UEFA Financial Fair Play Regulations are approved

Ruud_boy_10

Financial Fair Play Regulations are approved on UEFA.COM

Very interesting stuff. Does this mean the massives are screwed?

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Titanic Hitler

RedCanuck

In a word, yes. At least thats how the media have explained the new regs. Will be interesting to (finally) get a look at some detail regarding the Barca/Madrid finances too.

Ruud_boy_10

What about the italian teams? Inter spend more on wages than make in revenue. Crazy

Ruud_boy_10

The news is two hours old.

Thoraximus

Can we get some of the financially minded people in here too? Are we screwed? How does this affect us?

phelans shorts

This was all discussed in a thread by pogue (iirc) and andersred was explaining it a bit better in there.

phelans shorts

Infact it's on the first page, hardly a huge search is it?

lysglimt

No - the general rule is that you cannot spend more than you make. A club is allowed to have a £ billion loan if they want - as long as they make enough money to pay the mortage and loans. Which is logical from a judicial point of view. Having a loan isn't a problem unless you can't pay it.

However - as I recall - clubs are allowed to have sugardaddys investing in the club as long as they don't invest in the squad. For instance - Sheik whatshisname can't under this new rule buy £200 million worth of players - but he is allowed to build 5 new stadums for them if he wants to.

The major problem I see with this - is that there are ways around this. Theoretically (and a stupid example yes - but) - sheik whatshisname can buy 10 million City-shirts - and City's total revenue will increase and they are out of the woods.

This was a bizarre example - and I am sure a good financial advisor can think of smarter ways to fool the system. But I am 99.9% that it can be done if money is NOT an issue

kietotheworld

It's not, look at the top of the article

Thoraximus

Thanks for that.
So in theory we could have a sugar daddy come in and pay off all our debt and extend the south stand, build new carrington etc, leaving the other monies the club has generated for players?

teague

That is not at all how it works. The rules are specifically designed to prevent financial doping by rich sugar daddys.
There are rules governing related party transactions such as sheik whatshisname buying 10 million shirts.
The only exceptions allowed are for youth develpoment, community activities, finance costs related to fixed asset development (eg. stadium development) and non-football related expenses.

The rules are actually really well put together. Whilst they do allow quite a lot of flexibility they would genuinely prevent any club doing what City have done in the last couple of years or what Chelsea did when Abramovich first came in.

TheMancRedDevil

I think we're bound to see some teething problems with these rules as clubs like Inter and City will have a team of legal bods poring over the regs as we speak in an attempt to find loopholes.

As things stand, City would be well and truly stuffed. The last time I checked, their total revenues were in the region of £100million but their wage bill alone is well above that.

One thing that they seem to be hoping to take advantage of is the fact that the club can have other, non-footballing businesses in the area of the ground, stick the City name on them and it all becomes part of the "company's" revenue.

Hence talks of City attempting to buy Eastlands outright and open hotels, shops and leisure facilities in the surrounding area.

The FFP Regs sound okay in theory and I like the idea but in practice they could well get messy.

lysglimt

I know about finance etc - but theoretically Sheik Whatshisname can give 1000 employees £50.000 to buy city-shirts for or something else related to City - it will increase the clubs income!

And as I said - he could buy 5 new stadiums for them if he wanted - no laws against that (of course there would be no point but he could

But another problem - as I understand it UEFA cant ban a club from playing in the P.L - they can only ban them from playing in Europe

So for a club who has no real short-term hope of playing in the C.L - they can simply ignore the rules! Or possibly they choose - we can either be broke, possibly be relegated and not play in Europe without a sugardadddy. Or we can be rich, definately not be relegated but we wont play in Europe.

Of course they would take the sugardaddy anyway

teague

Non-football revenue is excluded. Obviously where you draw the line between non-football and football related commercial activities will not always be clear but this should prevent obvious abuse.

teague

£50,000 of shirt sales is a drop in the sky blue ocean.
Large scale abuse of the system is just not going to work.

You have to remember that this is not some UEFA imposed regulation against the clubs' wishes. The big clubs have asked for this as they need to break the cycle of ever escalating transfer and wage costs. They all want this to happen. The regulations are very flexible about historic costs; player contracts started before this summer can be ignored, if a club is in breach but is showing improvement they will be allowed in. The point is that the rules will prevent massive financial doping happening in the future and therefore competing clubs will not be forced into supporting ever higher wage bills. SAF's Value will return to the market.

teague

I think if that scenario came about you would just find the domestic leagues would adopt the same or similar rules.

TheMancRedDevil

Well, this is where it is a loophole.

I mean, Manchester United have the Man Utd credit card which probably makes us a few quid but it isn't really "football related" is it?

Is the sale of a meat pie or a bottle of beer in the ground "footballing related"?

If you stay at the Manchester City hotel as part of a hospitality package, is that really footballing related?

I am of the understanding that because all of these things are sold under the "brand" of the club then they are acceptable as part of the revenue calculations.

It's something I will have to read up on again but I am pretty sure we're going to encounter a number of grey areas over the years.

Your suggestion to another poster that domestic leagues could adopt the Regs in order to determine participation in the league is something I agree with - I do believe that will happen.

Having said that, if Real Madrid want to play silly buggers with the finances, can you really see La Liga kicking them out? Would the Spanish Government even allow it?

As I say. Fantastic idea in theory and I hope it has the desired effect but this is big money competitive sport (and business) and there are bound to be cases where certain clubs stretch the rules to the point where it is hard to say if they are being broken or not and there could well be some messy situations arising in the years ahead.

datura

Can one of the mods please merge with this thread to keep all the discussion together?

FIFA Financial Fair Play

UnitedRoadRed

The problem with being rich and not in Europe is that you're not going to attract the players. It's all good

phelans shorts

True, I imagine it won't be long before we are seeing "the Manchester city oil company" and "the Chelsea steel company" liking off football branded businesses.

dev1l

Q&A on Financial Fair Play and the mountain Manchester City have to climb

Uefa’s Financial Fair Play regulations won’t wipe out the tradition of benefactor involvement in football. They will merely lead to bans from European competition for clubs whose owners want to spend lots of their own money building up those clubs. Those who want to spend freely can do so, but be barred.

It’s a personal point of view that any owner should be allowed to spend their own cash on their own football club, with the proviso that the money is given freely and without conditions, not as loans but as equity, and provides some kind of guarantees of middle-term stability if they walk away. Maybe future funds for a set period could be held in escrow.

On the one hand that still allows benefactor growth (see Blackburn under Jack Walker, Middlesbrough under Steve Gibson, Chelsea, Man City, Wolfsburg, Bayer Leverkusen, Hoffenheim, Zenit and on and on and on). On the other hand it allows some security in the the catastrophic event that the benefactor disappears for some reason, or dies.

It’s easy to argue that Portsmouth went pop, for example, because supposed benefactors turned out not to be. And a more dramatic case of meteoric growth then sudden collapse was seen at Gretna in Scotland. The self-made millionaire Brooks Mileson took the village side from nowhere to the SPL and Europe in a few short years, then his health failed, he withdrew, and then died. And Gretna effectively passed away too.

Brooks Mileson was a good guy, at least in terms of his generosity towards football, and a likeable bloke who I met and interviewed on a number of occasions, as here. But ultimately his demise and that of Gretna showed the dangers of an ownership model where one man or one group pumps in money on an unsustainable basis.

If Roman Abramovich had suddenly become indisposed circa 2004 or 2005, for example, Chelsea would have been in serious trouble, the kind of trouble they were in shortly before he bought them – virtually insolvent. They’re slowly, slowly moving towards sustainability but still too many clubs rely on the largesse of one person. That’s why medium-term, ring-fenced guarantees of some kind are attractive. That’s why I personally have no problem with benefactor funding – as long as such guarantees are in place.

But Uefa does have a problem with it, and the FFP regulations outlaw it aside from in limited amounts in the early years of FFP. And that’s why Manchester City have a problem in the years ahead: because they will need to make some record-breaking leaps in income to have the tiniest prayer of meeting Uefa’s FFP regs. Why? (For a flavour see the table below). And briefly . . .

Q: What’s the logic behind FFP?

A: According to Uefa (in more detail here): “The regulations are aimed at bringing about a situation which curbs the excessive spending and inflated transfer fees and player salaries that have endangered football in recent years. They call for greater discipline and more rational financial behaviour from clubs, and encourage clubs to operate more responsibly by not spending more than they earn, while settling their liabilities punctually. The measures are designed to protect European football’s long-term health and viability, as well as the integrity and smooth running of the competitions, and also stimulate long-term investment in areas such as youth development and the upgrading of sports installations.

“The regulations are aimed at bringing about a situation which curbs the excessive spending and inflated transfer fees and player salaries that have endangered football in recent years. They call for greater discipline and more rational financial behaviour from clubs, and encourage clubs to operate more responsibly by not spending more than they earn, while settling their liabilities punctually.

“The measures are designed to protect European football’s long-term health and viability, as well as the integrity and smooth running of the competitions, and also stimulate long-term investment in areas such as youth development and the upgrading of sports installations.”

Q: What does it mean in numbers?

A: See the table below for detail but basically from 2011-12, any club with serious long-term ambitions of playing in Europe shouldn’t be losing more than £8.7m per year.

Q: And how do City measure up at the moment?

A: Losses of £121m in 2009-10, projected losses of more than that in 2010-11, perhaps £130m, maybe more, and this isn’t just guessing, this is sensibly projected and ratified by people who understands City’s books and spending.

Q: How can you be sure of what they’ll make / lose?

A: You can’t be 100 per cent sure because only Sheikh Mansour knows what he’s going to do, but certain income streams are pretty well fixed and predictable, including two of the three main streams: match-day income and TV cash. The only stream with massive flexibility, for now, is commercial income, ie: money from sponsorships and partnerships.

Q: And the outgoings?

A: Operating expenses are also fairly predictable (what it costs to run the club on a day-to-day basis) and wages are the biggest part of that. They were £133m in 2009-10 and will be something like £160m in 2010-11. After that, City hope wages will stabilise. It is one of the gambles they’re taking: faith that wages will stabilise and not need to rise to chase on-pitch success.

Q: What other gambles are they taking?

A: In short, and in all areas, they’re speculating to accumulate, spending big now on top players transfer fees and massive wage packets in order to try to get success on the pitch that will get them Champions League football and bigger income to pay for those top players and their big wages. They’re also investing heavily in City in general, in facilities, in the local community. All that is laudable but you cannot get away from the fact that the vast majority of the money so far has gone on players and their wages to try to win.

Q: So what needs to happen for City to break even, and can they achieve it?

A: They need to earn more than they spend. To do that, they’ll need Champions League football quickly, to boost their income, and on top of that they’ll need huge increased commercial income. A lot of this will probably arrive, from firms in the Middle East wanting a part of Sheikh Mansour’s project. But City need to be careful that they don’t fall foul of Uefa’s “related party” sponsorship rules, which basically outlaw “mates rates” commercial deals. City believe they can steer clear of punitive action on this front, but only time will tell. If they suddenly announce a stadium naming rights deal for £50m a season, for example, it will quickly be pointed out that there is virtually no precedent for big-money naming rights deals on existing stadiums.

Q: Any other difficulties?

A: City have c.£250m of unamortised transfer spending to put through their books in the next five years. In laymen’s terms and crudely calculated, they will start every season till 2015 with a £50m red hole in the accounts even before they start because of signings already made. For accounting reasons they cannot get rid of that burden (barring the shipping out of the players who they need to win matches), and if they buy any more players, the burden will only get bigger.

Q: How can City make it work, and comply with FFP by 2011-12, when monitoring starts?

A: They say they’ll produce their own players to negate the need to spend on transfers. They say increased income from commercial deals will boost their coffers and help them break even. They hope that Champions League football is around the corner and that it will attract players who are desperate for top-level action and therefore won’t want massive salaries as well. They hope, in short, to make loads of new money and keep costs stable or decrease them. It’s ambitious in a number of senses.

Q: Uefa will simply let them off if they fail to comply, surely?

A: Absolutely not, Uefa insist. Rules are rules. There may be a bit of flexibility around the edges, but any serious leeway for individual clubs means the whole system will collapse, and that’s not something Michel Platini wants to allow to happen.

A: According to Uefa (in more detail here): “The regulations are aimed at bringing about a situation which curbs the excessive spending and inflated transfer fees and player salaries that have endangered football in recent years. They call for greater discipline and more rational financial behaviour from clubs, and encourage clubs to operate more responsibly by not spending more than they earn, while settling their liabilities punctually. The measures are designed to protect European football’s long-term health and viability, as well as the integrity and smooth running of the competitions, and also stimulate long-term investment in areas such as youth development and the upgrading of sports installations.





Q&A on Financial Fair Play and the mountain Manchester City have to climb | Nick Harris | Independent Editor's choice Blogs

RK

There will always be loopholes if you have enough money to find them.

Flying Fox

...or to create them.

Team Brian GB

I don't understand why the threshold for losses are a fixed amount, why are Wigan allowed to lose the same amount of Money that Man United can despite running a revenue a fraction of the size?

These rules really are nonsensical as they are far too restrictive, western economies are designed to operate with losses and debt burdens in order to grow - I fear clubs could stagnate if they are effectively prevented from outside borrowing.

peterstorey

You mean they're going to cause Chelsea some pain. Shame.

MikeUpNorth

I've been having a quick read of the regulations: http://www.uefa.com/MultimediaFiles/...2_DOWNLOAD.pdf

Break-even regulation information starts on page 36. 'Annex X' describes the calculation of the result and what income/expenditure is included in it.

Mozza

Football shouldn't use debt to pay the wages or buy players, it's inflationary, forces other clubs to pay similar prices for players, it's jepordises the existence of teams. The fixed loss means the big clubs spend less and can only spend a little more then they earn

Teams can still grow if they are successful on the pitch. They can get into premiership, get into champions league, that will earnt them new money and attract new fans so grow. What this does is prevent an Abramovic or Mansour coming in, spending millions to make it to the top, effectivly winning from the boardroom, its the equivlent of passing in the pit-stop.

datura

There's some discussion of that here: FIFA Financial Fair Play


Please merge mods!

MikeUpNorth

I've been reading the regulations from the point of view of Man City's owners trying to get around them.

Most of the obvious things are ruled out explicitly or implicitly. However, I can't see anything that would stop the following situation to escape player wage costs:
Man City buy a top player and pay him a relatively low wage, but employ the player's brother as a 'youth development' member of staff on very high wages (youth development is excluded from the break-even calculations). The 'related party' stipulations which prevent fiddling the cost of certain things seems to be written from the point of view of parties related to the club owners, rather than parties relating to a player.

Indeed, the regulations define 'related parties' as follows:
Therefore, I don't think a player's relative would be a 'related party'. Though maybe 3.g would cover it?

Arruda

There need to be provisions that can encompass those hypothetical situations as they're too diverse to be all covered explicitly.

A youth being paid a senior's wage, whose brother is a well established player on the same club ought be reason enough to trigger an alarm and demand explanations. If UEFA wants to enforce this they will have to be able to act in every type of situation, like the situation you described, or shady sponsorship deals. Because if they don't than this will just harm the "honest" clubs that won't be seeking loopholes.

It all depends on how powerful UEFA will be to enforce the regulations. Clubs should also watch each other and denounce suspect situations.

MikeUpNorth

If we sell Rooney in January for big money (pre-FFP), can we use that money in the summer transfer window (post-FFP) and still meet the rules?

phelans shorts

I'd guess so, afterall it would be the same financial year...

MikeUpNorth

Financial year is April to April no?

phelans shorts

Not a clue, isn't that just tax year?

Complicated financey stuff confuses me.

Count Duckula

We'll be fine in that circumstance, because it won't be a completely clean slate such as that, otherwise clubs who have built up a bit of a transfer kitty by being prudent up to now would suddenly find themselves shafted it they spent it all in one go.

MikeUpNorth

I can't see that in the rules though. It says:

Meaning a club has to break even over the two 11/12 and 12/13 accounting periods when combined. I can't see a provision that takes into account cash balance at the start of the 11/12 financial year - I might well be missing it though.

If you were allowed to take opening cash balance into account, then there would be nothing to stop City's owners putting a billion pounds in the clubs bank account before FFP comes in. The whole point is that a club has to break even over the specified period of time. Money earned outside that time period surely doesn't count?

Redjazz

The Reporting year is July 1st to June 30th.
A sale in Jan would lead to a Profit on disposal of players in this financial year. Purchasing a replacement after June 30th 2011 would lead to a player Amortisation charge (a relevant expense under FFP regs) in the first year of the monitoring period-roughly transfer fee/contract term. There would be salary implications too. More likely (from a football sense too) that a replacement is found pre FFP reg. That's my understanding.

MikeUpNorth

So basically, we would have to spend money from a big fee received in January before July 1st 2011?

I don't think people have considered this before, there may be a lot of cash in United's bank account (£160m at last count), but we lose the ability to use that for transfers as of next summer.

Bearded but no genius

Jesus.

It would be interesting to see City get their Top Four finish, only to be barred from the CL they so desperately crave.