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October 2016
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FFP: Uefa seems to have given up, but maybe the League will be more resolute.

Chelsea and QPR have used different routes to get around FFP regulations.  But are they going to succeed?

By Tony Attwood

Remember FFP?

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.

Indeed when I first heard that the Football League were considering the matter I took it that what they were actually doing was trying to stop laughing.

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.


The books



13 comments to FFP: Uefa seems to have given up, but maybe the League will be more resolute.

  • @Tony, how do we know if some of the guys in the FFP have not been pampered by the mafios dollars to keep their butts cool hmmm!!

  • TailGunner

    I don’t think there are “any guys in the FFA”. It’s legislation. But if you’re inferring there is “mafios dollars” in the Football League….hmmmm!

  • Gooner S

    Did anyone really have any faith in Uefa or The FA to do their jobs properly in terms of FFP?

  • Mike T

    Poor article based on mis formation

    First the PL version of FFP is up and running. Clubs will be assessed over a 3 year period the first being 2013/14 the last 2015/16

    Second in accounting terms QPR are well within their rights to do what they have done however in FFP terms its not an allowable income hence the issue

    Third to suggest Chelsea were the first club to amortise players transfer fees or indeed extend contracts and then adjust the values is nothing more than nonsense. Its ben around in football for many many years

    As for the number of players out on loan I am personally not comfortable about the process but as I posted on ere several times if you really though that FFP would change things massively you were going to be really disappointed

  • porter

    Many of us said at it’s inception that the monied clubs would drive a coach and horses through it.

  • para

    As with all laws, loopholes, whether deliberate or accidental will appear.

    Thing is, will they be closed immediately or will it take a few years to do so?
    The club who do not use the loopholes while they are open is then the dumb one or not?

  • nicky

    All this brouhaha about the FFP Rules and its loopholes makes me incandescent with rage.
    If only I had concentrated on my studies at school, instead of playing sport and chasing girls (or vice versa!), I could have been a wealthy lawyer by now, advising clubs how to wriggle past the Rules.

  • Steve0

    I can’t help but laugh that anyone looked at FFP when it first came out and thought it had anything to do with competitive balance. It didn’t. All that FFP did is ensure that clubs couldn’t buy their way up the ladder as easily anymore, and helped lock the elite into their positions as elite.

  • You see Steve0, that is your problem. If you laugh at people instead of listening to their points and their evidence, you are never going to see anything much.

  • Steve0

    What evidence? Anyone who read over the FFP document could see that it was never designed to alter the current state of affairs.The only people who thought FFP was about competitive balance were the ones whose points and evidence contrasted the actual regulations.

  • Steve, what you say is simply not true because I know people who did read FFP in detail and who thought it was about altering the current state of affairs. You just make assertions which are pointless. What you need to do to make points like that is do what others do, quote particular sections from the document to prove your point.

  • Micheal Ram

    If I were UEFA official assigned to investigate Chelsea, I would have given up too. It’s like no matter what they do to control these schemes, the criminals will still have their way. However, doing nothing actually hurts the club more in the long term. As Tony and Walter always said, sugar daddies are there as long as the sugar is still sweet.

  • Will Rickson

    Tony your simple wrong no where does it say anything about competition in the FFP rules thats why its facing problems in court and why are you writing about FFP if your only going off what people have told you who are wrong by the way