The new UEFA Financial Fair Play Rules (FFPRs) relate only to participation in the Champions League and Europa League, and not to domestic leagues as yet. Each club that believes it can qualify for that season’s European competitions must, prior to the beginning of that season, apply for a UEFA Club Licence. From the 2013-14 season, the licence stipulations will include adherence to the FFPRs. Until the 2013-14 season there are no sanctions for breaching the FFPRs.
The Football League has recently decided to adopt a version of the FFPRs for Championship clubs which will come into force in the next few years.
The FFPRs will therefore start to bite for UEFA competition from the 2013-14 season. The rules need to be borne in mind, however, from the 2011-12 season onwards because the 2011-12 and 2012-13 accounts will be used to determine a club’s license application in the 2013-14 season (the first monitoring period). See the table and explanation below.
The rules incentivise investment in youth development and club infrastructure. Such infrastructure includes stadium and training ground development and expenditure on a club’s academy. UEFA is keen to encourage spending in these areas which means that any such running and financing costs are not included in the FFPRs break-even calculation. The idea being that the more the commercial revenue growth funded by long term infrastructure investment, the larger the revenue will be to balance against expenditure.
Although break-even usually means expenditure must equal revenue, there are the acceptable deviation provisions in the FFPRs which mean clubs do not have to actually break-even until 2018/19 season at the earliest.
The below table sets out for each monitoring period, the acceptable level of losses that are permitted through equity investment by an owner.
|Acceptable Deviation Levels|
|Monitoring Period||Number of Years||Years Included||Acceptable Deviation (€m)|
|T-2||T-1||T||Equity Investment||Non Equity Investment|
In taking the first row as an example, the rules come into force in the 2013-14 season (the first monitoring period). The reason why this is important is because, in the first monitoring period, two years worth of accounts are used to assess whether a particular club can successfully apply for its UEFA Club License. Therefore a club’s accounts for years 2011-12 and 2012-13 are used to determine the license application.
The table shows that the acceptable deviations (i.e. losses) vary quite considerably. From the first 2013/14 monitoring period, an owner can invest up to €45m over two seasons in exchange for more shares in the club. It means an owner can after the 2013-14 season on average only exchange €15m worth of cash for shares each year to spend on transfers and wages etc. That figure is reduced to €10m per season (€30m over three seasons) for the 2015-16 season. If an owner does not put any money into a club by way of cash for shares, each club’s acceptable loss (by reference to the last column in the table) is a mere €5m over three years.
As you can see, once the FFPRs become incorporated into the UEFA License criteria, clubs will have to ensure they have done their sums to come within the acceptable deviation provisions. Exempting stadium financing and youth development costs along with allowing a degree of loss making for the first few monitoring periods gives clubs some breathing space to ensure rule compliance. Future columns will assess other rules which may have the effect of assisting clubs in adhering to the FFPRs.