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Ramsey injured? Man City pay Arsenal, and the corruption of the loan system

By Tony Attwood

First off, Aaron Ramsey.  He was in Andorra doing an impersonation of Bale’s drag back and turn, with which the captain of Wales had wasted time in the first half, when he got kicked, slipped on the artificial turf and fell.  He was replaced at once, and we now wait to see if he is going to be fit for the Man City game.

Quite why Aaron Ramsey wants to do dinkie stuff on an artificial pitch in the Pyrenees is beyond me.  He knows what it is like to get a serious injury from a clogging maniac with no sense of the damage he can do, and he knows that more damage is done in international games (pro-rata) than league games, largely because of the tendency of international managers to play injured and half fit players.

I’m not suggesting any Andorran player went out to crock him, and I am sure they are all jolly nice chaps, but the fact is that when a semi-pro or amateur player is trying to get the ball off a highly skilled professional, accidents can happen.

Ramsey also knows what professional international players are like and why they are picked.  The Shawcross manifestation was picked to play for England after he nearly ended Ramsey’s career.

But Ramsey chose to play in front of 3000 people at the Andorran national stadium, and now we don’t know if he can play in match on saturday against Man City.

The only bit of light relief to this is the news about Man City themselves.  Man City was famously one of the clubs to be found guilty of breaking FFP rules in the first enquiry into finances, and the only club not to come to a very rapid agreement with Uefa over their mis-doings.

Now Uefa and the teams in its club competitions have been debating what to do with the fines collected from Man City and others.  And Uefa has agreed with the wishes of the compliant clubs that the money should be split among the compliant clubs for the season in question.   In the case of England that means Man C’s fine will go to Arsenal, Chelsea, Man U., Tottenham, Swansea and Wigan.  They will each gain something around a quarter of a million pounds.

There is a Uefa meeting on October 13 at which Man City might try and appeal the decision, but the way the compliant clubs are feeling makes it unlikely that such an appeal will do anything other than annoy delegates.

Man City were joined by Paris St-Germain, Zenit St Petersburg, Rubin Kazan, Anzhi Makhachkala, Galatasaray, Trabzonspor, Bursaspor and Levski Sofia on the naughty boys step, and it is the combined fines from all these clubs that is being passed on.

But the forthcoming meeting is about far more than any attempt at appeal by any of the clubs that broke FFP rules.   Michel Platini said yesterday that “The framework for Financial Fair Play must be dynamic, it must evolve constantly, which is why I have convened an important round table on the subject with [club] representatives at Uefa headquarters on Oct 13.  We will see whether any imperfections can be ironed out and whether there is room to further improve the system.”

The biggest issue facing Uefa is the continued determination of a small number of clubs to find creative accounting ways around FFP, hence the addition of the regulation which outlaws the introduction of any accountancy or other procedure introduced largely to get around FFP.

However there is concern that Uefa can’t do anything about one route that is opening up as a way around FFP (other than use its new artificiality cluse):  the manipulation of the loan market.

Last season the Mail published a list of loanees for certain clubs showing:

  • Chelsea: 27 (20 aged 21 or below)
  • Man United: 15 (12 aged 21 below)
  • Liverpool: 14 (11 aged 21 or below)
  • Arsenal: 14 (12 aged 21 or below)

Chelsea it seems have maintained that level of loans – it is currently said by the Telegraph to be 26.

There are no rules concerning international loans, but while they were originally considered as a way of helping young players get games, now we have players like Torres on a two year loan at Milan, arranged for a fee.  What is interesting about Torres is that at the end of his loan, his Chelsea contract will expire.  The loan reduces Chelsea’s wage bill, and helps Milan get around FFP by having the player without signing him.  I can’t say there is a secondary clause therein, relating to any other matter of a transfer from Milan to Chelsea, but if I were doing the business and looking for ways around FFP, that’s what I would be exploring.

Loans also achieve something else that it does for young players.  It can make them “home grown” and thus more valuable to Premier League clubs who need a number of such players.   Even if a player leaves a Premier League club and is sold to another, the fact that he comes with a home grown tag enhances his value.  And since it is Premier League clubs who have all the money, that is quite a valuable attribute.

However given that a player can  spend most of his home grown years on loan out of the country, it makes “home grown” meaningless.

And of course where a player develops, the club can make a profit.  Romelu Lukaku signed for Chelsea in 2011 for  £13m (£19m with add-ons) was loaned to WBA and Everton and then sold for £28m.

The Premier League rules say that bring in four players a season on loan, with a maximum of two at a time, but there is no regulation of loans of players out, and the idea of allowing clubs to play their B teams in the Football League was an attempt to overcome this growing trade

The problem is it is Fifa not Uefa who control international loans, and the chances of them coming out with anything remotely helpful or even sane is about zero.

Recent posts

34 comments to Ramsey injured? Man City pay Arsenal, and the corruption of the loan system

  • Hisham Hashim

    Prior to the Internationals, we had a few players already injured in the early games of the new season; 1player out from each match I think. Bar Giroud, hopefully these players should be back in the playing squad over the next few matches this month.

    Should Ramsay truly be injured, then it opens the door to others, like Diaby, to have the opportunity to play. This period will test the resolve and depth of the team. Here’s wishing the injured Gunners a speedy recovery and the returning ones the best of luck!

  • TwoOld

    Interesting article once again. The thought that occurred to me was in regard to the massive fee paid by Everton to Chelsea, which is so unlike Everton and much more than most people think the player is probably worth, but co-incidentally helps Chelsea with FFP. Did Everton get help from someone (possibly in Russia) to finance that kind of payment (how much did they pay upfront and how long have they got to pay the rest)? With no disclosure of fee deals much will no doubt continue to remain hidden from view.

  • Hisham Hashim

    Could not the regulations be tightened to say that, at any one time, a Club can only register (own) no more than 25 players over 21 years old? This rule will restrict the Club to not “hoarding” too many senior players by registering no more than 25 for their playing squad and then loan out the “excess” players.

  • TommieGun

    Tony, re the loans – I think you are missing something.

    The loans don’t help anyone get around anything.

    Players encumber the clubs with 2 matters: transfer fee (which is depreciated pursuant to the contractual term) and wages.

    So if a player is SOLD (vs. loaned), the only difference is the selling fee. In both cases, the receiving club pays the player’s wages. But in a sales deal (vs. a loan deal) the selling club enjoys the benefit of the selling fee being paid to them.

    Now let’s go to the Torres deal:

    Assuming you are right, and Chelsea do not want Torres (as his contract expires in 2 years), they would have preferred a sale, which would have benefited them with a transfer fee. Thus, the loan deal is not a win-win situation, FFP-wise: it’s a zero-sum game, FFP-wise.

    Probably, Milan could not afford to buy him, and Chelsea just tried to minimize their wage bill.

  • AL

    TommieGun
    I don’t fully understand how loan systems work but I’m sure it’s open to abuse. If not to bypass FFP(I’m sure it is) then certainly to weaken other teams. Remember Wenger complaining that certain clubs can loan players to other clubs in same league knowing they will not play against their parent club?

  • Twold- the answer to your question is “yes”

  • menace

    In most cases where a young player is bought & loaned, there is a sizable capital growth. The practice can be curtailed by penalties (on sales) on time spent outside parent club. International loans need regulation to ensure FFP is not abused.

    Injuries during Internationals are part of expectation. Players like Ramsey should be aware of their club responsibilities. Hopefully his injury is not more than a sprain.

  • Pete

    Tommie – I think it was Mike T, or someone else, on here fairly recently said that if a player is sold, the unamortised part of the transfer fee is written off immediately whereas if he is loaned it is not (I think transfer fees amortise over the course of the contract).

    With Torres, as he was bought for £50mm and his resale value must be negligible, to sell him would mean up to a £20mm immediate write off, given an initial 5 year contract.

    Also, he must have been earning a hefty wedge so if Milan even pay part of that then that probably helps too given that Torres would be unlikely to be a key contributor to Chelsea this season (or next).

    So that one looks like it is Chelsea deferring the loss until manana. Short term thinking or smart planning?

  • GoingGoingGooner

    I’m not sure that loans help or hinder the development of a player or whether teams can actually get around FFP using loans. I am concerned that teams with unlimited wealth will build up a crazy amount of loaned players and that these sheer numbers will constitute a real advantage over other teams. What is to stop Team A from loaning out 50 or 100 players. If their commercial side gets big enough and the transfer fees and wages are reasonable (and shared with the receiving team), they could:
    1) essentially start a commerce in buying and selling players
    2) help their product on the field and (because loaned players can’t play against their parent club give them an advantage when playing against a team)
    3) remove many players that a rival might want to buy.
    4) help their product by having the equivalent of 3 or 4 teams of reserves developing their players.

  • Quincy

    I thought each loan was different. Sometimes the club that recieves the player on loan pays the full wages, or only a fraction of the wages, sometimes no wages but a fee, or sometimes nothing; but I stand to be corrected on this.

    Also there is the case of a player like Lukaku. Loaned out to West Brom and Everton as soon as he arrived at Chelsea, then sold for a profit of £10m to £15m. All the time Chelsea, presumably, didn’t pay his wages, and didn’t actually develop Lukaku as a player.

    If that happens once or twice, ok, you can say it just happened to work out well for Chelsea and Everton. But Chelsea consistently have a large number of young players out on loan. This is becoming a business model for them. If there was a restriction on the number of players a club could send out on loan, then they wouldn’t be able to hoard them like that, and those young players would be able to sign for smaller clubs that would let them play regularly (which was the whole point of the original loan). If they happen to improve, then it’s a boost for the small club that owns them.

    Basically, restrictions on loaning out players would help smaller clubs. Then there is loans of more established players, like Torres and Falcao. I don’t really know much about what’s going on there, but both look quite suspicious to me. As Samuels points out, this really seems to be prominent now that FFP really is starting to be enforced, so it all looks and smells a bit dodgy, if you ask me.

  • Quincy

    Also, can someone explain the reasoning behind amortisation to me, please? Why does the buying club have the fee they pay spread over the length of the contract, but the selling club counts it as a lump sum in the year it is received? What’s the reasoning behind that?

  • bjtgooner

    Reportedly Ramsey may be available for Saturday, but let’s see what AW tells us tomorrow.

    Apart from trying to manipulate loanees to comply with FFP, the huge number of players scooped up by Chelski and then loaned out suggests an attempt to control the availability of (esp young) talent and hence deprive competitors of the same.

    There was a recent UA article on the press and how they would like to tell Arsenal fans what to think. I missed that, being in Scotland, where incidentally large sections of the media are trying to tell voters what to do!

    (As an aside anyone planning to travel near Gleneagles but not going to the event, should avoid the area of allow plenty of travel time – the traffic is already being disrupted.)

    Coming back to the media – when Arsenal results are positive the media will be subtly anti Arsenal, when the results are unfavorable they will be baying for blood. Always they have a vested interest!

  • Mike T

    @Pete

    After 3.5 years at Chelsea Torres has a value in Chelsea’s accounts of about £18 million.

    Had Chelsea given Torres a free transfer the chances are he would have walked away with a pay off but more damaging to Chelsea would have been that the whole £18 million would appear in the accounts as a one off loss. By loaning him out for two years Milan will not only be paying his wages but the remaining £18 million of his transfer fee will be spread over two years . I suspect Chelsea would have been happy to sort all this out as a one off but FFP has driven the approach Chelsea and Milan have had to adopt.

    I smile when those that want to applaud FFP want to cry foul when clubs use the rules to their advantage. Ironically Chelsea weren’t the instigators of this approach its been common place in Italy & Portugal for years.

    Transfer income is a legitimate income stream and without the £113 million transfer profit Arsenal received over the last two years the profit and loss account would look far different.

    Should Chelsea, Arsenal, Man City or whoever be restricted in terms of the number of players they signor put another way a business told how many people they can employ. I would like to see that decision be upheld in court

    The legal challenges to FFP haven’t finished.

    Next February the Court of First Instance in Brussels will rule on FFP and my guess is that will trigger appeal and counter appeal all the way up to the European Court.

    Incidentally it seems that PSG & Man City Supporters have joined ranks and have made a further complaint to the European Commission. It is thought highly likely the EC will re open the examination of FFP . This is because Striani, the agent that made the original complaint, was not deemed by the EC to be directly affected party

    UEFA & FIFA will not do anything about the loan system worldwide after all they haven’t even started on abolishing third party ownership which is far more divisive and emotive..

    The PL league clubs apparently have no appetite to address the loan system so I wouldn’t hold your breath on this one.

  • Mike T

    @ Quincy

    Players and their contracts are seen as assets.

    Its not a lot different than a company buying say a car and that deprecating the value of that asset

    So buy a car for £10000 after a year you write of 25% of the value and the car is worth £7500.

    Sale it for £8000 and you show a profit of £500.
    Sale it for £3000 and you show a loss of £4500

  • Quincy

    Mike T, Arsenal’s profit from sales comes from players who were regular first team players for Arsenal. I hope the penny drops.

  • Quincy

    Mike T at 4:36pm.
    But if you purchase the vehicle for £10k in 2014, is it recorded in the accounts as a £10k purchase in 2014? (I’m genuinely curious, not trying to be difficult).

    And the depreciation analogy isn’t really the same. Players may go up, down or stay the same in value. And if you purchase a vehicle for £10k in 2014, then sell it for £5k in 2016, isn’t that simply recorded as a £10k expense in 2014, and a £5k income in 2016? I’m struggling to see the anaolgy. As far as I can see, amortisation is just an accounting principle, or convention, or whatever. I still don’t get the reasoning behind it.

  • Mike Thomas

    @Quincy

    You are using selective memory I am afraid.

    Vela, Eisfeld, Miquel, Manoe, Lansbury& Bartley for instance all have been sold in the last couple of years and yielded a transfer profit for Arsenal in the region of £18 million. Hardly regular first teamers.

    In total these player 6 players turned out for Arsenal 52 times mainly in cup games. These players played in excess of 290 games whilst out on loan

    As for amortisation its the agreed accounting convention.

    It really isn’t any different than buying a car and writing down the value over a period in the accounts . Remember the FFP provisions aren’t a direct copy over of the accounts or indeed the P&L

  • Quincy

    I’m afraid you’ll have to try better than that, Mike T. The rough figures are:
    Vela – £12m
    Eisfield – £1m
    Miquel – £1.5m
    Manoe – ?I have no idea who you are referring to.
    Lansbury – £1m
    Bartley – £1m

    All roughly £1m, except for Vela. And that’s the point. We currently have seven players on loan:
    http://www.arsenal.com/reserves/arsenal-s-loanees
    How many do Chelsea have on loan?

    “If that happens once or twice, ok, you can say it just happened to work out well for Chelsea and Everton. But Chelsea consistently have a large number of young players out on loan. This is becoming a business model for them. If there was a restriction on the number of players a club could send out on loan, then they wouldn’t be able to hoard them like that, and those young players would be able to sign for smaller clubs that would let them play regularly (which was the whole point of the original loan). If they happen to improve, then it’s a boost for the small club that owns them.”

    And *that* is the point, Mike T. Chelsea hoards up young players, then loans them out for several seasons on end, with no intention of bringing them in to the first team. When those players become worth a bit, they get sold for a good profit.

    Arsenal has Szczesny, Martinez, Gibbs, Wilshere, and Campbell who spent time on loan, and are now a part of the first team. Chelsea has Courtois and Terry (in 2000).

    And to go back to an earlier point. You bring up Vela, etc., which was in the 2012/13 season. Compare those transfer to similar ones in that season and since:
    Song: £17m
    Van Persie: £27m
    Gervinho: £7m
    Vermaelen: £8m
    All of them were regular first team players.

    In the same period Chelsea sold:
    Sturridge – £13m
    De Bruyne – £19m
    Lukaku – £31m
    All players who were mostly sent out on loan.

    I’m afraid your argument holds no water, Mike T.

  • Quincy

    “As for amortisation its the agreed accounting convention.”

    I know that. That’s what I said in the post before that. I’m asking what’s the reasoning behind it. And spreading the cost of a player over several years isn’t the same as depreciating the value of an asset.

    “Remember the FFP provisions aren’t a direct copy over of the accounts or indeed the P&L”

    This seems like you are conceding my point: “And if you purchase a vehicle for £10k in 2014, then sell it for £5k in 2016, isn’t that simply recorded as a £10k expense in 2014, and a £5k income in 2016?”

    What I want to know is *Why is this amortisation convention adopted for FFP? What is the reasoning behind it?* I don’t think I can be any clearer.

  • Steve0

    If a young player spends the requisite three years to earn homegrown status on loan abroad, he’s not gaining service time toward homegrown status in the FA. See Thibaut Courtois as an example, who spent three full seasons as a U21 (as defined by the FA) on Chelsea’s books on loan at Atletico, and still requires an international slot. The player has to be loaned domestically to earn years toward homegrown status.

  • Mike Thomas

    @Quincy

    So when you said

    Mike T, Arsenal’s profit from sales comes from players who were regular first team players for Arsenal. I hope the penny drops

    You don’t seem to want to count the profit you made from the likes of the players I listed . Ok just a different take or should I say convenient take on things.

    I don’t disagree with your comment about Lukaku & De Bryne playing more games out on loan more than for Chelsea but Sturridge played 12 games on loan and 60+ at Chelsea.

    As for how many players do Chelsea have out on loan its 20+ shouldn’t be allowed. But it is and yes it seems that its a planned business approach all well within the rules though.

    Irrespective because me you or however don`t like it well it really doesn’t matter as it seems the clubs, and Arsenal are one of those clubs, use the loan system to their advantage and are not prepared to vote to outlook the practise

    This seems like you are conceding my point: “And if you purchase a vehicle for £10k in 2014, then sell it for £5k in 2016, isn’t that simply recorded as a £10k expense in 2014, and a £5k income in 2016?”

    Yes in cash terms that’s correct but in the accounts that’s not how it works.

  • Mike Thomas

    Why write the players transfer fee off over the contract term? I don’t know why UEFA didn’t just disregard the current practise but if FFP did allow you to write all fees off in the year of transfer I would be counter to the whole structure of FFP

  • Quincy

    Any reason for the sudden name change? 😀

    Anyway, I don’t think we’ll agree on this one. We don’t make anything like the profit Chelsea does on selling players who never make it at the club. Our famous fees from selling players came largely from players who were developed at the club. At Chelsea it comes from players loaned out and never a part of the first team, or expensive squad players, who would have played for smaller clubs if it wasn’t for Abramovich, e.g. Ba.

    And Wenger has spoken several times already about the need to change the rules governing loans, although he spoke about a different aspect, so I don’t think Arsenal is one of those clubs happy with the current loan system.

    I think it’s clear to any neutral observer how Chelsea is abusing the loan system.

    As for amortisation, I know that’s how it works, this must be the third or fourth time I’m saying this, I’m asking WHY is this so, what the reasoning?

    Anyway, it’s nice to have a normal discussion about a controversial topic with a football fan from another club.

  • Quincy

    Mike Thomas @8:18pm

    ” I don’t know why UEFA didn’t just disregard the current practise but if FFP did allow you to write all fees off in the year of transfer I would be counter to the whole structure of FFP”

    Why?

  • Mike T

    If a club not playing in the CL could write all the transfer costs in one year it could easily work to their advantage for years 2 onwards if they then qualified as the transfer fees paid would drop out the FFP calculations

  • Mike T

    @ Quincy

    I missed this bit of your earlier post:

    At Chelsea it comes from players loaned out and never a part of the first team, or expensive squad players, who would have played for smaller clubs if it wasn’t for Abramovich, e.g. Ba

    Made me smile bearing in mind who wanted to sign Ba.

  • Quincy

    Transfers and loans between big clubs do happen, Mike, if there is a need in a specific position, just look at Javier Hernandez.

  • menace

    Players who play most of their games while on loan should draw a proportional capital gain if sold for a profit. The use of wealth to deprive competition of players is not new. Liverpool did it during the ‘Littlewood’ years as did Man U until the oilers came on the scene.

    All of this will eventually spoil the game by robbing standards on the field.

  • Mike T

    @ Menace

    I note you exclude Arsenal from the list yet Arsenal in truth are no different in signing dozens of players and having them on their payroll only for them to be moved on. least when a player is sold or transferred they are more likely still to be earning a decent living from football as opposed to the dozens of younger players who at a very early age are just consigned to the scrap heap

    In 2013/14 Arsenal released over 20 players who clearly were on the books and the majority ” had been hovered up” as youngsters. Chelsea weren’t far away from the same sort of numbers so likewise are as guilty of this practise.

    It could be argued the majority of players out on loan are getting games and quoting the words on Arsenal FC website being on loan provides players with the opportunity to gain valuable experience.

    When a player is sold a 5% levy is already charged. A chunk of this is used to provide support & training for players who don’t make the grade.

    The whole subject of players trading and treatment of youngsters is a disgrace but what the majority are doing in singling out one aspect and very conveniently not looking at the whole picture

  • Steadman

    Surely Man city’s fines should go to grass roots clubs and not the elite clubs. Just proves what nonsense FFP is.

  • Quincy

    I’m sorry Mike, but now your arguments are just becoming delusional. Some youngsters will just never be good enough to be professional footballers. They were given the chance at a club, educated, and looked after, but just couldn’t make the grade. Where’s the disgrace in that? But what Chelsea does with its youth policy is drive up prices of young players, and takes talent away from the smaller clubs. You’re just trying to deflect this point, and it isn’t working.

  • Mike T

    It’s not delusional. Its about some not wanting to acknowledge that there is a far bigger issu and just writing off the impact on players who are just consigned to the scrap heap after being told how good and.special they were. But neber mind lots of other s like you have failed in the past.

  • godge

    Amortisation over the length of a contract is a rational response to Bosman.

    You buy a player for €20m in 2014 and put him on a four-year contract. If nothing changes, he will be worth €0 after the four years. In accounting terms, you amortise that cost over the four-year term at €5m a year. Makes perfect accounting sense.

    If you sell him after two years for €15m, you don’t make an accounting loss of €5m, you actually make an accounting profit of €5m as his value has dropped to €10m in the intervening period. This became an issue for some of the Man Utd. sales/loans this summer as they couldn’t afford to book too many losses on players they had signed recently. For example Mata was never going to be sold, no matter how little he was due to play because he had been signed recently for €37m and would only have amortised a little. Selling him for €25m would actually have put a €10m hole in Utd’s books rather than a €25m injection.

    Going back to the example above of the €20m player bought for four years, after two years he is worth €10m and is being amortised at €5m a year. Imagine you extend his contract by a further two years. The €10m book value is then amortised at €2.5m a year because there are now four years left and you can afford to give him a €2.5m a year pay increase without affecting the bottom line.

    All smoke and mirrors in accounting.

  • Quincy

    Thank you for that explanation Godge. I still don’t understand why the player’s value has to zero at the end of the contract, it makes no sense to me at all. It seems like an accounting trick to make losses on player sales appear as profits, as well as that trick of when a contract is extended the difference is amortisation is magically ‘realised’ as extra cash.