The tricky truth behind Financial Fair Play

By

The Premier League charged Everton and Nottingham Forest with breaching Profit and Sustainability Rules (PSR), sometimes referred to as Financial Fair Play (FFP), thus threatening the clubs with potential points deductions. With Everton having already received a ten-point deduction for the same issue, the response has been polarising. There’s a lot of confusion amongst fans and who can blame them. I will look to unpack the rules themselves, the intentions behind FFP and whether it is truly fit for purpose.

The Union of European Football Associations (UEFA) introduced FFP over a decade ago, in an aim to “improve the overall financial health of European club football.” The Premier League has its separate rules, PSR, but the two are similar.

PSR sets out to limit the losses by clubs over a three-year period. The quoted £105m covers three years but is much more complicated than it seems. Certain costs, like transfers and wages are considered, whilst others such as investment in infrastructure, women’s football and youth academy can be written off. Exceptions like acceptable owner investment and pandemic adjustment have muddied the waters too.

Elite level sport with eye-watering amounts of money in play mean clubs look to operate on the line of legality

FFP is similar, focussing on solvency, stability, and cost control. This refers to paying fees on time, an acceptable €60-70m loss over three years and expenditure not exceeding 70 percent of its revenue. Some of these rules are new given the evolving nature of football finance and the impacts of pandemic/inflation.

What can you take away from these rules? Essentially, there is an amount every year that a club cannot spend more than. Calculating that can be tricky, but these clubs employ the very best advisors, accountants, and lawyers to ensure they aren’t at risk. Sanctions, depending on the level of breach, can include transfer bans, squad reduction, expulsion from competition, point deductions, fines, and perhaps more extreme ideas in future.

Elite level sport with eye-watering amounts of money in play mean clubs look to operate on the line of legality. It’s within your interest to spend as much as possible, given the strong correlation between expenditure and success. Loophole searching and attempts to cheat are inevitable. But what is objective over-spending, and what is subjective rule interpretation? 

Everton and Nottingham Forest look like they’ve been caught with irrefutable evidence. Everton have given their new stadium project as an excuse, but it is looking unlikely to convince the Premier League to go easy. Manchester City situation is even trickier to decipher. 115 breaches have been charged, dating back over ten years, and even UEFA has accused the Citizens of financial wrongdoing. This investigation has gone on and will go on for a long time. City have the best lawyers and will take this as high as it goes.

The difference between the two situations is the type of breach. Sponsorship rules have been exploited by Sheikh Mansour, essentially becoming a stream that can be turned on or off to stay in line with PSR. This is a similar tactic that PSG have used with their Qatari backing, it is like sponsoring yourself and having complete control over your revenue. City have been accused of failing to disclose this financial information amongst other things, which will be difficult to prove.

I think people have misunderstood FFP

This battle is more than just one fight against one club. If UEFA and the Premier League fail to punish City, these rules lose all credibility and purpose. You can already see this happening, given the reactions to Everton’s charges following a pattern of “what about Man City?” However, I think people have misunderstood FFP.

Some fans believe that FFP is meant to even the field, giving smaller clubs a chance against big club overspending. But do UEFA or the Premier League care about dominance in their leagues? Not entirely. Sure, if one club won every year, as seen in France or Germany, ratings and revenues can take a hit. But these competitions have exponentially grown despite only a few clubs ever having a chance of winning.

With all the money in the game, mismanagement is both likely and dangerous. Clubs have folded, people have lost clubs or jobs and the leagues have lost credibility. FFP is designed to reduce this likelihood, whilst making sure none of the big teams try to become bigger than the competition.

To an extent, FFP is working. The January window showed this, as clubs were punished for overspending in summer by clearly reducing expenditure on signings in winter. Tighter rules on ownership checks show the desire to keep clubs sustainably managed. But if the so-called ‘big six’ keep getting away with more loopholes and escaped court cases, the rest of clubs will soon feel injustice. FFP needs to stay equitable to maintain its integrity. Closer competition is not a serious target for big footballing organisations, as the current system is most profitable. FFP will never achieve this idealistic goal. I believe the outcome of Manchester City’s case will determine FFP’s future in the sport. There are two paths to be taken, and only time will tell.

Image: Osterreichische Aussenministerium via Flickr

Leave a Reply

Your email address will not be published. Required fields are marked *

 

This site uses Akismet to reduce spam. Learn how your comment data is processed.