Written by Matt_G-Freebody for FootballFancast.com: UEFA’s Financial Fair Play regulations are set to become active for the following 2011/2012 season, but whilst the policy is designed to stop the big spending in transfers and wages by Europe’s elite clubs, there are ways in and around the system for it to be exploited.
As you may be aware of already, the Financial Fair Play (FFP) rule is designed to increase discipline in football finances. The likes of Chelsea and Manchester City have been scrutinised where rich owners have invested heavily in the football clubs which have created short-term success into Europe’s elite.
Also, the likes of Manchester United, Real Madrid, Barcelona and Bayern Munich are not free from scrutiny either, as the FFP rule aims for clubs to ‘balance the books’ rather than running the club in debt. UEFA feel that the big spending clubs have created an unfair playing field in football and aim to reduce the dependency on high money transfers and wages, and increase youth development and financial stability at all football clubs.
The penalty for breaking these rules has been talked about across the fan forums online, suggesting that the likes of Manchester City and Chelsea could be thrown out of European competition if they fail to show they have broken even by the end of the season. This will not happen.
Under the new rule clubs must keep their financial losses under a certain limit over a 3 year period starting next season. So no punishments would even be considered until the 2014/15 season or even many years later if clubs show they have improved on their financial stability.
The new system is not exactly foolproof. Under the new rules, clubs have two options in meeting the regulations; they can reduce expenditure or increase revenue. Spanish giants, Barcelona and Real Madrid would not have to stop spending with their multi-million TV money both clubs receive (around £150 million), which would allow them to sign a £50 million player or two without loss.
Compare it to the EPL’s TV Money revenue which is divided more equally, so the top 4 at the most make around £50 million and will have to focus on increasing revenue to balance the books. But this does not mean English clubs will be at a loss with the Deficit Cap being one of the biggest loopholes in the new FFP rule.
It states that clubs are not allowed to exceed a deficit of over £5 million in three years (spending on stadium and youth development not included). However, where this rule fails is that the same rule allows clubs to extend the deficit up to £45 million in losses if the club’s shareholders can pay it off as equity.
So a rule designed to make football a fairer playing field where finances are concerned, still allows those that are rich enough to go £40 million over. Rather than doing the set objective, it just gives football clubs even more reason to seek rich private investors if they are to break into Europe’s elite.
There are also more ridiculous ways that clubs can get around the new FFP rules that would make a mockery of the whole concept. For example, a rich owner or investor of a football club could buy all the advertising space around the ground for let’s say, £100 million. Under the FFP rules, this would come under the club increasing its revenue which is allowed.
Or even more silly is a rich owner or investor buys a scarf from the club shop for let’s say, £50 million which would come under the club increasing the revenue and be legit.
There are many other ways that rich owners and investors of clubs can get around pumping money into the club, from buying the naming rights to the stadium for a large sum (and keeping the same name) to using associates around the globe to increase commercial revenue.
UEFA have used Arsenal as a good example of how a football club should be run, supporting itself financially. Whilst the idea of the FFP is great for football – wanting to focus on youth development rather than big transfers, if you look a little deeper you realise that it’s too soft to make any significant changes.
The FFP will still let Europe’s elite stay there, whilst managing their finances a little better, owners, investors and presidents alike will find ways around the rules that lets their clubs to still spend big. Perhaps UEFA need to become strict with these rules if they want to see the game improved for the future.
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They have said you can’t inflate advertizing revenue prices, that only what is fair market value will be counted. But I’m sure there will be a few loopholes.