Clubs face cap on squads under amended FFP rules
SPOTLIGHT ON financial fair play in FOOTBALL
CLUBS could be forced to enter weakened squads for the Champions League next season if they are deemed to have made excessive financial losses, after European chiefs Uefa made late changes to financial fair play (FFP) rules.
The punishment can be levied on teams who have lost more than €45m (£38m) over the two-year period ending last summer but whose infringement is not sufficiently serious to warrant being banned from the Champions League or Europa League.
Amended disciplinary measures issued by Uefa earlier this year, just weeks before the first decisions are due, state that offending clubs face a “restriction on the number of players that a club may register for participation in Uefa competitions”.
The regulations add that this could include “a financial limit on the overall aggregate cost of the employee benefits expenses of players registered on the A-list for the purposes of Uefa club competitions”. In practice, this may mean Uefa capping the wage bill of a squad that a club wishes to submit for European tournaments.
Uefa has indicated it will announce the FFP offenders late next month, starting with more minor breaches. Serious offenders will learn their punishments in June.
Manchester City are the Premier League club considered most at risk of failing FFP rules. Chelsea have also made large losses but, as explained by leading sport lawyer Daniel Geey in City A.M.’s exclusive analysis today, may still pass Uefa’s test.
Uefa has also opened the door for its independent Club Financial Control Body (CFCB) to “settle” with offending clubs, whereby they offer lesser sanctions in exchange for not contesting rulings. At the same time, clubs also have the opportunity to complain about rivals’ punishments. Geey, a football law expert and associate at Field Fisher Waterhouse, predicts this will prompt clubs who finish just outside European qualifying places to complain if those who pip them avoid bans because they have used the settlement route.
“There is definitely that ability for a club that has lost out on European qualification through where they finished in the league actually doing something about it,” he told City A.M.
“There’s no case law, no precedent to be able to adduce what type of test will be required for them to reach that bar [of proving CFCB error] – and it’s a very high bar at that. I don’t necessarily think that will stop clubs.
“In the end clubs will spend potentially significant sums on that because a run in the Champions League can mean €30m in prize money.
“So if the worst happens and they don’t get within the Champions League qualification places and another team does and is allowed to play because they have settled, I can see a lot of clubs potentially looking to use that avenue.”
LEADING SPORTS LAWYER DANIEL GEEY ANALYSES PREMIER LEAGUE CLUBS’ PROSPECTS OF PASSING FINANCIAL FAIR PLAY BREAK-EVEN RULES
Arsenal
Reasons for optimism
● UEFA allows clubs in this first period to make a combined 11-12 and 12-13 loss of €45m. Arsenal made profits of more than £45m over the last two seasons
● The club’s past years of accounting profit can also be offset again future loss years for FFP compliance
● It seems unlikely the club will have any short term FFP compliance issues
Man Utd
Reasons for optimism
● United’s losses over the last two seasons are reported to be only £13.5m. That would mean they are well within the acceptable spending levels that Uefa prescribes
Reasons for worry
● United may give their manager significant sums to spend on players over the summer. Transfer spending and wages are relevant costs for FFP purposes which will certainly increase their cost base
● The risk of not being in the Champions League for next season could mean a £30m+ revenue fall. This is to be balanced against increased revenue deals like an anticipated new Nike deal worth over £90m+ per season
Man City
Reasons for optimism
● Things are much more nuanced than the headline loss figures. As the club’s year-on-year losses have decreased, they can remove the costs of pre-June 2010 contracts from their 11-12 accounts. Some reports suggest that could be a £60m cost reduction
● Uefa also allow for youth development, training ground, stadium and community expenditure to be removed from a club’s cost base for FFP purposes
● Even if the Etihad sponsorship deal is deemed a related party transaction under the Uefa rules, it is likely the deal would be deemed at a ‘fair value’ of £40m per season for shirt, stadium and community sponsorship
Reasons for worry
● City’s combined loss over the last two seasons is close to £150m. Uefa rules stipulate that clubs can only make a €45m loss
● Although City have not stated whether they will comply with the break-even rules or not, they will be a lot closer to the €45m figure than the initial £150m headline loss would suggest due to the allowable cost provisions set out in the adjacent column
Chelsea
Reasons for optimism
● It is likely a proportion of their £50m combined losses will be exempt FFP costs
● The club claims that they are not one of the 76 clubs currently being investigated by Uefa and that it will comply with the first FFP break-even test
● For the next season, so long as the club makes a smaller loss than the £49.4m from the 12-13 season, they will be able to use the pre-June 2010 wage exemption in the second 14-15 season to reduce their FFP compliance costs
Reasons for worry
● Chelsea made a combined £50m loss over the last two seasons
Liverpool
Reasons for optimism
● Regardless of the club’s combined £104m losses, as they did not participate in European competition this season, they did not require a license for this current season
● The first period they will be required to provide three years’ worth of accounts for is the 14-15 season
● As their losses have been decreasing, they can take advantage of removing the costs of contracts entered into before June 2010 from their 11-12 accounts. This will be a significant FFP cost saving
● Uefa also allows for youth development, training ground, stadium and community expenditure to be removed from costs for FFP purposes. FSG reportedly wrote off £35m in stadium costs which should be exempt for FFP calculations
Reasons for worry
● Liverpool made a combined £104m loss over the last two seasons
● When Liverpool submit their three years’ worth of accounts, they can only make a €45m loss, which equates to €15m per season. There may not be too much room to manoeuvre
Everton
Reasons for optimism
● Everton will have only made a combined £7.5m loss in the 11-12 and 12-13 seasons. They will be within the acceptable FFP parameters
Spurs
Reasons for optimism
● Without knowing the club’s 12-13 figures, it remains difficult to judge their losses over the combined 11-12 and 12-13 period
● Their large summer transfer window spending spree was based on the profit generated from the Gareth Bale sale to Real Madrid
● A loss similar to their £7.3m loss in the 11-12 season would mean they would be well within the FFP compliance parameters
Reasons for worry
● Additional seasons outside of the Champions League will mean the club cannot benefit from the additional revenue streams that come from a successful campaign