Can Man City and Chelsea really meet the UEFA Financial regs any time soon?

By Tony Attwood

Munchester City (also known as Man UOI) made a financial loss of £121m in the 12 months to 31 May 2010, the first full year of ownership by Sheikh Yermoney bin Zayed Al Nahyan.   Their income was £125m and their wages bill was £133m, up from £83m.

Put another way Manchester UOI spent £8m more than their entire turnover on wages alone.

Of course Sheikh Yermoney’s wanted his investment to be the biggest and the best, but at over £500m he still only has the second biggest financial loss in the Premier League’s history.   Exam Report: Must Try Harder.

The highest loss was the KGB in Fulham, who (rather carelessly I thought), lost £141m in 2004-05.  Pesky creatures these Russians.  Next thing you know they’ll be invading Afghanistan.

Anyway, back in Munchester, earnings increased by 45%, from £87m in 2008–09 to £125m. For the first time ever sine the nation donated the City of Manchester Stadium to the club, all season tickets were sold.  I wonder if they would like to give us taxpayers who paid for the stadium, our money back now.

Sheikh Yermoney and his brother Sheikh Yerbooty says in an accompanying letter faxed from the 19th green of the Sheikh Itallabout desert golf course, that he wants to develop City into “one of the most successful clubs on and off the pitch, but to do so without losing any of the characteristics that make it so special”.

So glorious failure is still the order of the day.

Anyway, the report covers the period in which they signed David Silva, Yaya Touré, Jérôme Boateng, Aleksandar Kolarov, Mario Balotelli and James Milner, and then sold  Robinho and Stephen Ireland.  The cost was £96.6m and rather surprisingly a higher wage bill.

Now the writing off of those costs will take four years on the accounts, which is worth considering in what follows.

The plan at Munchester UOI is clearly to buy big, get themselves up the league table, get the media exposure, and then try and have a youth academy to reduce the transfer bill and wage bill, as they sell off the ageing stars.

The trouble is, as the KGB in Fulham (and a lot of other clubs) have found, it is very hard to make this work.  Arsenal are the past masters, combining players that are brought to the club aged 9 and 11, with later imports such as Theo, Carlos, Cesc, Aarson etc.

Both methods work to beat the new rules on which says that clubs need to approach breaking even, starting from next season.  Clubs are permitted to lose only €45m (£39m) to 2014 – an interesting figure when you consider that Munchester UOI will still be writing down the cost of the current squad.

But the chief executive, Garry Cook, in a lovely statement, said City are aiming to meet the requirements of Uefa’s financial model, but his statements are said with sodium chloride in the mouth.

So my question is, have Chelsea and Man C (to use their alternative names for once) a cat in hell’s chance of making it?

Chelsea recently lost to Newcastle by playing some up and comings: defenders, Patrick van Aanholt and  Jeffrey Bruma, midfielder Gael Kakuta, striker Daniel Sturridge.

It’s a start, but it is still the fact that John Terry is the last player to have broken through the barbed wire and searchlights that surround Stamford Bridge and that was 200 years ago.  (Well ten years at least).

Since then it has been patchy, and there’s no sign of players to match the quartet of youngsters who have been bought in, or the likes of Clichy, Wilshere, Diaby, Denilson, Song, Bendtner who all joined young and for nothing or a very modest sum.

Michael Mancienne, Miroslav Stoch, Scott Sinclair, Franco Di Santo, Jeffery Bruma, Sam Hutchinson – they are all young players at the KGB but there has been a long run of not trusting the kids in the KGB team, and there’s a general feeling that they can’t step up.   If there’s a problem in the first team the money at the KGB still means, “buy someone” rather than, “give the kid a run, and give him time to fit in.”
It is not just expectation that is high, it is the mindset of huge wealth that prevents Chelsea pushing the kids through, as Arsenal have done.  The years and years of playing youngsters in the Little Cup has had its value.  Chelsea have never done this and could not, when the demand and expectation is to win everything now, and bugger the future.

Maybe Chelsea are just a year or two behind Arsenal in the youth development system which will allow them to get past the financial controls, but I am not sure.   They, like us, use the loan system, but in many ways they seem to overuse. I’m told Scott Sinclair has been loaned to six other clubs since going to the KGB in 2005, and he doesn’t even need to spend time in Spain to get EU nationality.

Chelsea’s kiddies have done well getting to a couple of youth cup finals, but I wonder if the whole system has not been undermined by the changes in manager at the KGB.  Wenger must have known about Wilshere and the rest for years and years – but if you suddenly come in to a side, you spend your time focussed on the first team.  And with endless money on tap, you just buy what you need, rather than nurture a 15 year old who won’t play for the club until long after you have been given the chop.

My point therefore is, Chelsea are trying to find a way around the financial regulations through the youth approach, but it is proving harder than they imagined, and the drive for instant success on which the modern club was founded, plus the effect of money is stopping it nurturing players bought in very young (Bendtner, Theo, Cesc), and bringing through your own youth team to the top table (Lansbury, Wilshere etc).

And so back to Man City where I started.  Will they avoid the Chelsea dilemma and actually play youngsters?  It is hard to say.  They are about four years behind Chelsea, and if Chelsea can’t get the books sorted and the team stable (and the age of the team must be a concern) then Man City won’t be able to for at least four more years.

So when Garry Cook says  City are aiming to meet the requirements of Uefa’s financial model and be allowed in the Euro leagues, it is a bit like his pal across the city saying that Man U are a highly profitable club.

Up to a point Lord Copper.

19 Replies to “Can Man City and Chelsea really meet the UEFA Financial regs any time soon?”

  1. Lol. Its shocking to see how much city have lost this year!! Surely they dont seem to be makin profit for next 2-3 yrs atleast. So i doubt they’ll confirming with the financial regulations.

    On the other hand, i still believe Chelsea will go around this problem. They dont need to spend lots of amounts on superstars anymore. Plus they have a youth system which seems to be producing atleast a couple of talented stars already. So they might make it as i had earlier predicted.

  2. And what about the Red half of Liverpool that cannot find a buyer willing enough to lose money season after season ,even the Chinese want nothing to do with Anfield ?

  3. These numbers from City are so utterly ridiculous that it stops being funny.

    I remember last year they made a then all time (for them) record loss of arount 90M. And this year they have outdone themselves and managed to break that record and turn it in to a 121M loss.

    More loss than their turnover twice in row. In a normal business environement they would have been bankrupt by now.

    And remember: we have to fight against such a club within the means we have. We have to compete with them with the money we make ourselves. And they got a stadium for free?

  4. The play amortisation figures over the next few years at City will scupper any chance that they have for working within the confines of the new financial fairplay landscape.
    The likelihood is that they will sell on several of these players at a loss to try to make up the shortfall
    the real problem will come when they come towards the end of this set of player contracts and have to commit more money to either keep them or even more money replacing them.

    a smart owner would have been very careful in choosing his first manager and the first set of players to be brought in. This owner was not careful and now he has a problem that simply will not go away.

    It is fair to say at this point that if Man City manage to qualify for the FFP rules, it will essentially render them pointless.

  5. If I recall correctly, Phil or Swiss Rambler suggested that wages should be less than 60% of turnover for a club to be financially stable (Arsenal is around 50% as of last season, I believe)… and City is at 106%?

  6. There is a huge issue as to how one can get into a Champions League spot from outside the regular holders of those places and it looks very tough.

    Look at Liverpool now and imagine how on earth they are going to get back into the top four. They might get a new owner, but even if that owner has a fortune how will they get back to the top without slipping up on the financial regs?

    Consider Man U, whose available cash slips away into the Glazer’s debt each year.

    Look at Villa who could not do it without insane levels of spending, which the owner refused to give.

    It’s a tough one – the only alternative is “do an Arsenal” and just look at the years it has taken our system to build up to its present position.

  7. well said tony…

    we our great financially and we will win trophies… i guess the purity in which we do stuff no one in the media/world likes it…

    i am quite sure this season can be ours if we get focused on each games… chelsea with their minuscule squad just can’t keep up with playing everything… its just crazy how lampard gets injured and the team looks shaky and we have to compete now with 8 first teamers out!

    but we have great dept… its going to be an epic game.!

  8. Spot On Terence. As I said when I wrote my review of the FFP criteria, you cant “spend before the regs come in” as all you do is shore up a huge amount of amort.

    Im dying to have a look at the figures though. That turnover growth is insane, considering it’s without the boost applied by CHampions League revenue.

    I dont udnerstand their business model, though. Their wages alone mean they will never ever turn a profit, and once you consider amortisation will take 4+ years to filter through (assuming they buy nobody from here on out…) it’s going to be impossible to break even in the next three or four years, meaning they won’t be getting into the Champions League anytime soon. Very bizarre, as champions league money is surely a key part to their attempts to break even.

  9. Tony, you have touched on a subject that I started to write an article on when the new regs were announced. I binned it though because it wasn’t particularly arsenal related and to be honest,it would have taken alot of research etc across all leagues.

    The main take though was that to those who were willing to read between the lines, the new regulations were SPECIFICALLY designed to maintain the Status Quo in the CL composition.
    What flagged this idea for me was that Platini mentioned that he had discussed the issue with several Key club owners including Abramovich and Berlesconi and their concerns.
    In an impartial system it is the reasons their concerns that should have been exploited by any new regieme.
    The bottom line is that after years of buying success, they realised that they wanted to maintain their position without having to continually spending ridiculous amounts of their own cash especially since REALLY rich people were moving into football from the Middle East.

    They simply wanted to stop new investors in the game doing to them as they had done to others and Platini facilitated them.
    The idea is that under the guise of financial fairplay, the majority of clubs will be prevented from ever getting near the top table of European football.

    the more things change , the more that they stay the same. It is also my firm belief that platini who isn’t an idiot, does this in the knowledge that eventually this will rule out most of the english clubs with perhaps only 2 clubs being eligable to play thus opening more places to his more favoured leagues in Italy and Spain.
    It would greatly please him to reduce England to holding just 2 CL spots.

  10. Man I really need to type more slowly or at least edit b4 I hit submit lol 🙂

  11. Chelsea have two problems which you haven’t touched on. The age of their squad nmeans that they will need a disproportionately high number of their kids to succeed for them not to have to go out and buy – and the 25 rule might scupper that anyway. They have also failed to build themselves a new and bigger stadium which was thought, six years ago, to be fundamental to them becoming financially self sufficient.
    Manchester City have a much weaker recent history and seem to play pretty uninspiring football – neither of which bode well for them attracting worldwide attention and support.
    Speaking of stadiums – Spurs seem to be very confused about their own future home. I wonder why?

  12. I think you’ll find MCFC pay a rent to the council for the stadium – whether there were break clauses in the deal to reflect increased wealth of the customer I don’t know. But I’d be amazed if the lease was less than 50 years. So I’m sure the taxpayer’ll be paid……….

  13. The deal with Man City is that they don’t pay any rent at all up to a certain crowd level – which I think is 35,000 and then after that some of the money goes back to the council. It was a deal done to get the City of Manchester stadium off the hands of the local authority – they were desperate to give it away.

  14. “Anyway, the report covers the period in which they signed David Silva, Yaya Touré, Jérôme Boateng, Aleksandar Kolarov, Mario Balotelli and James Milner, and then sold Robinho and Stephen Ireland. The cost was £96.6m and rather surprisingly a higher wage bill.”

    Tony – I am sure it wasnt intentional, but the sentence above makes it sound as if that 96.6m loss was included in the 121m loss for City last year, which of course it wasnt. City’s accounts make it clear that the year end was 31 May 2010 and that all of the above buys/sales were not included. So for next year’s accounts City are ALREADY looking at a loss of 96.6m plus the additions in wages that those players will bring. You would imagine that Silva/Robinho probably cancel each other out, as well as Ireland/Kolarov. So that probably leaves Toure (300k a week, 15m per year), Boateng (8m per year), Balotelli (11m per year) and Milner (12m per year)as additions to their wage bill, so a further 46m to their wages.

    Scary stuff for City.

  15. “Michael Mancienne, Miroslav Stoch, Scott Sinclair, Franco Di Santo, Jeffery Bruma, Sam Hutchinson – they are all young players at the KGB”

    Stoch, Sinclair and Di Santo all left Chelsea permanently this summer, while Hutchinson has sadly been forced to retire from a serious knee injury. Just thought I should mention it.

    Chelsea do have some good young players coming through, and they won the FA Youth Cup last season. If they can nurture rather than buy their stars going forward, Chelsea will save a lot of money in transfer fees. However, they will still need to find the funds to pay their wages. Even if Chelsea spent no money whatsoever in buying players from now on, they would still require Abramovich’s chequebook to cover the wage bill.

    So their situation is very difficult indeed. In order to retain their standing Chelsea will need to find and nurture some wonderful young players, AND reduce their wage bill, AND increase their revenue. When the CL is worth £30m a year to them, it would be an enormous hit to their turnover if they were to miss out. They’ll need to walk a real tightrope!

  16. i don’t agree with u tony on chelsea youth, manager is now taking chances to give youngsters a chance in 1st team. Look at mceaheren(sumthing like that), in my opinion if everything goes well he will be their next lampard. sturridge, kakuta are there.
    so they have some youngsters coming through.

  17. Cole – 30; Essien – 28+; Drogba – 32+; Malouda – 30; Anelka – 31+; Benayoun -30; Alex – 28;
    Ferreira – 31; Lampard – 32; Terry – 30; Ivanovic – 26+

    Chelsea’s future is in the past.

  18. Critic – it is all well and good saying that McEacheren is coming through as well as Kakuta and Bruma and others but the problem Chelsea have is whether those players will be anything at all like the players they are trying to replace. Who will replace Terry, a guy who is probably the perfect English League defender? Who will replace Drgba, a guy who is probably the perfect English League striker? To say McEacheren will be the next Lampard is suggesting that he will become the best goalscoring central midfielder English Football has seen in the last 30 years. Sturridge is already 21 years old. How good is he really? Heck, Kakuta is already 19 years old and hasnt really broken through at all yet. Bentnder, Denilson, Diaby etc were all playing regularly at that age. Of course our players had lesser players ahead of them but Wilshire has shown that if you are good enough, then you are old enough.

    Integrating youth is one the hardest things to do, as Arsenal have seen in the past 5 years. Half the teenage wonderkids in a system will never make it (see Bentley D., and Pennant J.).

    There is just no way that Chelsea can expect Bruma to be as good as Terry, Kakuta to be as good as Malouda (who has been sensational for the past 2 years), Sturridge to be as good as Drogba, McEacheren to be as good as Lampard. And if that is the case then Chelsea will fall back to the rest of the pack. How far back will depend on how much money Chelsea are able to scrounge together to spend. As Arsenal have shown, you cannot rely on kids only.

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