie A at €1.5 billion with Ligue 1 not far behind at €1.2 billion
Particularly worrying was the state of Juventus', finances. Still recovering from the effects of the Italian match fixing scandal which saw the club relegated, Juventus published the largest loss in their history at €95 million. President Andrea Agnelli, whose company Exor owned shares in the Italian motor company Fiat, and whose family had long underwitten the club's spending, called the losses "intolerable," but said that they were necessary to keep the club competitive. In 2005, Juventus’ earnings had been the third highest in Europe but since then their revenues had actually declined by 33% (€75 million) Having failed to qualify for that year’s Champion’s League and with a €43 million drop in domestic TV income due to the new collective deal, wages over turnover had jumped from 67% to a massive 91%, way above UEFA’s recommended maximum of 70%. Despite launching a new share sale aimed at raising €120 million of new money and changes to their financial model in order to meet FFP, Juventus admitted that losses for the coming year were also likely to be high.
Despite being the highest earning Italian club, AC Milan - also having a long tradition of big losses covered by their owner - generated a €67.3 million deficit on earnings of €220 million in the year ending 31 December 2011 (for the whole Milan Group, not just the football club) on top of a €69.8 loss for 2009/10.
Elsewhere at high spending Internazionale, who during the previous five years had lost a massive €665 million, the club's management were now seriously considering how they were going to meet the new rules. Again, 20 years previously Inter's revenues had actually exceeded that of Real Madrid but now totalled only around half that of their huge Spanish rival. Having estimated losses of €60 million for the previous season the club actually went on to record an €87 million loss, raising concerns that management were unable to control expenditure, at least in the short term. Even during their "best" recent year, 2010, when they won the Champions League and sold players worth €72 million, Inter still made a €69 million loss.) One club official compared the state of football’s finances to thesub-prime banking crisis but vowed, "We will be ready to meet all the standards set by UEFA and we are working on various fronts. That means cutting costs and increasing revenues." Inter had already made a number of changes, including a salary cap of €3 million for most first team players, a lower basic salary (with higher bonuses for success), lower contracts for older players extending their contracts and the sale of expensive fringe players. Inter’s sporting director Marco Branca admitted that the club could no longer afford the fees paid in the past, declaring, "We have to organise our finances for the financial fair play rules in the next two years. We are looking for younger players now with great talent who we can develop."
Despite their efforts to improve finances in the future, the ‘Big Three’ of Italian football accounted for 89% (€252 million) of the total Serie A loss of €285 million in 2010/11, and Massimo Moratti warned, "We are not yet able to balance the books. I don’t know how Italian clubs will play in the Champions League in future, if UEFA’s fair play is confirmed."
Milan vice-president Adriano Galliani also admitted; "FFP hurts Italy. There will no longer be patrons that can intervene. Until now people like Berlusconi and Moratti would be able to support us, but with the fair play it will no longer be possible.
La Liga's lack of competitiveness
Elsewhere in the Spanish Primera Division, the only remaining big league still with separate domestic TV deals, there was rising irritation among the smaller clubs at the resistance of Barcelona and Real Madrid at following the Italians in agreeing to adopt a more equal share of broadcasting income. Previously. the Spanish professional football league, Liga Nacional de Fútbol Profesional (LFP) had negotiated TV rights jointly on behalf of all 42 clubs in the top two divisions, however the system collapsed in the mid-1990s when Barcelona and Real Madrid broke away to sign separate deals with Mediapro
With the two massive clubs again racing well clear of the other terms at the top of the league while Real Zaragoza and Racing de Santander were facing administration, both clubs stood to earn some €120 million in TV money per year until 2013, whereas the previous season’s third-placed side, Sevilla, received only around €20 million from their deal. In comparison, in the English Premier League for the 2010–11 season, champions Manchester United received only 1.5 times more that the bottom club West Ham Unitedfrom the collective SKY deal, whereas La Liga winners Real Madrid received 12 times the amount of bottom club Almeria in broadcast rights. A study by the consulting firm Sport+Markt showed that including non-domestic earnings, in 2010 the two clubs each received almost 19 times more from TV than the smallest clubs in Spain's top division.
While Real Madrid and Barcelona occupied the top two positions in the football money league standings for 2012, (Manchester United's drop was mainly due to the weakness of the pound) the only other Spanish club in the Deloitte Top 20 was Valencia at No.19 on total earnings of less than a quarter the level of the big two. In contrast, there were five Italian clubs among the top earners and six Premiership clubs in the top twelve. Despite an impressive display on the field, in 2009 Valencia was forced to temporarily halt work on a new stadium and delay players wages when its bank Bancaja denied it more credit, leaving the club having to sell some of their best players, including David Silva and David Villa
In April 2010, 27 out of Spain’s top 42 teams, including Barcelona’s main city rival Espanyol asked the government to end the ‘extraordinary imbalance’ in the Spanish league by making negotiating football television rights as a group compulsory. Barcelona director Joan Oliver said the club was "radically" against a change because it would "alter our business model". Esteve Calzada, chief executive officer of marketing agency Prime Time Sport said; "Real Madrid and Barcelona will try to make sure it doesn’t happen, but it’s inevitable. They have 80 percent of the television audience, but you can’t have a league without the other teams"
The harshest critic was Sevilla President Jose Maria del Nido, who claimed; "Madrid and Barca are robbing us and the rest of the league, they are taking what is not theirs and they know it …they are the only clubs that can keep their best players, the rest of us have to sell our superstars just to stay within our budgets. The Spanish league is a much worse league than the other top divisions in Europe, the German, Italian, English and French leagues are ahead of us"
Eventually tentative negotiations began towards a collective Spanish TV deal provisionally for the 2015/16 season when all existing deals will have lapsed, however Real and Barcelona indicated that they would only be prepared to share some of the extra money that was negotiated with media companies. "We will never reduce in absolute terms our TV income, but in a relative sense, yes, it will be reduced," said Barçelona president Sandro Rosell. Overall it was felt the proposed changes would do little to dent the overall dominance of Real Madrid and Barcelona.
Proposal for Spanish football tax amnesty
With Spanish clubs providing 5 of the 8 semi-finalists for the two European competitions in April 2012, and with the national team concurrently world and European champions, the country itself remained in deep financial difficulties, with 23% unemployment, burgeoning public debt and almost zero growth. The 2008 slump in the Spanish housing market had left the big banks dangerously exposed and reliant on €152bn in loans from the European Central Bank (ECB), much of which was supplied by Germany on the condition that strict budgetary rules were followed by the Spanish government. In March 2012 the Spanish announced a €27bn austerity package coming on top of the €15bn euro package already agreed, however a compromise was later agreed with German finance ministers to reduce the yearly budgetary targets due to the ongoing recession.
With public spending slashed and tax revenues plummeting, there was astonishment when the Spanish Minister for Sport, Miguel Cardenal announced that the government was looking to write off the €1.3bn owed to the Spanish state by La Liga clubs (€700m in tax, €600m in social security). Cardenal stated; "It is unacceptable that any company, including those in football have a high level of debt and that's why formulas are being sought, within what is possible, to correct it" He revealed that the government was "working very seriously, swiftly and continually" to forgive the debts "within a reasonable period of time" and would ensure that they were never allowed to accrue again.
In Germany there was outrage at the plan. The newspaper Bild asked how long the German taxpayer was to subsidise the wages ofLionel Messi and Cristiano Ronaldo while Borussia Dortmund’s Hans-Joachim Watzke said he would have "zero understanding" if the proposal became a reality. Bayern Munchen's chief Uli Honess commented’ Such a plan would be ‘unthinkable and a blow to other football clubs…we pay hundreds of millions to get them out the shit and then the clubs don't pay their debts. Amid a general strike in Madrid where young Spaniards came out in protest at 50% youth unemployment, the centre-left Spanish Socialist Workers' Party called for a ban - as existing in Italy - on clubs with tax debts from competing in the league, while José Luis Centella of the United Left opposition party said; "This is bad news for all the people who have lost their homes and suffered from the cutbacks, while there is this tremendous generosity towards football.
Bundesliga clubs were particularly upset that while they themselves had been living within their means, Spanish clubs enjoyed what they saw as special privileges which sustained their success on the field and that they continued to be given money to buy expensive players which the Spanish banks had themselves borrowed via the European Financial Stability Facility, by far the biggest contributor being Germany, who now effectively carried the risk burden. By now there were real concerns that Spain would be forced to seek a bailout as had Greece, Portugal and Ireland having got into similar difficulties, and that some of the money given to stabilise her economy via the European Financial Stability Facility would later need to be written off as unrecoverable. Banco de Santander had received €43bn, Bankia €36bn, while La Caixa, who loaned Real Madrid the money to spend a world record transfer fee on Cristiano Ronaldo used the player as part collateral to obtain €18bn from the ECB Atletico Madrid, who were due to play German clubHannover in the semi-final of the Europa Cup owed the Spanish state €155m (£128m), yet having sold Sergio Aguero to Manchester City for €50m and using the money to offset some of their huge tax liabilities they immediately signed the Colombia striker Radamel Falcao from Porto as his replacement for €40m (£34.7m) using third party deals, while Hannover themselves signed a significantly lower profile player, Mame Biram Diouf from Manchester United.
There had in the past been accusations that Spanish football was to some extent protected by the government for political reasons and that regional and municipal authorities had provided direct or indirect subsidies, while banks themselves gave extremely cheap loans to clubs to buy players and had been unwilling to call in their debts for fear of upsetting customers who supported them. In May 2001 Real Madrid sold their training ground to the city council for €480m in order to wipe out a then €290m debt and to fund the purchase of the original Galacticos group of superstar players such as Luis Figo, Zinedine Zidane, Ronaldo and David Beckham. The EU believed that just prior to the sale the land had been deliberately reclassified to allow it to be redeveloped for apartments and thus inflate the price. Competition Commissioner Tilman Luder declared "We believe Madrid’s regional authorities may have overpaid", however a later EU investigation concluded that no state aid was involved in the transaction and that no government resources had been transferred to Real as part of it.
It was also claimed that with no points deduction applying (as in other countries), going into liquidation was too attractive an option for Spanish club owners as a way of escaping their creditors as it did not directly punish the club on the field. Despite a new law introduced in January 2012 authorising the authorities to relegate a club if it went into bankruptcy, similar threats to relegate Celta Vigo and Sevilla because of problems with their registration paperwork in the 1990s were ultimately dropped after massive pressure from the club’s fans. While Spain's tax authorities denied that clubs enjoyed preferential treatment, the Association of Ministry of Finance Technicians (Gestha) said they believed that in fact a double standard did exist, with some local authorities providing direct subsidies and sponsorship and that whereas normal borrowers were required to provide banks with real sureties against debt such as property which could be seized in the event of a default, football clubs were allowed to offer less tangible assets such as future potential TV and advertising rights. The Secretary General of Gestha, José María Mollinedo said; "We recognise that football is a national sport and raises passions but this is no justification for the treasury not requiring the same sort of guarantees that others have to give,
In Britain there were direct comparisons with the situation enveloping Scottish club Rangers, then in administration following action by HM Revenue & Customs to recover £49m in unpaid income tax and VAT. Premiership clubs owed nil tax at the end of the 2011 financial year and it was noted that if the Spanish government were as strict in collecting tax revenues as their British counterparts, the face of La Liga would be changed beyond all recognition, with numerous important clubs facing liquidation. Commenting on the tax write off plan, German MEP Elmar Brok concluded "Debt restructuring means state aid and violates competition rules. The EU commission has to look into it,
Following the pressure, on Thursday 16 March 2012 Miguel Cardenal announced that the plan had been dropped, saying "We are working to provide a solution to the problem. What the government can offer are policy instruments so that the clubs can cope with this situation, but neither will forgive the debt or provide more subsidies
European Union support for FFP
On 20 March 2012 it was announced that UEFA and the European Commission had signed a joint agreement intended to prevent clubs using the EU legal system to challenge the validity of FFP, for example by claiming that it conflicted with anti-competition legislation. This was an important step because for clubs in countries which are part of the EU, the European Court is the highest authority (above even a nation’s own supreme court) and the ultimate channel by which FFP might be challenged legally.
The European Union - who acknowledged the unique "specificity of sport" in the Treaty of Lisbon - policy on sport stated "good governance in sport is a condition for the autonomy and self-regulation of sport organisations". The vice-president of the EC and the Commissioner for Competition Joaquin Almunia confirmed that the existing FFP rules were both valid and in accordance with European legislation, saying; "I fully support the objectives of UEFA's FFP rules as I believe it is essential for football clubs to have a solid financial foundation."
UEFA president Michel Platini said: "Our statement confirms that UEFA's Financial Fair Play regulations are fully consistent with EU State aid policy. The rules will protect the interests of individual clubs and players as well as football in Europe as a whole"
UEFA general secretary Gianni Infantino said: "Let us be clear, this is not a new law … if anyone was thinking of filing some sort of complaint saying FFP somehow restricts European competition law they would have to file it to the Commission. This is a big milestone in the enforcement of the break-even principle"
During the summer, Spanish side Malaga, bought by a wealthy benefactor in 2010, unexpectedly went into financial meltdown with players wages left unpaid and several sold cheaply in order to keep the club afloat. Since buying Malaga, Sheikh Abdullah bin Nasser Al-Thani had invested almost €80 million in players, infrastructure and developing a youth academy as part of a five-year plan to fast-track them to domestic and European glory. Despite the team finishing fourth in La Liga ahead of schedule, earning a place in the Champions League, Al-Thani, a member of Qatar’s royal family, abruptly announced that he’d had enough of the uneven distribution of TV revenue in Spain and of criticism by the media, and was now no longer willing to bank-roll the club.
In July, AC Milan sold their two star players, Thiago Silva and Zlatan Ibrahimovic, to free-spending Paris Saint-Germain for a combined €65 million (£51.4 m) in order to meet FFP. Club owner Silvio Berlusconi commented; "We did not want to sell Thiago Silva or Ibrahimovic and turned down the first offer. We then thought about the Financial Fair Play…so we had to accept it with weeping hearts. It was impossible for us to turn down the offer. It has saved us a lot of money in transfers and wages, meaning our finances are secure for many years to come. We will save 150 million euros in two years.
In July, there were renewed concerns that wealthy clubs might try to bypass FFP when Chelsea signed a ‘commercially confidential’ three-year deal under which Russian oil and gas giant Gazprom would become Chelsea's ‘global energy partner’. Some commentators pointed to Chelsea owner Roman Abramovich’s 2005 sale of his controlling stake in oil company Sibneft to Gazprom as possibly infringing UEFA rules defining ‘related-party transactions’ as including those where clubs could potentially exert ‘significant influence’ over clubs' sponsors. Earlier Paris St Germain, the French club owned by the Qatar government (who had recently been, and continued to been the biggest spenders in world football), signed a similarly confidential sponsorship deal with the 50% state-owned Qatar National Bank. Having earned almost €60 million after winning the previous season’s Champions League, Chelsea had also signed new sponsorship deals with Audi, Sauber F1 and Delta Airlines, and it was felt that the deal was unlikely to be scrutinised in the same way that the Manchester City – Etihad sponsorship after the Chelsea club website also announced that Gazprom has signed an almost simultaneous agreement to also become an official partner of the UEFA Champions League and the UEFA Super Cup.
With Premier League spending on players continuing unabated during the summer transfer window, Liverpool FC principal owner John Henry, who had previously joined Arsene Wenger in criticising Manchester City's deal with Etihad Airlines as a means of circumnavigating FFP, proposed that the only way of preventing clubs from effectively ignoring the rules would be for the Premier League to follow the example of the French and German football authorities by incorporating the FFP legislation into the Premier League’s own rules. Such a move would allow domestic sanctions to be taken over and above any measures taken by UEFA to curb excessive spending by clubs. Henry said;
"The mandate of financial fair play in Europe is for clubs to live within their means... half of the clubs in the top divisions within Europe are losing money and 20% are in straits of varying degrees... There are a lot of clubs within the league that support financial fair play. We believe the league itself may have to adopt its own rules given that clubs seem to be ignoring UEFA’s rules, which may be porous enough to enable clubs to say that the trend of huge losses is positive and therefore be exempt from any meaningful sanctions."
At the Premier League Annual General Meeting, delegates from Manchester United and Arsenal spoke in favour of the Liverpool proposal, as did West Ham United’s joint chairman David Gold, who commented; "I was involved in bringing in the FFP rules in the Championship and at the time I thought should I get to the Premier League, I’ll lobby for it. Even the big clubs now are saying we have to get to grips with costs." The proposal was not unanimously agreed. Manchester City said that they would prefer to manage their business as they saw fit, while Fulham, who had in the past enjoyed significant financial support from their owner Mohamed Al-Fayed, said that such a plan might ‘kill the dreams’ of others.
It was decided that various possible changes would be discussed over the coming months, with one possibility being the full adoption of the FFP rules in to the Premier League’s own rules. Such a change would require a 14–6 majority by club chairmen.
On 30 May 2012, UEFA refused to issue a licence for the 2012–13 European season for Beşiktaş J.K. and Bursaspor, and probationally suspended Beşiktaş for one more season if the club had qualified between 2013–14 to 2017–18 (five years). They were the first two clubs to be banned since UEFA renewed its UEFA Club Licensing regulation in 2010. As FFP is only fully in force in 2013, both clubs violated UEFA Club Licensing instead of FFP. However, UEFA did not specify which article(s) they failed. Article 49 stated that there should be no overdue payables towards football clubs and article 50 stated that there should be no overdue payables towards employee and social/tax authorities. Beşiktaş have been sued by numbers of clubs for overdue solidarity contribution and the club used misunderstanding the rule as an excuse. However the club were also sued by Matteo Ferrari for overdue wages, and news reports claimed that Manuel Fernandes had submitted a transfer request after the club failed to pay his wages.
Moreover, according to the statutory filing in Turkish Public Disclosure System (Turkish: Kamuyu Aydınlatma Platformu), Beşiktaş Futbol Yatırımları Sanayi ve Ticaret A.Ş (İMKB: BJKAS), the list portion of the club, had a negative equity on 29 February 2012 for negative TL 286,256,446 The listed company also recorded a successive net loss in consolidated accounts: TL 12,050,502 (2006–07), TL 1,345,510 (2007–08), TL 29,417,643 (2008–09) TL 48,442,389 (2009–10) TL 120,079,175 (2010–11) and most recently TL 84,932,418 in the first nine months of 2011–12 season. It was uncertain whether Beşiktaş lied on the acceptable deficit of €45 million or not (after deducting irreverent income and cost). However, Beşiktaş certainly covered the net loss by increasing debt, as well as breaking one or more financial indicators such as negative equity, thus Beşiktaş would be banned if FFP was already in force.
It was reported that Bursaspor had overdue debt to Portsmouth F.C. (Collins Mbesuma). Last but not the least, the last Turkish Big-Three, Galatasaray, champion of 2011–12 Turkish Super League, had a negative equity and aggregate net loss in 2010–11 and 2011–12 season (first 9 months). The club had to either cover the net loss by equity contribution (instead of increasing debt) and/or reducing relevant break-even result to €5 million in the near future in order to avoid sanction due to FFP. However, the incident of Beşiktaş also reflected the fragility of Turkish football, as Beşiktaş were already the one of the leading clubs of the league and had qualified for European competitions successively from 2002 to 2012. Galatasaray returned to UEFA Champions League in 2012–13 season and this may put the club back on the right track.
Meanwhile another Turkish Super Lig club, Trabzonspor announced plans to greatly boost their annual income in order to both meet FFP and to provide a guaranteed revenue stream to allow then to expand onto the European stage when they received approval to build a 28 megawatt hydroelectric power plant in the hills above their Black Sea home of Trabzon. The Financial Times estimated that following after an initial investment of between US$30–50 million, Trabzonspor would be able to count on an additional $10 million per year from the domestic sale of electricity, before taking account running costs, financing and tax.
Massive new Premier League TV deal
Despite the worsening European financial crisis, during the same week that Spanish banks were forced to request a further €100 billion in loans (considered a national bail-out in all but name by some commentators) in mid June 2012 the Premier League announced that the sale of the latest three-year broadcast rights package to BskyB and BT had yielded a spectacular 71% increase over the previous deal to BskyB and ESPN.
The new contract, covering the 2013–14 to 2015–16 seasons, was worth £3.018 bn, an increase of £1.25 bn over the existing agreement, and guaranteed each top flight English club at least an additional £14 million per year; in addition, once Internet and overseas rights plus the £180 million paid by the BBC for Match of the Day highlights were included, Premiership clubs could count on a total of at least £5 billion in TV earnings by the time the deal expired, well into the period that FFP was scheduled to come into full effect.
Amid predictions that the huge windfall would spark a renewed wave of excessive transfer spending, the Chief Executive of the Premier League, Richard Scudamore, expressed his hope that the money would not merely find its way into the pockets of players and their agents and that clubs would use the opportunity to reduce their debts and bring their businesses onto a more secure financial footing, as demanded by FFP. He commented:
"We are entering a new era with financial fair play, I'm hoping it will get invested in things other than playing talent. It should also be able to achieve sustainability. Priority number one is retain and attract top talent but there ought to be a way of doing that while achieving sustainability. Some of it ought to be used to reduce losses"
Rangers PLC liquidation
During the close season, Scottish football was warned that it faced ‘financial armageddon’ following the liquidation of the company that ran Rangers, one of the big two SPL clubs. After forcing Rangers into administration, HM Revenue & Customs claimed that Rangers had been underpaying tax for at least 10 years following years of stagnant growth in Scottish football revenue by using (then legal) Employment Benefit Trusts to pay staff. When the news broke, fans of fierce rivals Celtic complained that Rangers had effectively received an unfair advantage over their own club and should be stripped of the numerous trophies they had won over the previous decade
Rangers financial position had already been so bad that it had been sold in May 2011 for the token price of £1 (one pound sterling), however new owner Craig Whyte later admitted that he had borrowed £24.4 million against the next four years worth of season tickets sales to offset an annual deficit of £10 million in running costs This turned out to be less than the whole story; Whyte, who had previously been banned from being a company director for 7 years had actually used the money to finance his own takeover, and was subsequently banned for life from Scottish football.
On 5 April 2012, the administrators Duff and Phelps revealed that total debts could top £134m. On top of the £93m now being claimed by HMRC in various taxes, unpaid VAT and PAYE which has now been reduced to approx 10 Million after the old company won the big tax case, there were various amounts owing to 276 separate businesses, individuals and public bodies including £26.7m due to the ticket agency Ticketus, £7.7m to fans who had purchased debentures in the club, £2.3m to twelve football clubs throughout Europe and liabilities to playing staff and employees who temporarily accepted up to 75% reduced wages in order to keep the company afloat during administration. Despite being taken over by another new owner, Charles Green, the company running the club were finally consigned to eventual liquidation on 12 June 2012, and later attempts to relaunch Rangers as a SPL club were frustrated by chairmen of the other clubs who voted against the transfer of the existing playing licence on the basis of ‘sporting integrity’. SPL chief executive Neil Doncaster immediately warned that the decision would cost the game about £16million in annual income due to the substantially lower gate receipts from the additional fans who traditionally attended for glamorous Celtic / Rangers fixtures.
After Rangers received a conditional licence to play in the fourth tier of Scottish football, (Scottish Third Division) on 27 July 2012, Rangers manager Ally McCoist bitterly accused the other chairmen of adopting "as hostile an agenda as possible towards his club, though many others – including some of their own fans - maintained that Rangers downfall had been due entirely to their own financial recklessness.
First Financial Fair Play penalties - Malaga banned
On 11 September 2012, UEFA announced that they had imposed the first penalties of the Financial Fair Play era. The penalty was to temporarily withhold prize money from 23 clubs after they failed to comply with the rules. The 23 clubs penalised had until 15 October 2012 to prove that they had plans to pay a combined €30,000,000 in unpaid player wages, transfer fees and social taxes for the period ending on 30 September 2012.
It was announced later that 16 of the 23 clubs facing potential prize money lost had received their prize money won in European competition as they had managed to settle their debts before the 30 September 2012 deadline. As a result, the following clubs had a punishment reprieve after having prize money initially withheld:
- FK Borac Banja Luka, FK Sarajevo and FK Zeljeznicar (Bosnia)
- CSKA Sofia (Bulgaria)
- Maccabi Netanya (Israel)
- FK Shkendija 79 (Macedonia)
- Floriana (Malta)
- Buducnost Podgorica and Rudar Pjevlja (Montenegro)
- Ruch Chorzow (Poland)
- Sporting Clube de Portugal (Portugal)
- Vaslui (Romania)
- Rubin Kazan (Russia)
- Atletico Madrid (Spain)
- Eskisehirspor and Fenerbahce (Turkey)
Since the original 11 September action by UEFA, two other clubs faced action as their situation with overdue payments had deteriorated between June and September 2012. They were Lech Poznan of Poland and Arsenal Kyiv of Ukraine.
On 21 December 2012, the first punishments of UEFA Financial Fair Play were handed out to eight clubs in total. Vojvodina and Arsenal Kyiv avoided a ban but both were fined with Vojvodina fined €10,000 and Arsenal Kyiv fined €45,000 but facing an extra €30,000 fine if they fail to prove they have no outstanding payments by 31 March 2013. Hajduk Split, Osijek, Rapid Bucharesti, Dinamo Bucharesti and Partizan Belgrade have been punished with a ban from UEFA cup competition for the next season that they qualify unless they can prove that have paid their outstanding payments by 31 March 2013. If they fail to meet the 31 March 2013 deadline, then they will be banned. The ban would be applicable for the next three seasons (i.e. 2013-14, 2014–15, 2015–16). Osijek, Dinamo Bucharesti and Rapid Bucharesti were fined €100,000 each. Hajduk Split were fined €40,000 but will be fined an extra €40,000 if they fail to prove they have no outstanding payments by 31 March 2013.
Malaga have been handed the biggest punishment though and will be banned for one year from UEFA competition, applicable for the next four seasons (i.e. 2013-14, 2014–15, 2015–16 and 2016–17). They also face another one year ban during the applicable four seasons if they fail to prove that they have no outstanding payments by 31 March 2013. They have also been fined €300,000.
The case against Lech Poznan and Sporting was dropped. UEFA released the prize money they withheld from all clubs that were punished or avoided punishment.
French government inquiry on FFP
It was announced that the French government would look into the impact of UEFA's Financial Fair Play rules on the French league and how it would affect clubs with Paris St. Germain and AS Monaco coming under the spotlight, particularly Paris St. Germain with their heavy spending due to Qatari ownership. The Cultural Affairs, Education and Sport Commission set up the inquiry with Thierry Braillard, the deputy for the Rhone region, given the task to lead the inquiry. Braillard stated:
"The aim of this inquiry is to talk to people at UEFA about Financial Fair Play, bearing in mind that, for the 2012-13 season, the cmulative deficit of professional clubs in France was €250 million. The commission will focus in particular on the financing of clubs like Paris Saint-Germain and Monaco by Qatari or Russian investors, and the fairness of that in relation to their opponents in domestic competition."
The inquiry would last up to four months and would also look at how the preparations for Euro 2016 would be affected.
UEFA warning on inflated sponsorship
In early February UEFA reminded clubs that they would be expected to prove that they were not trying to bypass FFP by entering into inflated sponsorship deals with parties closely associated with their owners. The warning came in the wake of an announcement that Paris Saint-Germain had completed a deal with the Qatar Tourist Authority worth €200million ($262m) per year until 2016. As with the Manchester City agreement with Etihad Airlines, the news was met with considerable criticism in view of the ownership of the club by members of the Qatari royal family, however PSG President Nasser al-Khelaifi refused to accept that the club was doing anything wrong, telling L'Equipe; "We have been building an international brand. This deal is a strong symbol. Qatar have benefited a lot from their investments in PSG…it's necessary to become one of the great European clubs. Other clubs have invested for 20 years. We have been there for a year and a half and now we must stop pouring money? It would be unfair. UEFA general secretary Gianni Infantino said: “Everyone, including PSG know they have to demonstrate (that the sponsorship deals) are without cheating and that will be submitted to panels. We have a regulation which speaks about fair value of deals and the fact that a related party cannot just inject money into a club directly or indirectly.
The most recent UEFA Licensing Report confirmed that despite rising revenues, club losses had almost trebled between 2007 - 2011 from £515million to £1.45billion, with player’s wages increasing 38%. Figures also indicated that at least 46 European clubs - including two from the Premiership - are in danger of failing the rules when the first accounting period comes to an end at the end of the 2013-14 season.
Premier League agree new financial regulations
On 7 February 2013, the FA Premier League in England agreed to new financial regulations in the wake of the big upcoming new TV deal and pressure from both the Government and supporters. From the 2013-14 season, Premier League clubs cannot make a loss of more than £105 million over a three season period (including 2013-14, 2014-15 and 2015-16) which is an average of £35 million per year. Any club that loses more than £105 million in that time faces possible point deductions while clubs making any loss up to the £105 million limit will come under tighter financial scrutiny from the Premier League. Clubs are restricted on how much of the Premier League Central Funds they receive that they can spend on player wages. The limit is £4 million in 2013-14, £8 million in 2014-15 and £12 million in 2015-16. However this only applies to clubs that have a wage bill higher than £52 million per year in 2013-14, £56 million in 2014-15 and £60 million in 2015-16.
On 11 April 2013, these new rules were ratified at a summit in London and added to the Premier League rulebook. 14 of the 20 clubs voted in favour, 5 voted against while Swansea City were the only club to abstain altogether.
Well that is is all there is to it, complicated but in my eyes a BIG step in the right direction for a sport that was fast getting out of control money wise.
If all the clubs embrace it you could see big changes to the way football is run.
Thanks for reading.