Platini announces FFP rules to be 'eased

May 18, 2015

The announcement that FFP rules are to be 'eased' has left both critics and supporters of the rules wondering what this means for the European football.

The FFP rules and their concept of 'break-even' look set to stay, but crucially, the rule that prevents a wealthy owner from injecting cash into the club to fund losses appears about to be scrapped. In many ways this isn't hugely surprising; UEFA's 'sustainability' argument always looked the most vulnerable in respect of a wealthy benefactor who makes-good any loss made by the club. Although Platini managed to secure approval for FFP from the European Commission, their consent was built firmly on the 'sustainability' platform; the EC has never expressly come out and said it supported the restrictions placed on benefactor owners who didn't run their clubs into debt. The sustainability argument looks decidedly wobbly when the rules are used to punish Man City and PSG's owners who routinely making-good the value of any losses and injecting cash into their debt-free clubs. UEFA would be hard-pressed to argue that Man City and PSG are in a perilous financial state teetering on the edge of oblivion.

It is clear from Platini's comments that UEFA have been unnerved by the legal challenges it has faced and is still facing (in addition from the lack of overt EC support to this element of the rules).  In addition to the ongoing Striani/Dupont case, Dynamo Moscow have recently become the first club to refuse an FFP plea-bargain and take their case to the CFCB Adjudicatory Chamber (we don't yet know the reason for their appeal but given Platini's announcement, it seems probable that the club, owned by a bank via one of Russia's most wealthy individuals, is challenging the equity injection rules).

Other than the legal issues, there is another key reason why cash injections from owners will soon be permitted for the break-even test: Man City and PSG (the biggest FFP transgressors) are able to fudge the 'break-even' test. Both City and PSG are State-owned clubs and to get round the FFP rules the now write a large number of inflated deals with state-influenced companies. By maximising income, they can ensure they break even (or come very close). UEFA's Related Party Transaction rules are simply not able to adjust the value downwards for FFP purposes; each of the deals could in isolation be argued to be 'fair value'. Last year Qatar-owned PSG were hit by an FFP sanction for writing a single 250m euro deal with the Qatar Tourist Authority; the club have learnt their lesson and adopted City's model spreading their inflated income round a smaller number of companies. 

It is worth remembering why the equity injection rules were originally introduced along-side 'break-even' rules. The FFP rules were voted-in by the European Club Association and the view was that benefactor owners caused wage and transfer-fee escalation. By paying huge fees and wages, clubs such as Chelsea and Man City made it hard for other clubs to keep and acquire players without running up large, potentially unsustainable losses.  Although it has taken some time for the effects of FFP to have had an impact, only last week Man Utd's Ed Woodward told press that "FFP is starting to have an effect in terms of controlling player costs".  Add this to Infantino's statement that "Aggregate net losses of Europe's clubs have fallen from 1.7bn euros in 2011 to 400m euros in 2014", and we have a picture of FFP clearly helping to move clubs in the right direction.

So how will the changes affect football?

This is clearly good news for most Man City and PSG fans. Those fans who want to see their club purchase the world's finest players (possibly including Messi) will be delighted. Any residual supporters longing nostalgically for the basic charms of the Kippax may find themselves disillusioned but most fans will be delighted at this news; there really is no stopping them. Sam Wallace's (Independent) article from September looks spot-on; "It's no longer a case of whether or not Manchester City can win the Champions League, it is merely a matter of when.."

Both the Premier League and the Championship's FFP rules work on a broadly similar concept to UEFA's (with owner injected equity excluded from Break Even). However, given the increased TV deal and the larger permitted loss in the Premier League, a similar rule change here would not have a huge effect. Although at first glance, Chelsea might look to be a winner from any PL rule change, they would still be constrained by the restriction on increasing the annual wage bill by a maximum of either £4m a year, or an uplift in commercial income.  Interestingly, this wage-rise cap would also restrict clubs like Everton and Southampton from getting to the top-table (even if owner cash injections were permitted for FFP purposes and if they had an owner willing to roll the dice). Quite what the Liverpool owners would think of a potential PL change would be interesting; they cited FFP as one of the reasons they bought club. A rule change in the Premier League would make it a real struggle to get as close to Man City as they did last season.

If the winners from a UEFA/PL/Championship rule-change would clear, it less easy to identify who would lose from any change.  We may well see wage escalation take-off again and see more European clubs get into difficulty. Perhaps it is in the Championship that things might change the most. In the short term, QPR will be heartened by Platini's announcement (in advance of their arbitration hearing).  Longer term, any lifting of the restriction in owner-injected cash might require the introduction of wage-rise caps (or interactive, real-time monitoring) to avoid a desperate spending battle to get out of the division.

Before critics prematurely rush to celebrate FFP's demise, is worth noting that it is now over two years since any Football League or Premier League club went into administration.  That just might have something to do with FFP.


QPR's accounts released and heading for £50m fine

March 14, 2015

QPR’s controversial accounts were released this week.  As anyone following this story will be aware, the club recently announced profits via a vague Press Release which claimed that surprisingly low losses of just £9.7m had been made in 2013/14.  A number of people raised questions about how this could have been achieved without some accounting ‘slight-of-hand’ (see my previous article).

Now we have the accounts, it transpires that the club owners wrote off £60m in loans and classed th...

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QPR figures not all they seem

March 2, 2015

QPR issued a press release on 2 March to announce that the club had improved on losses of over £65m in 2012/13 and had made losses of just £9.8m in 2013/14.  Not only that, but the owners had paid off loans of £60m. On the face of it, a terrific improvement and stories about the club being hit by a £30-£40m FFP fine were clearly wider of the mark.  However, things are not quite as they may initially seem

The improvement was both stunning an unexpected. And as we know, when something seems...

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The Championship Embargo and Premier League's role in the rule change

December 13, 2014

New spending constraint rules have been voted-in by Championship clubs. The new rules replace the term "Financial Fair Play" with the term 'Profit and Sustainability' and crucially do not come into effect until next season (2015/16). The actual vote was a close run thing with 6 clubs voting against the change (Ipswich and Charlton were amongst the clubs that voted against the new rules).

The deferral of the implementation of the rules means that clubs must keep to the 'old' limits, and keep lo...

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QPR still on a collision course with Football League

November 13, 2014

Although Championship clubs voted for new FFP rules on 6th November, QPR are still on a collision course with the Football League. The rule changes do not expressly alter any sanction applied as a result of the club's overspend during 2013/14.

Although QPR’s accounts have not yet been released, it is inconceivable that they would have been able to keep losses below the threshold for the 2013/14 season (£3m maximum loss, or £8m if the owners injected £5m equity). Looking the most recent ac...

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Which Championship clubs can expect to receive a Transfer Embargo?

October 30, 2014

With Championship clubs due to submit their Fair Play information to the Football League by 1 December, it is worth considering which clubs are likely to have breached the rules and the likely impact.

Looking at the Championship clubs, 9 are viewed as being ‘Likely’ or ‘Very Likely’ to receive a Transfer Embargo from January.

The Football League will look back at the season 2013/14 and determine which clubs exceeded the permitted loss limits for that season. During 2013/14 clubs were ab...

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Was FFP the reason for high-profile 'Loan&Buy' deals this transfer window?

September 3, 2014

During the Summer 2014 Transfer Window we saw a number of deals where a player was loaned for 12 months, with the option to buy at the end of the loan. There were a number of reports that FFP was the reason for this type of transaction and it is worth exploring the issue.

There are a number of reasons why clubs might want to enter into a 'Loan&Buy' deal:

To get round a spending cap

Under the UEFA FFP sanctions, Man City and PSG were give a net player spending restriction (in addition to other sa...

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Championship FFP rules ‘undermined’ by Premier League

May 26, 2014

Last week, the Championship clubs voted on a number of potential changes to the existing FFP rules. However, as none of the tabled amendments could muster the required 75% of the vote, the rules will remain as they are.  Huddersfield issued an excellent summary of the proposed changes and outlined their disappointment that ‘real-time’ monitoring of finances was not approved.

Under the current rules a ‘Fair Play Tax’ is levied on all clubs that gain promotion to the Premier  League but ...

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Reports of record €60m (£49m) fine for PSG and Man City

May 6, 2014

Following recent press reports, we now have a much better idea about the sanctions that are reportedly being offered to Manchester City and PSG. It is now up to the clubs to decide whether to accept the terms or risk a potentially more severe punishment. The punishment reported in the press raises a number of interesting questions:

Why is City’s fine so large?

When City filed their accounts, on the face of it they looked to have nominally passed the FFP Break Even test (after permitted exclus...

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Man City failure of FFP test - a matter of choice

April 30, 2014

So, now we know that Man City (and PSG) failed the FFP Break Even test. However, this was no accident. Man City didn't fail the test because of an oversight - they failed because they chose to fail. The following analogy is helpful: 

I recently handed my son £5 to buy some sweets, telling him to spend no more than £1. Inevitably, he came back with quite a lot of sweets having spent about the £1.50. He didn't exceed the budget because he wasn't able to count - he just evaluated the pros and ...

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