Connect in the back of the net

Financial Fair Play (FFP) has become a three letter acronym to strike fear and confusion into the hearts of fans, managers, and board members alike.

Yet, many of us are left questioning what Financial Fair Play is, and why it exists.

In an era of football where the elites of the game are having no issue sourcing money as TV deals keep getting bigger and transfer fees continue to inflate, we have to ask ourselves, is Financial Fair Play fair on the smaller clubs?

 

The process of FFP

Devised in 2009, and implemented in 2011, Financial Fair Play is the jewel of UEFA’s economic policy; aiming “to improve the overall financial health of European club football”. It is essentially a cap on spending, with certain exclusions.

The exact figures of the spend limit can vary, but UEFA’s general figure of the financial cap is that a club can spend £5M more than their earnings in that assessment period, which is a period of up to three years. ‘Earnings’ is essentially a club’s revenue. I.e. the more money a club brings in, the more they can spend.

But if a club is struggling financially, Financial Fair Play discourages them from spending. Many will wonder how this impacts foreign investment and UEFA stress it does not hinder ‘proper’ investment.

If the next Chinese investor were to go in to Burton Albion and try and spend £100M this summer of course Financial Fair Play would sanction huge fines against them. This is because transfer fees and wages of staff are the main source of scrutiny for the assessment.

But money spent on infrastructure (stadiums, youth development, training facilities) does not impact the assessment of whether the club has passed FFP. Supposedly ensuring that positive spending for the future of clubs is not hindered by the FFP process.

This long-term investment into infrastructure, so that the club creates a larger revenue stream which means long-term they have more income and then can spend more on players in the future, is what UEFA aim for all clubs to achieve.

When you strip away the financial lingo, Financial Fair Play is essentially a transfer cap on a sliding scale, dependent on the income the club can generate.

 

Why implement it?

According to UEFA? It seeks to stop the next Portsmouth.

After winning the FA Cup in the 2007/08 season no one would have predicted where Portsmouth would end up just a few years later. The spending of Portsmouth didn’t seem too brash, signing the likes of Glen Johnson and Lassana Diarra for modest fees (£4M and £5.5M respectively).

However, the problem was further down the line when they could not afford to pay off the loans for these transfer fees by the deadlines imposed.

Selling players became the quickest form of seizing cash, which resulted in poor performance on the pitch. This happened to many of their stellar players, including Jermaine Defoe and Peter Crouch.

Due to interest on the loans taken for the transfer fees that bought these players in the first place, the debt accumulated. The management were able to offload many of their players at a good price (Johnson and Diarra were both sold at close to £20M), but by this point the club could not even afford to pay the players still on their books.

This financial horror story is the main the reason UEFA sought out a new system to regulate finance in football.

However, even with FFP rules and regulations, an owner can still choose to pay for players without surplus money or take out high risk loans to finance the club, he’ll just face fines/penalties (if you read our article on Ruben Neves signing for Wolves you’ll see that the new ownership there certainly isn’t concerned about getting in trouble with UEFA officials).

FFP discourages this kind of spending but is this enough; does FFP work?

 

Does it work?

For the average club, no.

Whilst it does aid in preventing situations like Portsmouth happening, it does not stop it.

Go and talk to a Leyton Orient fan whose club can’t afford to pay their players, a QPR fan whose club is now crippled over pending fines from UEFA or a Blackpool fan whose owner has pulled all investment after back-to-back relegations (resulting in a huge drop in revenue).

Then ask yourself, is this really helping the smaller clubs? Of course these issues are partly down to poor management of a football club, but FFP does not stop it from happening, rather, it worsens the blow.

 

Benefits the elites

It’s quite clear this system favours the elites of our game.

Being a Premier League club renders FFP as about as relevant as sun lotion in December. It’s is creating an enormous wealth gap in English football. Every season outside the Premier League is becoming a step closer to liquidation.

With every Premier League club getting upwards of £120M a year just from TV deals, FFP becomes obsolete. Yet, clubs in the Championship and below are scrapping to get enough free income in their budget to get in an average player on loan, out of fear of exceeding their £5M overspend limit.

UEFA will point to the likes of Burnley and Swansea who have risen to the cream of English football adhering to FFP and living within their means as a success for the system, but for every Burnley there is a Portsmouth, for every Swansea a Blackpool.

There is no doubt this rule was devised with the best intentions for all clubs in European football, but what UEFA have truly done is punish the small clubs for being small, and reward the big clubs for being big.

 

Written by Dominic Mehlig

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