Chelsea and QPR have used different routes to get around FFP regulations. But are they going to succeed?
By Tony Attwood
You might, but it seems the Premier League doesn’t. We should have known about the Premier League’s Financial Fair Play regulations a year ago, and still not a word.
Indeed the only thing the PL has done vis a vis FFP is to make the work of the Football League tougher by refusing to support the FL as they try to make their own FFP work.
In fact overall FFP looks to be in a bad way with only the Football League holding out against the odds. But for how long?
Take the case of QPR. They have been spending money this way, that way and any other way, because they knew that if they could stay in the PL there would be (because the Premier League now has no FFP regulations) no financial niceties to bother them. The Football League couldn’t touch them, and the Premier League wouldn’t seek to ensure QPR paid any fine the Football League handed down. All clear then.
But now QPR are down, and their accounts for the season 2013/14 when they were in the Championship show losses of just a bit under £70m. And the Football League introduced FFP in 2012.
Of course QPR don’t agree. They say their losses are £9.8m. Because Tony Fernandes “wrote off” £60m of the loans and placed that fair old sum (£60,000,000 if you want it spelled out) as an ‘exceptional item’ in the accounts and therefore to be counted as “income.”
Yes – that is right.
The owner loaned £60m to the club, then said he didn’t want it back, and then called it income.
As a director of three separate limited companies I have a certain amount of experience in company accounts, and knowledge in terms of what Revenue and Customs would say if I and my fellow directors tried that trick. But this is football, so hey, who’s counting.
The Football League’s FFP regulations quite obviously explicitly say you can’t do that. I suspect they probably didn’t bother to say it explicitly at the start, but then did add the rule in on the grounds that “some of these club owners are utterly bonkers so we had better cover the insane as well as the normal financial tricks and turns.”
QPR’s losses by any normal standard of accounting are £69.8m. The FFP fine is £57.9m and if QPR fail to pay up they should be ejected from the Football League. The Conference might have them.
The Championship section of the Football League’s FFP were permitted losses of £8m with £5m funded by shareholders for the 2013/14 season. But maybe there is a way out, as Bournemouth posted a loss of £15.3m for 2012/13 but claim that they have been told by the Football League that the club has complied with 2013/14 Financial Fair Play rules and will not receive any sanctions. Trouble is, they don’t tell us how they did it.
Football clubs that stay in the Football League but break FFP rules can be punished with the deduction of points and transfer embargoes. But clubs that spend the money and go up to the Premier League can’t be punished in that way, so they are to be fined. If QPR don’t pay, or challenge in court, then the League can indeed throw them out.
QPR’s defence is that the rules were themselves unworkable and have since changed because of that. It is an argument, but it is one that will need a lot of lawyers to sort it out. The big question is what to do next season – because the case probably won’t be finished by then.
At the moment we don’t know, so let’s look at the other issue. Clubs in Europe?
Sadly Uefa has backed off FFP and more or less abandoned it as a fighting tool. Of course they won’t say that publicly but their abject failure to address the ways that Chelsea have found of getting round the rules show that they are not going to take matters further.
This is not to say Chelsea are alone in doing what they are doing. Others are following. Chelsea have the honour however of being the first.
First off Chelsea are exploiting a loophole that means that when a player is offered a new contract his value in FFP terms goes down, because his cost is spread over a longer period. (And this even though in footballing terms his value has gone up).
These new long term contracts are meaningless in many regards since the CAS ruling (cited in earlier Untold articles) that after three years the player can renegotiate the deal if he wishes, or if there is no deal, leave for another club.
There is of course a risk for Chelsea in that they can sign a player on a long contract, and he then loses form and so doesn’t play – but has to be paid. But they are overcoming this to some degree by writing in new injury clauses which allow the club to pull out in the case of a long term injury.
So to give one oft-quoted example, Hazard’s annual FFP cost at Chelsea has gone down considerably even though he signed a new long term contract at a higher salary.
Hazard’s £32m fee was amortised at £6.4m a year over an initial five-year contract. Then that contract was torn up and a new one issued. There was £16m value left on the books, but that was now to be written down in FFP terms over the new 5.5 year contract, decreasing his annual FFP cost from £6.4m to £2.91m.
The second trick being pulled is loans. They were recently shown to have 28 loan players. Since the club taking the player pays a lot of the salary, while Chelsea are amortising the player’s cost year by year, the players are becoming worth less and less in FFP terms, while their actual value on the transfer market is going up and up.
You only need a couple to be sold at a profit for the club to be making a huge FFP benefit out of this wholly artificial situation. In other words the loan system actually makes Chelsea money in FFP terms, possibly gives them potential star players for nothing in FFP costs, and can also make a profit from time to time when they sell the odd player on.
This of course isn’t football – it is wholly artificial and done for FFP purposes.
A terrible shame, because I really thought FFP was a good idea, but it always needed Uefa to have the diligence and muscle to make it work.
Let’s hope the Football League are more resolute.