Football, eh? Just when you think you have got to grips with the never-ending soap opera that is the Premier League, Manchester City and their mysterious black book have again taken centre stage, setting off a frenzy of potential implications for the reigning Premier League champions.
The topic of the month is Financial Fair Play (FFP). There is a fine line that every club must ensure is not crossed. Manchester United Football Club, while not facing investigation themselves, is also actively involved in remaining diligent in achieving financial acceptance.
Before I begin, I will not assume that each individual is confident in the grand scheme of FFP. UEFA established Financial Fair Play to ensure that football clubs were not spending more money than was earned. It commenced in the 2011-12 season, having a majority agreement on rules solidified two years before implementation.
At its core was the hope of preventing football clubs from falling into financial trouble that could endanger their long-term survival. In UEFA’s own words, they wanted to “improve the overall financial health of European football”. One primary component of the regulations was to prevent a club, or clubs, from overspending across several seasons by maintaining a budgetary framework.
Famously, speaking at the announcement of the new legislation, former UEFA President Michel Platini said: “Fifty per cent of clubs are losing money, and this is an increasing trend. We needed to stop this downward spiral. They have spent more than they have earned in the past and haven’t paid their debts. We don’t want to kill or hurt the clubs; on the contrary, we want to help them in the market”.
Help the market or introduce a regulated market that would ultimately line the pockets of some questionable individuals? Not a statement, simply a thought.
He continued: “The teams who play in our tournaments have unanimously agreed to our principles…living within your means is the basis of accounting, but it hasn’t been the basis of football for years now.
“The owners are asking for rules because they can’t implement them themselves – many of them have had it with shovelling money into clubs, and the more money you put into clubs, the harder it is to sell at a profit“.
It is easy to become lost within the novel that is FFP, but the crux of the financial regulations is the break-even requirement. It dictates that all clubs cannot spend more than the income generated and must balance their books over three years.
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Revenue is the key word to consider, and the specific type of revenue that matters for a football club. Outgoings in dividends, transfer fees, employee wages and benefits and financing will be considered over income from player sales, matchday sale income, finance and advertising, prize money and television revenue.
It is critical to note that money spent on training facilities, infrastructure, and youth training fees is not to be included. A significant factor for consideration is the influx of billionaire owners in the modern game. With that, we have seen a dramatic shift in the transfer market with notable inflation for various footballers.
Manchester United are in the midst of a unique scenario. Erik ten Hag has rejuvenated the club. Supporters are optimistic but cautious. A caution supplied as a result of its American landlords. However, with uncertainty about the club’s ownership looming large, the Stretford End awaits confirmation of its future.
Amid any potential investment or takeovers, January has seen a transfer window for loan acquisitions. Historically, United will plan around the summer window, with January generally considered reactionary or one where a significant opportunity may present itself.
In recent years the Red Devils have disbursed significant amounts on transfer fees and wages. Erratic spending and incompetent strategy have left the club in a difficult position when attempting to offload unwanted players. Covid football also saw a significant drop-off in matchday revenue, with the perennially packed Old Trafford remaining painfully subdued.
Furthermore, developments with the sides shirt sponsor make for compelling reading. Chevrolet paid a record £64m per year to appear front and centre between 2014-21. The £47m figure paid by Team Viewer presented a decrease while remaining a record for a shirt-only sponsorship deal. Following disappointment from key shareholders within the German software giants, United has allowed the contract to be severed and are welcoming a new partner.
Club representatives have met with UEFA, and the interpretation of these meetings leaves much to consider. Reports state the Glazer family have stopped paying dividends and that the Manchester well is dry. As a result of poor footballing decisions, United finds itself precariously close to that FFP line.
Manchester United, a once great powerhouse of European football, is gunning for a return to the Champions league. The prestige of involvement is well known, but the financial element is of paramount importance. In the summer, priorities remain clear. Reports of a pursuit for veteran hitman Harry Kane are prominent, with a desire for a young midfielder and an additional centre-half widely accepted.
Marcel Sabitzer’s January arrival was deemed reactionary but was required to maintain momentum and keep the club on track for that top-four finish. The potential financial implications of missing out on the European payday may be a dagger in the club’s chest.
Astonishingly, the blue side of Manchester faces the threat of relegation from the Premier League following charges which implicate them in breaching numerous financial regulations. Pep Guardiola’s club stand accused of more than 100 alleged financial breaches over four years.
The charges include not supplying full details of the previous manager Roberto Mancini’s pay during his four-year tenure at the club. There is also a failure to provide details about player remuneration packages over a six-season period. Additionally, the club overstated sponsorship income and ignored rules for approaching youth players.
UEFA had previously ruled a two-year ban on Manchester City and fined them €30 million for alleged FFP breaches. These were related to false sponsorship payments but were overturned in 2020 and reduced to a €10m fine. The Court of Arbitration for Sport stated that “most of the alleged breaches were either not established or time-barred”.
When considering the intense scrutiny in managing the mega-wealthy of the Premier League, owners have started to think outside of the box. Enter Todd Boehly and his consortium. He teamed up with fellow Los Angeles Dodgers co-owner Mark Walters, Swiss billionaire Hansjorg Wyss, British businessman Jonathan Goldstein, and US investment firm Clearlake Capital to purchase Chelsea Football Club.
Speaking after the takeover, Boehly was forward with his intentions: “Our vision as owners is clear: we want to make the fans proud. Along with our commitment to developing the youth squad and acquiring the best talent, our plan of action is to invest in the club for the long term and build on Chelsea’s remarkable history of success.
“I personally want to thank ministers and officials in the British government, and the Premier League, for all their work in making this happen”.
Since then, the club has broken the British transfer record for World Cup winner Enzo Fernández. At 22, Fernández sealed his deadline day move to London for a fee of £106 million, taking the Premier League sides spending over the £600m mark since the end of last season.
Their January spending has amounted to a staggering £323m. This figure eclipses the combined outlay by clubs in the four European rival powerhouse leagues during the same window. The spending has been so extreme that it has led to reports of new regulations being implemented by UEFA.
These regulations would prevent clubs from circumventing the rules of FFP via the use of abnormally long contractual arrangements. How did they achieve this, you ask? They did so via the implementation of ‘amortisation’.
With this tactic, there were no rules broken. It was simply a case of exploiting a loophole that allows such accountancy measures to be applied. But what does it actually mean?
In plain language: Chelsea has been spreading the total cost of a transfer across the length of the contract of a signed player, preventing a significant single-year expenditure and not infringing on FFP regulations.
For example, newly signed Mykhailo Mudryk has arrived with a colossal eight-year contract. This deal will run until 2031 and enables the club to spread the transfer fee across that period in their accounts. With that, the total fee is not immediately tied to the club’s books, allowing Boehly to acquire this vast array of players.
While Chelsea remains confident of its strategy and the integrity of its finances, this is not without its risks. Such a lengthy contract remains reliant on the player being a success and remaining injury free. Also, such is the severity of their transfer activity, success in major competitions – such as the Champions League – is paramount for generating prize money.
As football fans, we thrive on analysis, debate, and arguments. It is pivotal for Saturday night conversations with friends and colleagues as we attempt to solve the many great football debates. We never stop learning, and the world of ‘amortisation’ is a new chapter for all to digest. We can only hope that this particular avenue is addressed before it spirals out of control.