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The Future of Financial Fair Play


June 1, 2015

First published on the excellent ‘The Secret Footballer’ website here

Introduction

Cost control and Financial Fair Play (FFP) has dominated the football financial headlines over the last few weeks. First came an announcement from the Football League and QPR that an arbitration panel will determine whether the Football League’s FFP regulations are legal and whether the Football League has the power to sanction the club. Recently came the news that UEFA’s FFP regulations, according to UEFA President Mr Platini will be ‘relaxed’. This short post sets out how such a relaxation may occur and the consequences for high spending and frugal clubs alike.

The Basics

The FFP rules were put in place by UEFA to ensure that clubs become more self-sustainable by breaking-even in the medium to long term. UEFA, the Premier League and the Football League all have different regulations setting out the acceptable losses that clubs are able to make in order to avoid being sanctioned. Acceptable losses start from £105m over three years in the Premier League, to currently under £8m each year in the Football League Championship to €45m over three years for UEFA competitions. Sanctions vary depending on the regulations but include transfer embargos in the Football League, potential points deductions in the Premier League and squad size restrictions and even expulsion from competition in UEFA competitions. For more detail click here.

Recent Developments

Mr Platini has been quoted as suggesting that “I think we’ll ease things, but it will be the executive committee who will decide if it is to be eased, and the outcome will be known by the end of June.”

Indeed, Gianni Infantino, Uefa’s general secretary, said:

“Regular review of the Uefa Financial Fair Play regulations is vital in ensuring that they keep pace with the ever-changing football environment. Any potential changes to the existing regulations will look to encourage more growth, more competition and market stimulation while strengthening the emphasis on controlling spending and safeguarding financial stability as our objective is and remains to ensure the sustainability of European club football.”

The likelihood and detail of a loosening of the break-even restrictions may become clearer after the European Club Association (ECA) FFP sub-committee meet later this week. It is possible that UEFA will move towards a Premier League type of regulatory control which would allow club owners to spend over what they earn but subject to stringent requirements to provide a guarantee for any such losses up to a certain level combined with a robust business plan to set out how the club will still move towards break-even, even with some short-term transfer fee and wage spending. It remains to be seen what the actual increased allowable losses will be. By way of comparison, the Premier League allows its clubs to make a £105m loss so long as £90m is through the secured funding route. The detail of how the Premier League regulates its clubs through ‘Secured Funding’ is set out here.

The Consequences

Clubs with benefactor owners that are happy to provide guarantees and secured funding will be able to invest more in their club in the short term. Clubs like Manchester City or PSG who were unhappy at their FFP settlement sanctions last year, may be provided with greater squad investment opportunities once more. With Premier League clubs under their own domestic spending obligations, clubs will have to ensure compliance with both domestic and UEFA rule changes. UEFA FFP advocates like Arsenal and Liverpool are yet to publically comment on the proposed changes but one can assume that various non-Premier League clubs, that won’t benefit from the latest £5bn domestic TV deal, may have pushed for additional investment provisions in order to compete with the huge Premier League revenue streams. From the 16/17 season, the winner of the Premier League may receive over £140m. A loosening of the break-even restrictions may thus go some way to combatting the competitive imbalance that some clubs believe they may currently face.

In addition, UEFA’s announcement of possible change may have implications for the current legal actions undertaken in various European national courts including actions brought by football agent Daniel Striani. His case has been primarily based on criticism that the regulations severely restrict owner spending. By relaxing the spending regulations, the strength of such arguments may be diluted and could even lead to the matters being dropped. The next step however is for UEFA to announce the detail of any changes and when such modifications may come into force.

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