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Financial Fair Play creeps into the Premier League

By Tony Attwood

And so it came to pass, just as suggested on Untold and elsewhere.  Premier League clubs will lose points and face other “touch sanctions” (in the words of Richard Scudamore) if they don’t comply with the League’s on Financial Fair Play rules.  The new approach has come in just in time to stop the whole £5.5bn television rights arrangement being spent on salaries.

It is by no means perfect, and it by no means everything we wanted, but at least it is a start.   It should have an impact on wage inflation and on long term losses.  With a spot of luck it will make clubs more stable.  And most of all, it is the first rule about finances in the Premier League.  Which means it is open to amendment and development.  Getting the first rule in place is always the hardest measure.

From next season the total loss a club can make across three seasons will be £105m. A big loss, but not so big that it won’t stop another buyer from the UAE taking over a club and throwing money at it.  Academy development and stadium building are not included in the calculations.

To give a perspective, last season the total losses were £361m – which suggests that the losses over the next three years without this regulation would be over £1bn.  If every club made the maximum allowable loss across the next three seasons then the total loss would be over£2bn, which suggests the rules will have no impact.

But that is not how the Premier League plays out.  A few clubs make a profit, a lot of clubs make losses well below the permitted level, so in fact only the big losers will be caught.

Thus the plan is not to cut spending but to stop it rising so fast, and to stop any more buy outs of the Man City and Chelsea type, and finally the reign in those two clubs.

Those clubs that have a wages bill over £52m a year can only add to that in a restricted way over the next three years – unless genuine increases in match day and commercial income occur.   13 of the Premier League clubs have wages bills over £52m a year.

Chelsea, Manchester City, Aston Villa and Liverpool would have had points deducted if the rules had been in place from 2008 on and they had behaved in the same way as they actually did.  And to give a comparison, it is believed that Roman Abramovich has put £1bn into Chelsea in the past 10 years.

This is not all that Arsenal wanted – the club was seeking to put the Uefa rules into place in the league.  But even when the rules were relaxed to the ones that went through yesterday, Manchester City, Fulham, West Bromwich Albion, Southampton, Swansea and Aston Villa all voted against any restrictions.  Curiously Reading abstained, and so the new rule was passed.

It is far from everything that Untold has argued for.  But it is something.  As always, the journey of 10,000 miles starts with a single step.

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32 comments to Financial Fair Play creeps into the Premier League

  • avatar @babakrdaemi

    Hi, I understand that thecowner can cover a portion of the debt? Is this true? If so, we are no better off

  • avatar M Thomas

    I said elsewhere that RA must be laughing in his yacht. He has run rings around every one and .

    Had the £105 million loss over the last 3 accounting year been in place, after allowable expenses Chelsea would have met all the requirements of these new regulations.

    Rubbish I hear you say.

    Ok let me explain in 2010 Chelsea lost £70.9 million, 2011 £67.7 and a small profit in 2012 0f £1.4 making a net loss of £ £137.20. Without looking too deep Chelsea spend about £12 million a year on Academy development or £36 million over a 3 year period so the net loss was £101 million and thats before you take off other allowables such as community projects etc.

    Over the same 3 year period Chelseas wage expenditure has remained roughly the same.So no problem with this one either

    Man City, as we know would have failed and strange as it may seem so would have Spurs as despite declaring net profits over the period their wage costs have increased by quite a significant amount.

  • @M Thomas

    I guess that is why Chelsea is for the League’s FFP, and not against it.

  • avatar Adam

    M Thomas, but no matter how you present the figures, This money is not solely contributed by Chelsea’s fan base or club dealings, its an individuals wealth.

    Maybe when an individual puts so much money in a club, that club should lose the right to call itself by its given name and must compete under the owners name. This might wake the fan base up a bit?

  • avatar M Thomas

    Adam

    Interesting you say that as the club name is owned by the pitch owners and if the club moves, withouth their agreement, they cant take the name so maybe we might be renamed Roman FC!

    As for an individual putting so much money in well maybe not the same amounts but benefactors have been around in football since day one

    When Chelsea, Man City or whoever are found guilty of breaking the rules maybe the debate about finacial doping will be valid for me and many the fact that Arsenal havent spent more of their significant cash reserves to bring in better players isnt down to Chelsea or Man City or whoever its down to Arsenal and thats why you havent won trophies. quite simply you have had the resources to compete but choose not to.

  • avatar Rupert Cook

    Indeed we’ve had the resources but we did refrain from competing with the new big teams but whisper that because our fans don’t want to know.

  • avatar WalterBroeckx

    M Thomas,
    let me doubt what you say that it isn’t down to Chelsea or City that we haven’t brought in better players.
    Mata was as good as signed until Chelsea, sorry Abramovitch doubled his offered wages and off he went.
    Hazard was as good as signed until Chelsea, sorry Abramovitch stepped in and doubled his offered wages and off he went.

    So nothing to do with Chelsea you say? Arsenal even agreed to pay the high transfer money but for budget reasons could not match the wages.

  • avatar Shard

    M Thomas

    It depends what you mean by ‘compete’. Do Arsenal have money in the bank? A definite yes. Could they have spent this money? Also yes. But could they have spent enough money to significantly close the gap on Chelsea and ManCIty’s spending, even assuming they didn’t just up their spending level in response? No.

    Since 2009, when ManCity was taken over by Mansour, the annual average spending on transfers and wages is 117m MORE than Arsenal. That’s 117m pounds more than Arsenal per year for 3 years. Chelsea’s is at 108 million more. There is absolutely no way Arsenal have those resources. Some of our fans don’t want to know that either.

  • avatar Adam

    M Thomas (like the name, did you chose it just for us).

    Weird how you state Roman fc, I was thinking the same thing, and to think about it they probably have a longer history around Londinium than Chelsea. Maybe we could rename Norwich the Iceni and get them to march south all over again. Now that i’d pay to watch.

    This is guess work now; if we tried to compete with the richer clubs we would have been out-spent but on a larger scale. The disappointing point you raise, is that the financial aspect wholly dictates success within top flight football. You have to win off the pitch financially before you can be successful on it, which goes against the spirit of football as a participants sport.

    As for Chelsea losing their name, Football is still a sport of location, but with the globalisation of the sport the locality of the club has less meaning to some areas of the fanbase. which again is understandable but a shame.

  • avatar Shakalula Gooner

    Man U and Chelsea, even though they have shown that they can compete in the format where there wasn’t any FFP restraint whatsoever; however, they have justifiable fears that over time, they will reach the limits of their ability to compete if the ante keeps getting raised every year (e.g. on account of Man city’s deeper pocket or on account of the entrance of new owners with Man City-type spending appetite).

    Now, if even Man U and Chelsea fear for their future prospects in an atmosphere of long-term unrestrained spending, what does that portend for smaller clubs and the overall financial stability of EPL? It is wishful thinking to expect all 20 clubs to get billionaire benefactors that are happy to spend £200m or more per year and year on year.

    This is the motive for getting the needed majority to approve the idea of FFP that they have embraced.

    there are 2 levels at which this is beneficial to all clubs. The first is the possibility of buying 5-6 new players at premium prices in one season to replace aging ones. I believe that Chelsea’s Abrahamovich really hoped that he would be able to get more players coming in from the Youth Program before the generation that Mourinho put together would retire. That didn’t work out hence the new round of spendings on players in 2011 to date. Now, with FFP in place, it may be more difficult to embark on the same strategy in 4-5years time, when these current players become due for replacement.

    The second immediate benefit is limiting the number of players that earn £120,000plus per week to only a superlative few – at least over the next 5 or so years. Those that have such players sitting on the bench for most of the year will begin to wonder at their financial prudence.

    In these two ways, the FFP help Arsenal, Everton, Newcastle etc. immediately and more than it helps Chelsea or Man City.

  • avatar Dreamer

    “From next season the total loss a club can make across three seasons will be £105m.”

    Please clarify for me, is the £105m allowed per season or the total for the next 3 seasons?

  • avatar M Thomas

    Walter

    Mata was signed by Chelsea for a fee of £23.5 million . Valencia announced on 21 August 2010 they had agreed the fee with Chelsea no other club had agreed to pay the fee that the wanted for the player. Matas wage was around £60k upon signing he signed an improved £100k a week contract in Dec 2012.Are you suggesting Arsenal coulndt afford these type of sums? Of course they could but choose not to.
    As for Hazard I very very nuch doubt that Arsenal would have agreed that level of fee for it goes agains how Wenger has always opperated in the transfer market.

    Adam

    We share the same chrisitian and surnames and our middle names are both strange ones.

    Shakalula Gooner

    Chelsea team re build is fairly well adavnced. We have a lot of players in their early to mid 20s already at the club as well as 3 full Belguim internationals already signed and out on loan (Lukaka, Courtois & De Bryne.
    In the youth squad there are 4 or 5 that will be in the squad in a year or two and yes I will agree that the track record on youngsters making it from the youth through to the first team squad isnt good I would encourage you to google players such as Piazon, Ake, Chalboah, Thorgen Hazard, Blackman and Feruz.

  • avatar Shakalula Gooner

    M. Thomas
    The young players always look good on paper but there are often two issues:
    1. Will Chelsea’s future coaches be happy to risk them in games as necessary to enable them to develop into top class players that you think that they have the potential to become? Indeed, will the owner have the patience to tolerate avoidable losses in the drive to win trophies every season? Chelsea have lost a few good players on the altar, the most recent being a certain Danny Sturridge.

    2. Will all of them truly be “world class”? Or be put together in a world class team instantly? While the process is ongoing, will Chelsea owner and fans have the patience to see the experiment through?

    So, we see again, the benefit of FFP in another dimension: clubs will not have the easy option of aborting the team building process in favor of bringing in new, ready-made world class players in other teams by reaching for the cheque book.

  • The problem with football is it’s a business that allows clubs to trade after bankruptcy.E.G Glasgow Rangers.They start again and can become a big player in the SPL after a few years in the wilderness.Rangers are the example of financial doping.

  • avatar Stuart

    Dreamer,
    It is over a 3 season period.

  • avatar M Thomas

    Shakalula Gooner

    You make a good point and who knows however I truly think that Chelsea are at a crossroads.
    Starting in goal I think within the next 18 moths you will see Petr Cech, Hilario & Turball leave. Courtois is getting rave reviews in Spain where he is on loan & Blacknman is already a better keeper than Turnball.
    The back four is quite settled and other than the obvious retirement (John Terry)and Cole leaving I think you will find that one experienced”leader” will be brought in and two others who are on loan in Holland and Brazil will be brought back.
    Midfield is interesting and I think you will find one holding come in .Lampard may get another season but having watched him live I truly believe that his performance is being talked up by the press. At both Reading & Newcastle he ran out of steam and should have been subbed.De Bryne is already receiving rave reviews in Germany and being a regular Belguim international I dont think there is too much risk there
    Up front there will be a two forwards coming in one being Lukaka ( who is on lan at WBA)
    Will the coaches risk the younger players? well although its gone under the radar Chelsea average age has dropped like a stone and there have been debuts for the likes of Ake & Piazon but the jewel in the crown is a player called Nat Calboah who is gaining huge plaudits and awards whilst on loan at Watford.He should be a future England player and possibly even captain. Will they all be world class? Not at all but in truth how many truly world class players are there in the EPL?
    Will the supporters and or the owner allow the “experiment” through? Thats an interesting one and I suspect that the timelines arent that long but to suugest that we dipped out on Sturridge is interesting as he is possibly the most selfish & overatted player I have ever seen.On loan at Bolton he got his head down and did well over a short period it was much the same when he returned to Chelsea for the first few months and I have no doubt that in a few months his form will dip somewhat at Liverpool.
    Apologies for making such a long post about Chelsea on an Arsenal site but I thought a little more meat on the bone may add to the debate as to why RA agreed to the FFP at at Thursdays meeting.

  • avatar Stuart

    M.Thomas
    Arsenal probably could afford the 100k but Chelsea would just out bid us any way. We will never win a bidding war against them.

  • avatar Andrei

    We know what the intended benefits of this FFP deal are. So the question is what are the potential unintended consequences? Any takers?

  • avatar robl

    Not sure it will do too much as its pretty much the champions league clubs that are running at that level of loss and they have FFP…

  • avatar WalterBroeckx

    robl,
    the way I see it is that clubs are fine and can stack up losses to 105M over 3 year without much problem (except go bankrupt maybe – not Chelsea or City of course) but from the moment they want to play in Europe they will face the stricter rules from Uefa.
    And that is where they will have to make a decision: apply to not just the PL-FFP but also to the UEFA-FFP rules. And only make a 35M loss over 3 years.

  • avatar Florian

    It is yest unclear to me how the new rules will encourage the clubs to break even. So far looks like they don’t. In fact, they seem to encourage a certain amount of losses, and the short-to-medium term effect is drawing away people who view football as a money-making business. But then, the UEFA FFP will start kicking in, and the bigger clubs will eventually have to stop losing money, so maybe this is just a 2-step process in forcing clubs to break even. This all assumes though that UEFA will enforce its regulations, which is far from being certain.

  • avatar robl

    @ Walter, thanks, that was what I was trying to say just less eloquently!

  • avatar Florian

    Sorry Walter didn’t see your post.

    To decouple the club losses from the investments in academy and stadium, that’s what doesn’t actually make sense. It still allows for a big investor to subsidize the team while buying out the stadium and developing the academy. How does that benefit football is beyond me.

  • avatar Gord

    @Florian

    I’m in North America (western Canada). I don’t think I have ever heard of a professional sports franchise that ever built it’s own stadium. All of them want the local, provincial/state and even federal governments to foot the bill, and just give them the stadium. And then they turn around and sell the naming rights to another group.

    I think that if an investor decided to buy an English team, and they needed a new stadium, by all means they should be allowed to do so on their own bill. And as they paid for the building themselves, they can certainly let someone pay for the name of the thing.

    But if they do that, don’t go looking for handouts from government because you are already doing so much. Nobody forced you to build a stadium, you decided that on your own.

  • avatar Florian

    @Gord

    I see your point. And that can probably extend to academies, though it’s a bit of the same thing having the stadium and the academy gifted by a generous donor vs having to build your own. Meh, the more things change, the more they look the same.

  • avatar Rupert Cook

    Regarding Mata, he was as good as signed but Arsenal dithered and then Chelsea stepped in. And we surely could afford him but we chose not to. That’s because we consider ourselves as a business first, football club second. Soon we may swap priorities but who knows?

  • avatar Dave C

    @rupert Wow… You still don’t get it. We will be outbid by either fee and/or salary. You truly are dense. I don’t know why we waste time on you.

  • avatar Rupert Cook

    @Dave C, insulting people will always strengthen your argument. Mata was as good as signed and then Arsenal dithered and Chelsea saw an opportunity and stole in. But don’t let the facts get in the way.

  • avatar Stuart

    How do you know Arsenal dithered Rupert?

    How do you know we weren’t just following the normal transfer procedure whilst Chelsea got wind of it and hijacked it?

  • avatar M Thomas

    Stuart

    Surely normal transfer procedure is you make an offer to club and player and they sign.

    So one can only assume that one of the stages hadnt been achieved. am inclined to support Ruperts comment that Arsenal dithered. After all Chelsea didnt agree a fee till 21/8 which was a week or two into the season.My guess is that Arsenal quite simply didnt agree the transfer fee and held on hoping that they would get him on the cheap.

    Quite simply if Arsenal had wanted the player why did .

  • avatar Rupert Cook

    Strong reports by a French journalist who is nearly always correct when it concerns Arsenal stated the case. I think his name was Auclair, though I maybe wrong on his name.

  • avatar Stuart

    M Thomas,

    I would hazard a guess that there is more to a transfer than just making an offer to the club and then bobs your uncle.

    You would need to approach the club, negotiate a fee, entice the player / sell the benefits of your club, negotiate a contract with the player, carry out a medical & register the player among other things which all take time. At any point, either party can pull out or shop around. The selling club (or players agent) can shop around for another buyer to create competition and inflate prices (or fees/wages) whilst the buying club can look around for a better deal or a plan B if they wish, this doesn’t happen overnight. (One or all of these wouldn’t necessarily always happen but they can happen).

    If a club and player have already come to terms that the player will be leaving, anyone (Chelsea) can then jump in and make a higher offer (upon tip off from agent) which I’d lay money on being exactly what happened. The long winded part is getting everyone agreed to the transfer happening, anyone can hijack it once the work has been done.