Financial Fair Play - the future of football

Purpose

This site explores the issues of Financial Fair Play (FFP) in football.

Understanding FFP

Click on the 'Financial Fair Play Explained' tab for diagrams, videos and explanations of the UEFA rules.  


News, articles and information

If you want to get in touch about FFP, please contact the site.

Contact www.financialfairplay.co.uk

Financial Fair Play News


Sanctions to be ratified on 20-21 March in Istanbul 7 Feb 2011

At the 24/25 Jan Executive Committee in Nyon, a number penalties for failing to meeting FFP criteria were agreed. Three sanctions are still to be approved and will be tabled at UEFA EXCO in Istanbul at the end of March.  The Media Pack has been attached at the foot of this article and outlined the penalties as follows:

Potential Sanctions
  • Reprimand / Warning
  • Fine
  • Deduction of Points
  • Withholding of Revenue from UEFA competition
  • Prohibition to register new players for UEFA competitions;
  • A restriction on the number of players that a club may register for UEFA competitions
  • Disqualification from a competition in progress
  • Exclusion from future competitions
*shaded blue - new sanctions still to be approved by UEFA congress next March

The 'Deduction of Points' sanction is interesting in that it has not been tabled previously by UEFA or publicly proposed by Platini. This punishment would seemingly apply to Group games in the both the Europa League and Champions League and offers a rather ingenious way of punishing clubs whilst still allowing them to compete in competitions at full strength.  It is interesting that this new punishment has been proposed and agreed at Nyon, suggesting that may well be be a favoured punishment.  

The 'Disqualification from competition in progress' punishment is rather perplexing and it is difficult to envisage a situation where UEFA would apply this sanction for FFP transgression.

Of the punishments that will be ratified in Instanbul, it is interesting to see the much-touted 'Transfer Ban' punishment has, as expected, been watered down so that player registration restrictions would apply to UEFA competitions only. UEFA have previously been concerned about the
about restraint-of-trade issues that would arise following a full ban on player registration.

The 'Restriction on the number of players that a club may register for UEFA competitions' offers some interesting possibilities. However the delightful prospect of a team being forced to field a team of fewer than 11 players seems unlikely!

Although the menu of punishments has nearly been finalised, we are yet to find out what level of non-compliance would trigger a particular punishment. 

The bell tolls for Pompey 2 Feb 12

If Michel Platini lies awake at night wondering about the wisdom of pressing ahead with FFP regulations, he might do well to consider events at Portsmouth.

Pompey went in Administration in 2010 having run up debts of around £135m. The club had adopted a wage structure that could only ever be sustained through cash injections from the Gaydamak family. Once the funds dried up, the club found they could not pay the wages and Administration followed.

In a recent interview with Express FM, CEO Lampitt advised that by the time the club came out of Administration, Pompey had managed to get the P&L account to a broadly break-even level.  However, when the club was then acquired by 
Vladimir Antonov (via a holding company called CSI), the club changed it's financial approach. Clearly not mindful of the lessons of the recent past, Lampitt proceeded to use a £10.5m loan (as oppose to equity) from CSI to boost the playing staff.  Players such as Huseklepp (£1.5m) and Pearce (500k) were purchased.  Within a short period of time, the club had yet again adopted a wage structure that could only be sustained through cash injections form their overseas owner.  When Antonov was arrested (for appropriating his Baltic banks’ customer deposits) Pompey found that once again they could not pay the player wages.  Lampitt points out that his spending was not at the same level as his pilloried predecessor Peter Storrie and that the Football League had also been taken-in by the Antonov’s ‘proof of funds’ documentation.  Although many fans believe he is culpable for their current plight, if the CEO is to be believed, Portsmouth have simply been extraordinarily unlucky.


At the time of writing, Pompey fans fear that the situation is so grave that the club may even by-pass Administration and simply be wound up.  The nightmare at Portsmouth illustrates the danger of ‘light-touch’ governance and will surely give Platini some comfort in his plans for a more prescriptive approach to football financing.


Rummenigge calls for City to be banned - Mancini takes the bait 6 Dec 2011

A public argument has broken out between Bayern Munich and Man City over the penalties for breaching Financial Fair Play regulations. In an interview with Austrian website www.90minuten.at Bayern CEO Rummenigge makes a stinging attack on City’s spending and expressly calls for UEFA to exclude them from European competion..  Rummenigge explains:

“I recommend that Uefa should think of harsh punishments, otherwise there will be no financial fair play.

“Let’s take the example of Manchester City. How does it work when you write about 200 million (£194.9m) loss?

“The working group of the Uefa is required here to establish strict penalties. Some clubs want leniency, but in the final analysis, only the exclusion from the international competitions or the non-licensing for the European competitions or Champions League place (is appropriate.)

Rummenigge also went on to outline the reasons that Dutch, Belgium and Austrian clubs should all get behind the FFP proposals.

Perhaps somewhat unwisely, Mancini decided to hit back at Rummenigge’s comments. Mancini explained

"This has been six months now that he talks against us. He says he hopes Napoli get through to the second stage [instead of City]. “But you don’t want to see an important man like Rummenigge, who is the Bayern Munich president and a representative of a top club in the world, saying things against us. There are other teams in Europe that have a problem with Financial Fair Play, not only Manchester City.”

Although, Mancini’s comments "I think Manchester City are working for this FFP for the next two years” will have raised some eyerows given that the club lost nearly £200m in the financial year that ended just 5 months ago.

Original article

http://90minuten.at/index.php/sportsbusiness/sportsbusinessnews/61-fussball/46098-rummenigge-fussball-muss-wieder-fairer-und-rationaler-werden

Summary and improved translation of Rummenigge’s comments:

http://www.telegraph.co.uk/sport/football/teams/manchester-city/8936900/Manchester-City-v-Bayern-Munich-Bayern-chairman-wants-Euro-ban-for-clubs-who-break-financial-rules.html

Mancini hits back

http://www.telegraph.co.uk/sport/football/teams/manchester-city/8937994/Manchester-City-v-Bayern-Munich-Roberto-Mancini-wants-Karl-Heinz-Rummenigge-to-explain-his-criticism.html


Novel punishment proposed for FFP breaches 26 November 2011

With a UEFA committee due to meet in January to determine the punishment tariff for FFP breaches, an interesting suggestion has been proposed by a blogger at http://www.maracanazo.com/ .  UEFA's previous plan to impose a transfer ban for certain FFP breaches seems to have hit the buffers (due to restraint-of-trade issues and the fact that control of player registrations rests with FIFA and national associations, rather than UEFA).  The enterprising blogger proposes that teams who enter the Group Stage of the Champions League (and Europa League) would be docked points based on the level of FFP overspend. The devil is always in the detail, but with UEFA seemingly having few tools in at their disposal to punish transgressors, we might not have heard the last of this idea.


 UEFA shelves Transfer Ban punishment 24 November 2011

The Telegraph published a significant FFP article which maintains that UEFA have had to withdraw one of the proposed punishments for exceeding the Break Even deficit. The use of a transfer ban was put forward as a favoured punishment at the ECA in September (see article below). However it appears such a ban would fail the EC's restraint-of-trade rules.  This seemingly leaves UEFA with only three options:

  1. Levy fines as a punishment (however the irony of being able to buy your way out of the Financial Fair Play requirements will not be lost on many UEFA members).
  2. Defer FFP until after Blatter retires from FIFA in 2015 and is replaced by Platini. 
  3. Impose UEFA competition bans on the worst FFP transgressors 

Of the three options, UEFA may decide to defer FFP implementation and punishment, citing the Eurozone/recession problems as the reason behind the delay.

http://www.telegraph.co.uk/sport/football/european/8908065/Uefa-shelves-proposals-to-impose-a-transfer-ban-on-clubs-that-breach-its-financial-fair-play-rules.html#disqus_thread


 Media confusion over first Monitoring Period20 November 2011

In the rush to comment on City's recently announced £195m loss, a number of columnists have submitted incorrect copy regarding the duration of the current Monitoring Period.  The error seems to have started in a Press Association article on 18 November and has been included in a number of separate articles, including those in the Guardian, Telegraph and Mail.  To clarify, the current Monitoring Period lasts for TWO years (not three) - clubs must restrict losses to a maximum of E45m over the two years. The UEFA rules state on page 34:

'the first monitoring period assessed in the licence season 2013/14 covers only two reporting periods, i.e. reporting periods ending the first monitoring period assessed in the licence in 2013.' 

Subsequent Monitoring Periods will run for three years - see our attached grid:

 

City 'give up' on meeting FFP criteria 18 November 2011
Man City today announces losses of £195m for 2010/11 season. Significantly they have given up their pretence that they can meet the FFP criteria for the first Monitoring Period.  The club announced:

"As we undertake the club's commercial transformation, we are cognisant of the incoming Uefa financial fair play regulations and consequently we continue to maintain positive and ongoing dialogue with all appropriate football authorities."

Being 'cognisant' of the regulations is not the same as having a realistic expectation of actually meeting the requirements.  Today was a bad day for City - had Blatter departed (following his 'shake hands to resolve racism' comments), Platini would have been a shoe-in for the head of FIFA. As it is, Platini will face a deafening chorus of anti-City sentiment from across Europe over the next few days (expect Bayern and Inter to express their views publicly).  City have no UEFA history to speak of and a ban would hardly devalue the Champions League.  The size of City's loss actually makes the position easier for Platini - he can strengthen his position by excluding City from European competition, whilst dishing out lesser penalties to other clubs who fail to meet the criteria.  In short, City are probably 'toast' but they have may well have saved Chelsea's bacon.

Platini discusses watered down punishments 15 Oct 2011
Although the UEFA rules on Financial Fair Play, quite clearly spell out the punishments for clubs which overspend (non-compliance=no licence to compete), Platini has this week discussed imposing lesser punishments for rogue clubs (see link below).  In the Der Spiegel interview Platini discussed 'a range of possible sanctions' with exclusion being one of them.  Interestingly, the concept of reduced punishments such as fining clubs and/or imposing a transfer ban were previously raised at the European Club Association (ECA) on 7 Sept by Financial Fair Play strugglers Inter (see article below). 

As the scale of FFP non-compliance is becoming apparent, Platini is clearly keen to ensure that the UEFA competitions are not devalued.  However, the alternatives to a UEFA ban are not trouble-free options; the imposition of a fine (or withholding UEFA prize money) would be self-fulfilling and result in the club being less likely to achieve the FFP criteria. The imposition of a transfer ban would result in some UEFA games where clubs would, with some justification, claim their opposition had fielded players who should not have been on the pitch.

The UEFA rules are pretty clear about the punishments. Attached is extract from page 14 in Chapter 3:

..the criteria defined in this chapter must be fulfilled by clubs in order for them to be granted a licence to enter the UEFA club competitions.

The rules then go on to list the situations where a ban would not apply (these are listed and include failure to have a supporter liaison officer or youth coaches). Failure to meet the the financial Break-Even criteria within FFP not listed as an exception.

http://www.spiegel.de/international/zeitgeist/0,1518,791235,00.html

Chelsea outline their plan for Financial Fair Play compliance 9 Oct 2011
Steve Tongue in the Independent on Sunday pulled together an excellent article on the challenges faced by Chelsea in order to comply with the Financial Fair Play rules.  Bruce Buck (Chelsea's Chairman) outlined the 4 actions the club will be taking:
  1. Reduced spend on transfer fees for new players
  2. Reduced spend on wages
  3. Increased sponsorship income (possibly including selling stadium naming rights)
  4. Increased match-day incomes
Of course this is easier said than done.  Match-day incomes can only be materially increased by following Arsenal's example and building a new stadium (and Buck seems to be suggesting that the club may not proceed with the new site). Chelsea have tried to sell the naming rights (reportedly for £100m) but had to admit defeat in the summer.  Given the perilous economic position world-wide, it will also prove difficult to attract substantially increased sponsorship deals. Wage spend and transfer fees are more within the club's control. However action in these areas will be difficult and potentially unpalatable for the supporters - the club will soon have to replace Lampard, Terry and Drogba and have a number of high-profile players locked into long-term contracts.

It will be a significant surprise if Chelsea are able to meet the FFP test for the first Monitoring Period. Chelsea's best chance of taking part in the Champions League in 2014/15 may be to work with fellow non-compliant teams, such as Inter and press for a delay or reduction in UEFA's punishment. Understandably, Buck is not yet ready to discuss this contentious option.


FFP catches Sunderland Short 5 Oct 2011
It was interesting to see that Sunderland used 'Financial Fair Play requirements' as part of the justification for Niall Quinn's change of roles. In a move that signalled the increasing frustration of club owner Ellis Short, Quinn was this week replaced as club Chairman. In an unusual move, Ellis Short now becomes club Chairman.  Quinn will now focus on "developing Sunderland's profile and business interest overseas". Clearly,
all is not well at Sunderland. Gates are 3,000 down on last season (comparing the same fixtures over the two seasons); they are hovering
above the drop-zone with only one win this campaign, and the club have lost £23.5m and £25.5m over the last two seasons.  Ellis has sent Quinn to South Korea in an attempt to bring in some desperately needed commercial funding. Niall will have his work cut out - Sunderland are hardly a global brand and other, more successful, clubs with greater fan-appeal have been fishing in the same pond for several years.

When Quinn 'sold' the Sunderland vision to Short, it was very much portrayed as a 'Field of Dreams' - build it and people will come. Back in March 2010 Quinn said. "People say, ‘Why is he here?’ It's the potential which is why he’s putting all this money in; he wants the asset to grow and he feels in five to ten years that the asset will be worth far more than it would if he had just let it go. He feels it will be good value in time, especially with the way the world [television] rights are going.

After having pumped in £67.5m of his own money into the club over the last 18 months, the dream has turned into a bit of nightmare and success is
further away than ever . Short is seemingly not happy with Quinn's performance as Chairman and the Irishman faces a tough job to build the
brand in the Far East when the supporters in the North East are losing interest.

Ellis Short has dug-deep in his financial support for Sunderland - he put in £19m of equity (i.e. not loans) into the club earlier this year, in
addition to the £48.5m he stumped up the previous year. Short is a very wealthy individual and his personal wealth is usually given as $1.2b. However his background is in banking and investments (a sector that has seen 25% falls over the last quarter) so things may not be quite as rosy
for Ellis as they were this time last year.

Short is quite right to point out the FFP issue at Sunderland. However, the issue runs deeper than the obvious challenge of reducing the
club's losses to within the E45m maximum Break Even Deficit over the Monitoring Period that covers 2011/12 and 2012/13 seasons. Under FFP rules, a club is only able to lose more than E5m over the current two-year Monitoring Period if there is an injection of Equity to cover the loss.  This
means that Short will have to put his hand in his pocket yet again and fork-out up-to E40m.  This, of course, assumes that Sunderland will continue to apply for a UEFA licence on the off-chance that they will eventually secure for a the Europa Cup or Champions League place.


Chelsea decision long overdue 4 Oct 2011
Stamford Bridge have known for some time that they need to improve the income generated from their Stamford Bridge stadium.  With a capacity of 42,000 and generating around £82m of match-day income each season, the stadium compares particularly poorly to Arsenal who are able to generated around £122m over the same period.  Of course Arsenal have the benefit of a shiny new stadium and wisely decided to build extensive corporate facilities in a successful effort to maximise the income derived from every home game.  Chelsea  have spent nearly two years agonising over how to proceed with Stamford Bridge - they have been trying to sell stadium naming rights since November 2009 (the club admitted defeat in the summer in its protracted bid to raise £100m in a 10-year naming-rights deal).  Now it looks like the club are about to take the decision it should have taken two years ago and start the drawn-out process of building a new stadium.  Unfortunately, it will take several years for the club to reap the benefit of the increased match-day income and in the interim it is faced with the tough challenge of trying to reduce losses to just E45m over the 2011/12 and the 2012/13 seasons combined.  Without the extra income a new stadium would provide and without the immediate prospect of an Etihad sized naming-rights deal, Chelsea may 
even fail the first FFP test.


Owners asked to dig deep 2 Oct 2011
With the financial reporting season upon us, the impact of FFP is starting to hit home with club owners.  Although clubs are able to report a deficit of up to E45m during the current two-year Monitoring Period, clubs are only able to record this level of loss if the owners are willing to put their hands in their pocket and inject Equity that will cover all any deficit amount over E5m.  Where the owners are not willing to subsidise the club in this way, the maximum permitted loss is only E5m for the Monitoring Period that covers 2011/12 and 2012/13.  For the likes of Abramovic and Sheikh Mansour this will not present any problem but there are issues for other Premier League Clubs. All clubs wishing to take part in UEFA competitions are required to apply for their UEFA licence in advance of securing their qualification for the competitions.  In practice this means that the owners of Stoke, Newcastle, Bolton and the other clubs hoping to win an UEFA place will need to put their hands in their pockets to fund the deficit, rather than saddle the club with debt.

Arsenal can only break even 1 Oct 2011
Arsenal are viewed by UEFA as a role model - they play nice football, are not owned by a 'Sugar Daddy', they have built a lovely new stadium and operate on financial model that will seemingly ensure FFP compliance. UEFA will therefore have been pleased to read Arsenal's recent financial results (their last ones to be produced before the first Monitoring Period).  Although Arsenal announced a profit of £15m before tax, they recorded a profit of just £2.2m once transfers are factored in.   In many ways these results indicate how difficult several English clubs will find complying with the FFP rules - if Arsenal, with the benefits of their world-beating corporate facilities, few expensive player purchases and a reasonably rigid salary structure, can only break even, it will be extremely difficult for some of the other Premiership teams to comply.

How to solve a problem like Carlos 28 Sep 2011
Following Tevez' refusal to come of the bench against Bayern, a number of pundits proposed that Tevez should be 'sacked' or be 'left to rot in the reserves' for the rest of his contract. Other than the employment law issues surrounding these two proposals, there would also be a FFP impact:

Sacking option
Tevez was signed two years ago for a reported fee of around £45m/£48.  Under FFP rules, his value will have been 'amortised' or written-down and he now has a 'book value' of around £27m. If the club were to 'tear up his contract', City would immediately be hit by the 'loss' of all his book value in the current financial year. Whether they can still keep costs within the Break Even Deficit limit is debatable but a  one-off  'loss' of this size would probably be too much for City.

Running down contract in the reserves
As Tevez was signed before 30 June 2010, his wages are not counted as an expense for the 2011/12 season. However his wages do have to be accounted in full for the 2012/13 season (at around £13m).  The club would also have to amortise his purchase price for another year (costing around £9m for a full year). Again, City will be keen not to be impacted by £22m costs added to their Break Even Deficit.

Financially, the best option for City would be to sell him in Summer (or possibly January). However his value is probably greatly reduced and City would have planned to sell him for around £40m at the end of the season (making a profit of around £20m over his projected June 2012 book value). Unfortunately for City, they may struggle to raise much more than £20m for the player. Again, the absence of the planned book value profit on the sale of Tevez will hit the club's ability to meet the FFP criteria.

For more information on how contracts are 'amortised', click the Financial Fair Play Explained link above.


Inter do not expect to meet FFP requirements 9 Sep 2011
Further light was shed on Inter's role in proposing lenient FFP punishment at the ECA conference, when Massimo Moratti, the Inter General President, announced that Inter are not ready currently meeting the FFP requirements. Suddenly it all becomes clear...


European Club Association sub-group proposes FFP leniency 8 Sep 2011
Following the dissolution football's elite club organisation 'g14' in 2008, UEFA has sponsored the creation of the European Club Association. At the ECA conference in September, board member Ernesto Paolillo,(Internazionale General Director)  chaired a sub-group which convened to propose the penalties that they felt should apply for FFP breaches. Although all UEFA documentation is clear (i.e. non-compliance = no licence), surprisingly, the group proposed that the punishments should be withholding prize money and a transfer ban.  UEFA does not have to accept the 'recommendations' from the ECA but this episode must have left a few people wondering why this sub-group was convened and why the proposed punishments were not as severe as UEFA has indicated.


Will the Etihad money be enough for City? 22 Aug 2011 
Etihad's reported £400m deal over 10 years includes a provision to spend around £100m on developing the stadium complex.  Although the numbers are not yet fully in the public domain, it seems around £30m a season will be earmarked to subsidise City's huge wage-bill in their quest to meet the FFP requirements. Given that City are currently running losing £100m+ every season, they face a seemingly impossible struggle to bring down the FFP deficit total  to under E45m for this season and the next.   Seemingly City's only hope would be if the Etihad deal were heavily
'front-end-loaded' - however a deal structured this way is likely to result in problems for further down the line if the City Academy and Hotel complex do not deliver significant results.

Some clubs expected to fail FFP test 17 Aug 2011
Privately, a number of sports and financial journalists believe some clubs will fail the meet the FFP criteria. However people are reluctant to put
their heads over the parapet and say as-much publically.  Things are starting to change. In an article published by Reuters, Neil Patey from Ernst &Young (a former Abramovic adviser according to the Edinburgh Evening News) has stated publically that he expects some clubs to fail the FFP test. 

"If I was a betting man I would say one of the rich benefactor clubs will
fail to meet the regulations first time around," said Neil Patey, a soccer
industry adviser at global accountancy firm Ernst & Young. "I think there's
a high chance Chelsea, Man City and Inter Milan will fail (to balance their
books). If Barcelona and Manchester United failed, UEFA would find it
difficult to not have them in European competition and I think UEFA are
praying that doesn't happen."

Record Etihad Deal12 Jul 2011
Eyebrows were certainly raised by the size of the Etihad sponsorship deal with Manchester City. Etihad, who are yet to report a profit and have a
similar sized fleet to UK-based Flybe, have reportedly paid City around £400m in a 10 year deal which will extend the existing shirt-sponsorship
deal and re-brand City's stadium complex as "The Etihad Campus".  Not all of the Etihad funds will be used to boost City's coffers for the purposes
of FFP - a reported £100m has been earmarked for an extensive development programme which provide a hotel, call centre, training pitches and a
state-of-the art Academy set-up.  Although any expenditure on the youth-team set-up and the the stadium infrastructure is exempt from FFP
calculations, the eventual financial benefits of such an investment can beused to offset the club's wage-spend.

Barcelona sponsorship - from heroes to zeros 19 May 2011

Barcelona unveiled their new shirt bearing the Qatar Foundation logo.  Barcelona President Sandro Rosell and coach Pep Guardiola championed Qatar's successful World Cup bid and were rewarded with the E170m 5-year deal just 8 days after the World Cup hosts for 2022 were announced. Barcelona had been struggling to comply with the FFP criteria and desperately needed the income from this huge deal. The Spanish FIFA delegation were also keen to arrange a reciprocal voting arrangement with Qatar that would have seen Spain hosts for the 2018 competition.  

The Qatar Foundation is a charity run by the Qatar ruling family and announces that it "aims to support Qatar on its journey from a carbon economy to a knowledge economy by unlocking human potential".  However, not everyone was happy at this piece of business - the former Barcelona President Joan Laporta did not attend the vote on shirt deal, saying that it made the Spanish champions look like Qatar's national team.  Prior to the Quatar deal, the club had previously given the Unicef logo pride of place on the centre of their shirts.