Football Leagues » Premier League » Financial Fair Play
Financial Fair Play
English Football Clubs Face Financial Fair Play Time Bomb
James Goyder
The clock is ticking for English clubs struggling to meet the requirements of UEFA's Financial Fair Play Regulations. The new rules will be implemented gradually over the course of the next three seasons but will ultimately mean that clubs making a loss of more than £8.7m per year will not be able to take part in UEFA competitions, such as the Champion's League and Europa League.
At present at least three of the Champion's League chasing clubs in the Premier League would not meet UEFA's criteria. Manchester United recently announced a loss of £84 million while Manchester City lost £121.3 million in the last financial year. Chelsea 's 2010 accounts have yet to be announced but they registered a loss of £47 million last time around.
Clubs losing more than an average of £19.6 million a year over the course of the previous two seasons will not be allowed to enter European competition in the 2013/14 season. Clubs losing more than an average of £13 million a year over the course of the previous three seasons will not be allowed to enter European competition in the 2013/14 season.
From 2015/16 the rules come into full effect and the maximum permitted average loss per season will be £8.7m per year. As things stand Chelsea , Manchester United and Manchester City are not on course to be able to qualify for the Champion's League anymore from the 2013/14 season onwards.
It is not just the fans who will lose out if these teams are no longer able to enter European competition. The Champion's League is not just the most prestigious competition in club football, it is also the most lucrative. Manchester United and Chelsea receive an average of almost £27 million per year from UEFA for participation in the Champion's League and this figure does not include the additional income they will also receive from gate receipts and sponsorship.
This gives a clear indication of the severity of the problems facing both these clubs. If Chelsea and Manchester United are not making enough money in the first place being barred from the Champion's League is going to massively exasperate this problem.
Chelsea parted company with Ricardo Carvalho, Michael Ballack, Joe Cole and Deco in the summer. These players were all high earners and the club should save in the region of £10 million per year by getting them off the wage bill. It is clear that Chelsea are drastically cutting back expenditure on new players in an effort to reduce their deficit in time to meet the new regulations.
Manchester United's £84 million loss is much more problematic. They actually made an impressive £286 million last year but this was wiped out by a cumulation of costs. The problem for Manchester United is that they have been burdened with debt by the owners who borrowed vast amounts of money in order to purchase the club in the first place.
If Alex Ferguson's men could win the Premier League or the Champion's League they could potentially make even more money but in football success on this scale can never be guaranteed. Cristiano Ronaldo was sold for £80 million just over a year ago, which is approximately the cost of the annual interest on Manchester United's debt. The only remaining player in the squad who would fetch anything like this sort of money is Wayne Rooney and selling key players might be the only option if the club are to reduce the level of their loss.
The only problem is that Manchester United are not the only team struggling to comply with the Financial Fair Play rules. Real Madrid spent £80 million on Ronaldo but the club a little more reticent to splash out £50 plus on a single player once the new regulations take effect. Much as Real Madrid might covet more blue chip signings they will probably need to be a little more prudent in the transfer market in future or risk incurring the regulatory wrath of UEFA.
Reduced spending from teams like Chelsea and Real Madrid contributed towards making the last transfer window one of the quietest in recent memory. There was one team which bucked the global trend though. While clubs across Europe were reluctant to reach for their cheque books Manchester City showed no such restraint. Yaya Toure, Mario Balotelli, David Silva, James Milner, Jerome Boateng and Aleksandar Kolarov arrived for a combined fee of around £121 million.
The cost of these players will be calculated on the balance sheet across the course of their contracts. Toure is reportedly on a five year deal worth £200,000 a week which would mean that his total cost to the club is £15 million per season. Even if Manchester City cease signing players, and they claim that their epic recruitment spree is coming to an end, the club are still burdened with the long term cost of their existing players.
Manchester City lost £121.3 million in the past financial year and are likely to post even more substantial losses in 12 months time when the cost of the new signings are taken into consideration.
The two Manchester teams both have financial difficulties but United's current position looks far more precarious than City's. Firstly Manchester City are not even in the Champion's League so being unable to qualify for the competition is not going to have an adverse affect on their existing finances. Secondly they are bankrolled by owners with an almost unlimited budget.
The Glazers were forced to borrow heavily to buy Manchester United and are unlikely to pump any more money into the club regardless of the new regulations. The cost of purchasing and financing Manchester City is pocket money to the Abu Dhabi group and while the team risks not being allowed to enter European competition its financial future is totally secure.
Of the other regular Champion's League contenders Tottenham are sitting pretty with a tidy annual profit, whereas Aston Villa registered a £47 million loss last year. The ownership situation at Liverpool is so volatile that is impossible to speculate on their long term financial situation but the Financial Fair Play Regulations cannot come into play soon enough for Arsenal who are the most profitable team in the Premiership.
Chelsea, Manchester united and Manchester City have all got less than a season to get their financial house in order. All three clubs will need to start pinching the pennies or risk missing out on the Champion's League once the Financial Fair Play Regulations come into force.
© James Goyder & Soccerphile.com
|
|
|
|