Top football clubs call time on sugar daddies

THE DAYS of mega-rich individuals, such as Roman Abramovich at Chelsea and Sheikh Mansour at Manchester City, lavishing billions on clubs in pursuit of instant success are over after England’s top teams agreed historic new financial rules.

Premier League clubs will face points deductions if they lose more than £105m over a three-year period or increase wages by more than £4m a year. The regulations take effect from next season and were narrowly passed at a vote of top-flight chairmen in London yesterday.

Advocates of the moves, such as West Ham chairman David Gold, say they are an effort to curtail spending and will prevent more teams from following Portsmouth into a spiral of financial difficulties and decline.

Critics, such as football economics expert Professor Stefan Szymanski, argue that the rules will hinder competition by cementing the dominance of the established big clubs and, as such, may be illegal.

So-called sugar daddies such as Abramovich and Sheikh Mansour have transformed their clubs’ fortunes by pumping in hundreds of millions of pounds to cover spending – something Premier League chairman Richard Scudamore said would no longer be permitted.

“A new owner or even an existing owner with a change in attitude or in fortunes can invest a decent amount of money to improve their club,” he said. “But they aren’t going to be throwing hundreds of millions at it in a very short period of time. I’m not criticising that – I’ve been supportive of what they have done.”

Scudamore said he would push the league’s disciplinary commission to levy points deductions on clubs who flout the £105m threshold, which is significantly less strict than the limit imposed on teams playing in European competition. “If there is a material breach of that rule we will be asking the commission to consider top-end sanctions,” he said.

Chelsea, who must comply with the stricter Uefa rules anyway, voted in favour of the moves. It is believed that City, Fulham, West Brom, Aston Villa and Swansea opposed the changes, with Reading abstaining.

Gold, writing in today’s City A.M., said he would have favoured even tougher limits on spending but welcomed the compromise as a step towards preventing further insolvencies like Portsmouth.

Professor Szymanski believes that measures to prevent sugar daddies bankrolling losses could harm English football. “The rule will limit competition on the pitch and may also be illegal since it restricts competition for players without bringing any benefit to the fans,” he writes in today’s City A.M. “Longer term it may drive the best players to sign for clubs in China and the Gulf.”

New ball game: how rules will work

Limiting permitted losses
■ Clubs will be permitted to make maximum aggregate losses of £105m over a period of three seasons, starting with 2013-14. Any clubs making losses of more than £15m in the same period will have to provide the Premier League with evidence of secure owner funding for the three years that follow. This measure goes beyond European governing body Uefa’s financial fair play (FFP) rules. But clubs playing in the Champions League or Europa League, and therefore subject to Uefa’s FFP, are already required to limit losses at €45m (£37m) over two years, with that figure diminishing each year. Premier League chiefs insist clubs who flout the new rules should expect to have points deducted.

Cap on wage bill increases
■ Wage bills may not be increased annually by more than £4m, starting from next term, except in two cases: 1) the club’s salary spending is less than £52m currently, thereby allowing promoted clubs to vastly increase wage bills; 2) clubs use extra cash generated by rises in matchday and commercial revenue. This latter clause is designed to ensure that a projected £20m per club rise in television revenue from next season is not immediately absorbed by wage inflation, as it has been historically.