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Could Leicester and QPR be relegated to League one?

By Tony Attwood

Sometimes emails to Untold ask why we spend so much time on FFP when the real issue is who Wenger is about to buy.

One reason is that this is Untold – Untold deals with the stuff others ignore – and if ever there was something that is largely being ignored by the media it is FFP.

And what makes FFP so fascinating is that there is not one but four different FFPs (one for Uefa, one for the Premier League, one for the Championship and one for Leagues 1 and 2).  They are all different, and in many ways most of them seem quite unstable.  I don’t think anyone is quite sure what will happen – but things will happen, and that is what I am trying to chart here.

In a sense FFP is the financial equivalent of transfer rumours.  We don’t quite know what will happen, but can be sure something will happen.

Premier League clubs spent £722m on transfers in 2012/13 which was 28% up on the £564m spent in 2011/12.   So this suggests that not everyone is taking notice of the new FFP regulations, and that there is a real sense of “we’ll worry about that when we get to it.”

Certainly in the Championship, this seems to be the case.  Under FFP any Championship club that exceeds an £8m loss for the 2013-14 campaign when their accounts are submitted by 1 December this year is subject to a punishment.

For 2012-13 QPR showed a loss of £65m, and will probably make the same for the past season, which means they will have a bill of £30m-£35m.   But the Premier League has now said that it will not help the Championship collect the money on clubs that get fined but get promoted.  In response Tony Fernandes told the Guardian Will we fight the fine? What do you think? After all we’ve been through, it’s my middle name: ‘Fight it’ Fernandes”.

This has led some to suggest that the Championship will sue Leicester and QPR, and they might.  But they could also issue the bill to those clubs, and apply a hefty interest rate, and then deduct the sum due from the clubs when they finally return to the Championship as they surely will.   Or even ban them from the Championship and send them down to League One – quite viable since the club would have been in breach of Championship regs by not paying the fine.

That would really hit QPR and Leicester where it hurts for it would mean that just as they lose all the income from the PL TV deals and while they are still paying Premier League wages, they find themselves playing League One clubs.  Also it would scupper Fernandes’ scheme of dragging the whole thing out through the courts.  He would then be appealing against QPR being banned from the Championship.  That case would take a year or two to see through the courts – during which team QPR would have to apply to League One – if League One actually wanted them.

If you want to know how that looks, look at Rangers in Scotland.

As I say, the Championship has yet to decide what, if any, fines will be imposed, and we have had Leicester supporters here already speaking in a way very reminiscent of Man C supporters, in that hiatus between the imposition of the fines and their acceptance of them.

But although we have seen Man City’s and PSG’s “they wouldn’t dare” policy towards Uefa it looks like most clubs now seem to be considering rather more carefully at exactly what the four different versions of Financial Fair Play now in existence actually mean.

Of course you wouldn’t know it if you just focussed on the frantic “Liverpool to buy everyone” approach of the press at the moment, and it is possible that Liverpool have decided they can find a way around FFP, but overall the effect is there.  But it is clear that editorial policy is that FFP regulations and transfer tales are not allowed to be mentioned in the same article.

Indeed in the case of Liverpool, discussion of the issues of where the money is coming from, not only for transfers but also for their new stadium, seems to be vetoed.  Interestingly both Tottenham and Liverpool await planning permissions, while refraining to give much of a clue as to where the money is.  Liverpool also don’t seem quite clear on the level of disruption there will be to crowd numbers while the new stadium is built – something that will affect their income considerably.

So it is muddled.  So muddled that unless you are really into FFP you wouldn’t actually know that in May the Championship clubs had a vote to change their own FFP rules in a number of ways.  None of the votes got the majority needed – so in one sense yes, it is a non-story, but it shows just how much is going on in FFP – and how little of it is reported, and how concerned some of the clubs are getting.

There is another equivalent here I am reminded of.  When Arsenal voted to become a professional club in 1891.  The issue was, would the London FA and the Kent FA ban their members from playing Arsenal?  That issue was far more important than who Arsenal signed at that moment – although the telling of the tale got mangled.  For years Arsenal’s own publications said the club was banned and nearly went bust.  In fact the other clubs voted not to ban matches against Arsenal, and the club flourished for the next 15 years.  If you want to read the story details are in “Woolwich Arsenal, the club that changed football” – see below).

Meanwhile what’s interesting with the PL model is that it focuses on wages, and wage increases have slowed down although the Deloitte Sports Business Group report shows that they are still running at record levels.

But in the Championship half the clubs spent more on wages than they actually earned in total from all sources, basically because they wanted one of the three spots that gives them a year in the Premier League.  QPR under Arry spent 129% of their total income on wages.

It is interesting in passing to see just how diverse the Championship is. Peterborough Utd spent just £6m on wages.  As opposed to half the clubs that like QPR spent more on wages than they actually earn.

But Championship revenue is in decline – it fell by £39m in the season under revue.   Clearly this is not viable – both from an FFP point of view, and from the view of the long term stability of the club.  One day the wealthy owner pulls out, and then the club has nothing.  It suggests that if the money launderers don’t get hold of the club then the reckless gamblers will.  Either way disaster lies ahead.

Overall players’ wages for all clubs in the four divisions increased to over £1.7 billion, a 6% rise.  It simply can’t continue like that.

 

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The books

23 comments to Could Leicester and QPR be relegated to League one?

  • Andy

    Literally unbelievable.

    The books for the season just gone aren’t even submitted until December 2014. Meaning NO clubs are even in breach of FFP as yet, which in turn means no fines have been issued, let alone refused to be paid…

    So you make the giant leap to QPR and Leicester being relegated to league one!?!?!

    As for Leicester fans coming on here and sounding like Man City fans. Which I presume is a reference to me, once again I would urge you to actually go through the books last submitted. If you aren’t willing to, then how about you stop muck spreading about something you are prepared to do little research on.

  • WalterBroeckx

    Andy,
    I think the numbers that are quoted in the article refer to the accounts of the season before. That is what I can read anyway. And apart something really significant happened between then and now in financial terms it assumes that the numbers of the last accounting year are roughly the same. If not and both clubs found a pot of gold and can balance the books: fine. If they didn’t they might find themselves in trouble.

  • bjtgooner

    It is almost predictable the our ‘Arry and his adviser Rosie are in the forefront of excessive spending.

    It is interesting that “Fight it Ferandes” will reportedly support the breach of rules by using the litigation route for self advantage and that this is the same Fernandes that through the Tune Group sponsors the PGMOL. Does he expect an advantage from his sponsorship?

  • Paul

    Just to inform you. Leicesters owners turn the debt into equity which included buying back the ground outright.

    So they shouldn’t be effected too much.

  • oldgroover

    bjtgooner
    The PGMOL have sponsors, one of which is a Premiership club owner?
    How does that fit with conflict of interests regulations?
    I assumed that PGMOL was financed completely by the FA.
    Something very wrong here.

  • bjtgooner

    @oldgroover

    “The PGMOL have sponsors, one of which is a Premiership club owner?
    How does that fit with conflict of interests regulations?”

    I have asked myself the same questions!

  • Richmond Fox

    This is a very poor piece of writing, scraped together from message board, paper talk an opinions of idiots. The reason Leicester had a loss of around 34mill for 2012/13 season was due to the owner buying the ground 17m, interest on loans to the club back to the owner 7m, wages and other expenses getting rid of players, all one off costs that won’t be on the 2013/14 finances The wages were over the top but we have Sven to thank for that. Those players are now gone and we made a slim profit on transfers.

    Will you be doing an update on this piece come Jan 2015? Reports showed that we were in 120+ m debt, this wasn’t debt to a bank but what the owner had spent in buying the club, ground, state of the art training set up ( i suggest you see the bbd sport doc they made about our fitness and training). The owners have taken this debt off of the club, wiped it and turned it into money they have invested in the club.

  • Andy

    Hi WalterBroeckx,

    I went through all of this before on a previous article that talked about Leicester. The accounts WILL be different.

    The loss of £34m isn’t quite what it seemed. There was £7m of interest that was added to our debt to the owner. A debt that was then written off meaning that £7m never went out of the club and never will.

    There was one off £5m worth of squad revaluing, that goes down on the books as a loss. But again, this wasn’t money out of the door it was just paper shuffling.

    There are certain costs (such as youth setup) that don’t count towards FFP. We’ve invested heavily in this to gain Cat 1 status (you may have noticed our youth team appear in your league). the club estimates costs that don’t count to FFP are £5m.

    Then you have an allowable loss/investment from the owner of £8m. This is already in place.

    So already, there is £25m worth of losses that should not appear on our books for this year in terms of counting towards FFP. This is before even taking into account the increase in revenues from a successful season, transfer profits, ridding ourselves of some of our highest earners (Beckford, Danns, Wellens & others).

    Will be make the FFP rules, I don’t know. But the club have told fans that we will and when you look at the figures rather than the headline it’s more than possible.

    Speak to any Leicester fan and they will tell you the club has been run very differently since Pearson came back, the owners found out chucking money at it wasn’t the answer and FFP came into play.

    People seem to have the perception of us being run the same way as we were 4 years ago when Sven walked through the door. That was a long time ago. Our current 18 that we use on a match day cost about £12m, of which Pearson raised most of it by selling players.

    This perception isn’t helped with the way the English press reported the £180m nosense the other week… if they had reported everything the owner said it might not have been as much of a story though.

  • jambug

    Andy

    You said:

    “The books for the season just gone aren’t even submitted until December 2014. Meaning NO clubs are even in breach of FFP as yet, which in turn means no fines have been issued, let alone refused to be paid…”

    Do you think with FFP lurking in the background that everyone should just carry on as they are in blind hope that when there books are submitted in December they are not in breach of FFP?

    Or do you not think that perhaps it might be best to do something akin to what Tony has done, and run through a few possible scenarios, taking into account what they have been spending during the time relevant to FFP, just to see if they think they will, or will not contravene FFP?

    Perhaps you’re one of those, bury your head in the sand types, who thinks you should just ‘Spend spend spend’ and hope?

    Well that’s fine, but if you do and fall foul of FFP, I bet you’d be the first one crying about how those dastardly foreign owners fucked your Club up.

  • Interesting article in so many ways, yet you persist with the misconception that Leicester spent big to get where we are.

    As much of an achievement as 102pts and runaway champions is, more impressive was Nigel Pearson’s development of the side while conducting a clearout of overpriced rubbish bought by the Tabloids’ Sven Goran Eriksson. Only Burnley used fewer players than us this season, and our transfer and wage structure has put us on an incredibly strong FFP footing. We’ve not spent over £1m on anyone since Pearson came in (Knockaert may rise with appearances, but only him). We will be compliant with FFP, and despite the odd Leicester tweeter talking up our purchasing power I don’t think you’ll see mega bucks leaving the King Power. Our owners are wealthy, but have learnt from the Sven era. If you’d like to compare us to the policy of Premisership managers, you’d probably find 06 Wenger or 12 Laudrup as the best comparisons (albeit operating at lower levels till now).

    Your point about QPR stands though, they have been the essence of bloated football mismanagement for three seasons and their promotion won’t help stem the tide.

  • WestLondonWilly

    OxfordFox, you started out so well, then went all dumb with your final sentence….

    Season 2012-13, we had loads of overpriced, overpaid mercenaries on our books. Remy, Mbia, Taarabt, Samba, Cesar, Granero, etc. All of these have been moved on, either on loan or sold. Wages are off the books for the season just finished, and transfer fees recouped. Pretty much all of the loanees are being sold this summer, and are no longer a burden to the club. Lots of action has already been taken to address the issues. However, it’s easier to make a dig at us than to bring reality into the equation.

    We, like yourselves, will need to see what the books look like in December when the numbers are released for the season just gone, and then deal with the situation. But don’t simply believe that your club is whiter than white, the same as ours isn’t at all ‘bloated mismanagement’. You really let yourself down with that uneducated statement.

    And you were doing so well….

  • Andy

    @jambug

    You seem to be missing several points.

    Firstly, I have already been through with the article writer that the books of Leicester are not what the headline loss leads you to believe.

    I have explained the reasons for this in previous articles in detail, the books are also there to look at if he wishes to. He obviously chooses to just read articles by David Conn and believe everything he says though.

    The owners and Pearson have done a great deal to make sure the club meets the FFP requirements, so there is no “burying your head in the sand” going on with them or the fans. If I was doing that I wouldn’t know the exact details of the books and I wouldn’t be on here questioning the article.

    Secondly, there is discussing scenarios and then there is the nonsense of an article stating “Could Leicester get relegated to League one”…. I mean, how far do you want to go down the line with regards possible scenarios “Could Leicester go bust after relegation to league one”.

  • para

    It seems that football has become so diverse over the different leagues. I thought football was football. How come they are going to be different rules across the leagues. It just makes things more complicated and obscure, leaving room no doubt for manipulations as per usual.
    One would think that the rules would be made exactly the same all over, with the same punishments(not fines). Then everything would be transparent to ALL football clubs.
    But what do i know?

  • jambug

    Andy

    I’m not missing anything.

    If you look at the times I was typing my post at exactly the same time you was typing your 2nd response.

    Your first response seemed to me to be just curt and dismissive without addressing anything Tony had said.

    Having since seen your 2nd response I gracefully concede to both yours, and Walters, superior knowledge in all this. 🙂

  • jambug

    And Tonys, sorry 🙂

  • @willy

    Appreciate your (largely) graceful response and have to hold my hands up to limited knowledge of the arrangements of QPR, which perhaps makes me as guilty as the original poster with his misguided chat about our finances.

    I think the assumptions I made were reasonable, in that your transfers and squad still show huge amounts of outgoings for what can only be described as ‘players in the twilight of their careers’. However, I don’t know whether you were still covering portions of Samba/Cesar/Taraabt’s wages alongside those of Green, Hoilett, Barton, Zamora etc, so I apologise for making assumptions.

    That all being said, until Harry goes, I think you’ll be stuck in a vortex of overspending, and that Fernandes has tried and failed to emulate Man City in their spending:success ratio. You need a better man to handle that kind of investment. I believe without substantiation that FFP will have a vastly greater effect on your club than mine, and while I don’t wish you ill will, I do think the approach your owners have adopted is exactly what FFP has tried to eliminate. The fans can hardly be held accountable, but as with Cardiff and Tan (and Hull’s Tigers), it’s difficult not to look in and hope the owners see their attempts fail, because it goes against the spirit a bit. No more than Jack Walker’s Blackburn or the Sheik’s Man City, but still.

    I sincerely believe we exist in a different financial plane to QPR, and I’m very happy to be there. Maybe if Sven had fluked a playoff win when he was here, we’d be in a vastly different position now, but thankfully he fell short. Nevertheless, I hope you don’t find yourselves in Portsmouth’s shoes a couple of years hence…

  • omgarsenal

    There seems to be a dichotomy between QPR and Leicester’s way of managing their situations and it appears to be largely due to redknapp’s knack of spending other people’s money until he can safely leave them in the lurch,financially destitute and in serious difficulty. Will this happen again at QPR or will he finally stick with the Club and see it do well in the premier league? I know little about Leicester but the fans who have come on here to support their club seem well informed and generally gracious, and perhaps this is where Tony’s placing both clubs in the same box was erroneous.
    That said, only time will tell if Leicester can succeed in the premiership but if they can, then that will be another proof that the Arsenal way is the best way. I hope to see both QPr and Leicester play beautiful Football and make their supporters proud, as AFC do theirs.

  • Gord

    It’s entirely possible I am wrong, but none of the comments seem to be right. 🙂

    There are 2 problems:
    1) The League (Championship/1st/2nd) year end sucks big time.
    2) The EPL is separate from Championship/1st/2nd.

    The season ends in May. The next season starts in August. Having year end after August was always going to cause problems, especially because the EPL is separate.

    I may be wrong, but I am guessing that the official day of being promoted is the day before the first day of the new season. Hence, standing in the league on the last day of play is only an indication that promotion or relegation happens.

    If the year end was reasonable (say June), teams with finances out of whack and subject to fine, could find the league having a rule like (if you are to be fined for FFP reasons, you will be docked 20 points until fine is paid). Which is the only way this would nicely work with the EPL being a separate entity. If you are found in violation of FFP, your “promotion” is stayed due to the 20 point “temporary” points loss. Don’t pay the fine (or challenge in court), and promotion goes to some other team.

    But, with this wacky year end, the Championship is able to fine a team for breaching FFP, but has no ability to collect. At some point, the newly promoted team may find itself in the relegation zone of the EPL, and now the Championship has them by the short and curlies. You did not pay your fine, you are dropped to 2nd league with a starting tally of -20 points. And you still have to pay the fine. And the rich owner walks, having had his day in the EPL, and the club folds with no assets.

    That is my interpretation of something I really have no interest in studying. I’m probably wrong.

  • Mike T

    @Gord

    The governing bodies in football have to look at and rule on what some would think are out of date accounts.

    Although a season ends in May players contracts, in the main run till the end of June. Players are entitled to a set number of weeks paid holiday after the season ends.

    All leagues have AGMs when the agree the line ups for the next season . As Tony said the FL had their meeting recently in Portugal

    Clubs are limited companies, most have accounting years that end on 31 May or 30 June.

    It is pretty easy to produce a simple profit and loss or even cash flow details in real time but to complete a set of accounts based on full information takes time.Football at even Div 2 level is quite a undertaking and to try to prepare accounts conduct an audit and get those accounts agreed at a company AGM takes longer than some would imagine.

    Bodies such as HMRC and Companies House allow many months for the information to be submitted.

    Even if clubs could get the relevant information to football governing bodies in a couple of weeks following their respective year ends the task to go through those accounts to rule accordingly and allow time for any potential challenge would set impossible deadlines around.

    The club I worked for had a 31 May year end. On 1 June we would sent some basic information to the accountants but it wasn’t till mid July that we knew details such as the years bank and interest paid details.

    The earliest we ever had draft accounts was mid August and having given 21 day notice( the FA insisted all clubs insert something in the companies articles of association so had to put a special resolution to the members)we ever had the earliest AGM was late September and some weeks after the season started

  • Gord

    If some way to get that information earlier cannot be found, the League is hooped because the EPL will not collect fines on their behalf. Which leaves government. Does the government force the EPL to collect the fine, or does the tax department (or sheriffs) go collect the fine?

    What else could be done? Put a disciplinary ban of 6 games on every player on the team?

  • Mike T

    @Gord

    No one will collect it on behalf of the FL. So for me its quite simple.
    If say QPR are fined and refuse to pay they should the be told that at some time in the future (maybe a year maybe 10 years) if they are relegated from the EPL the FL will refuse to grant them membership

  • Gord

    That is more than likely just going to result in the destruction of clubs. Banning the owners from ever owning a club isn’t likely to have any effect, there is an infinite supply it seems. Oh well, being a Canadian, it isn’t my culture. All we know how to do is play ice hockey it seems. 🙂

    And in other FFP news, UEFA has banned Red Star Belgrade from Champion’s League.

    http://www.bbc.co.uk/sport/0/football/27741460

  • Gord

    According to Wikipedia, that ban effects the second qualifying round:

    > ^ Serbia (SRB): Red Star Belgrade, the champions of the 2013–14 Serbian SuperLiga, would have qualified for the Champions League second qualifying round, but was banned by UEFA for breaching UEFA Club Licensing and Financial Fair Play Regulations.[13] As a result, the berth was given to Partizan, the runners-up of the league.

    The BBC said 10 days to protest. First games for the second qualifying round are July 15/16.