Financial Fair Play - the future of football
 | PurposeThis site explores the issues of Financial Fair Play (FFP) in football. Understanding FFPClick 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. |
Financial Fair Play News
Sanctions to be ratified on 20-21 March in Istanbul 7 Feb 2011
- 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
|
UEFA Club Licensing Benchmarking January 2011.pdf Size : 5029.879 Kb Type : pdf |
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
Summary and improved translation of Rummenigge’s comments:
Mancini hits back
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:
- 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).
- Defer FFP until after Blatter retires from FIFA in 2015 and is replaced by Platini.
- 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.
Media confusion over first Monitoring Period20 November 2011
For another example of how this works go to www.sportingintelligence.com:
- Reduced spend on transfer fees for new players
- Reduced spend on wages
- Increased sponsorship income (possibly including selling stadium naming rights)
- Increased match-day incomes
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.
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.
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.
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.
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.
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.
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."
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 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.
