Financial Fair Play: an impending clash for club owners?



Bobby Zamora’s goal on Saturday may have just caused a massive headache for the Football League. QPR’s assent into the big time once again may cause the start of a battle between owners and the footballing authorities over sustainable finance. The sight of Tony Fernandes, jumping on the back of Joey Barton could have been inspired by the fact that he may have just escaped the clutches of Football League punishment. In contravention of the Financial Fair Play regulations, QPR posted losses of £65.4m in 2012-13, with a wage bill of £68m. This year, despite loaning many of their more expensive players out to Europe, finances are not projected to look much better; they are not expected to have reached the Football League’s target of reducing losses to £8m. The Football League’s sanctions to non-conforming and frivolously spending clubs include a transfer ban and a fine for ambitious overspending clubs. But they are not enforceable for clubs entering the Premier League, since these are under a different jurisdiction who have refused to enforce theFootball League’s punishment.


Potnetially, this could lead to the Football League attempting to en- force the fine through the courts. UEFA and all professional leagues in England have created FFP rules in an attempt to cut spending. In the Premier League, clubs are not permitted to have losses over £105m (£15m if no equity injected into the clubs), otherwise they face a points deduction. In the Championship clubs have to re- duce losses season-on-season to a maximum of £3m by 2015. Clubs in Europe cannot post more than £45m losses over 3 years.


Recently Manchester City and Paris St Germain have been hit with a €60m fine and a restriction on the number of players they can enter into next year’s Champions League competition. Indeed, Manchester City has been accused by some of trying to circumvent FFP rules through a lucrative £400m contract over ten years with Etihad, who happen to be owned by Sheikh Khalifa bin Zayed Al Nahyan, the half-brother of Man City owner Sheikh Mansour.


Many have questioned the validity of enforcing financial regulations in football. A court case dealt with by the European Commission has already defeated a legal challenge to the rules in May 2014 – where a Belgian agent attempted to argue that the rules restricted investment, dampened wages and locked-in the power of the big clubs. The court ruled there was no case to answer. In spite of this, Tony Fernandes has already vowed to fight any fines given to QPR.


The rules were first devised in 2012, in response to the unsustainable levels of spending in professional football. The modern game has seen inflation of transfer fees and wages entering into billions of pounds. In 2013, the world’s most expensive player, Gareth Bale, cost Real Madrid a staggering £85.3m. The rise of clubs such as Manchester City, where an Abu Dhabi-based consortium bought the club in 2008 and proceeded to make a loss of £93m in 2008-09 and £121m in 2009-10, has caused concerns over the competitiveness of the sport. The Premier League table looks like a list of the top spending clubs on players’ wages.


In response to such concerns, it has been pointed out that, without teams like Manchester City, Chelsea and PGS entering the fray, the top competitions of European Football would be dominated by the same teams like Manchester United and Real Madrid. From this angle, the regulations protect the dominant teams and prevent a challenge to the status quo.


Yet, arguments that football needs to become sustainable, before the bubble bursts do have force. High levels of spending and debt can only remain when the sport stays popular and attracts worldwide audiences. There is no guarantee that such levels of interest will continue into the indefinite future. What then for clubs like Manchester United, who incurred £265 debt against its assets when the Glazer family acquired a majority shareholding in 2005?


Certain clubs attempting to enter the big- time have also fallen foul when the investment ran out. Portsmouth is a good example of this. They entered administration and dropped from the Premier League to league 2 in 4 years after a report of £58m debt in 2012. Other clubs, such as Chester City and Darlington have been liquidated, despite long histories in the Football League.


It will be interesting to see who takes the hit: the clubs, or the players’ wages. Professional sport is one of the only industries to have continued to prosper throughout the financial cri- sis, but can it continue to do so?


It is clear something has to be done about the frivolous spending by all clubs across the football world, before the bubble does eventually burst. FFP is a means of doing so which is facing strong resistance from many clubs, who stand to lose out.


As a result, be prepared for a clash fairly soon between owners and the football authorities. The scene could well get very messy, very quickly.



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