July 2011

UEFA’s Financial Fair Play (FFP) rules have already impacted on the Premier League – clubs such as Chelsea have been ‘‘Doing their buying before the shops close’ as Arsene Wenger recently put it with huge money invested in the last recent transfer window and more planned this summer. The rules have been triggered by Platini to provide some form of counter to the sugar daddy owners which have contributed to the widening gap between clubs like the Blues and the top clubs. Platini is not a popular guy in the UK but the rulings he is proposing are designed to help clubs like ours. Will these rules have the desired effect for us though? This article will chew the fat….

Background to reason for FFP

More than ¾ of the clubs in the Premier League made a loss in the 2009-10 season – in total the figure was £484m. The number one spend was wages of £1.4bn, £70m on average for each club >68% of their overall turnover.

The same figure of clubs (¾) were funded by rich owners, who have put in well over £2bn since they took over, mostly to fund the increased players’ wages and transfer fees. Clubs in the top flight spend a combined £30m + on academies per year, but this is dwarfed by the £67m+ they spend on wages. The above has created a situation where the English top flight is unbalanced and for clubs like ourselves uncompetitive….and boring.

Key Rulings of FFP….

Clubs will be permitted to record losses of only £39.7m altogether over the three seasons from 2011-12 to 2013-14, and cannot rely on owners’ subsidies. (Everton losses combined in 2 years between 2008-10 was well below at £10m -Man City’s huge losses in 2009/10 alone were £121million which means they are the club in England facing the greatest difficulty to abide by the rules.
Clubs expected to break even or face exclusion from European Competition from the 2013-14 season
Grace period does enable losses until 2018
Money spent on stadiums & youth is exempt from FFP
Owners are allowed to inject £12m a year (15m euro) into their club – our owners currently contribute nothing.
Focus is on player transfers and wages
Clubs are banned from owing money to players (e.g. Portsmouth/Liverpool example with Crouch/Johnson transfers)

Positives of FFP

Money should force clubs to switch to spending money on academies and youth development – an advantage for a club like Everton who had the 4^th most academy graduates playing in the Premier League last season
Medium-Long term it should benefit the club – times in the past when we’ve been blown out the water by clubs like Newcastle on Parker/Emre deals for haphazardly high fees and enormous wages should no longer happen.
Also in terms of protecting our existing players e.g. Lescott will cost City £46m over 5 years – basically for a reserve centre back – clubs will still spend but will be more selective in the big signings and not able to fill their squad with players on £90k pwk.

In theory it should make the league more competitive eg in 2009 Everton finished 13 points above Man City – in no small measure down to the fact that City have spent a gross of £200m + on fees and a further £60m+ per year on wages – this 13 point advantage was this year turned into a 17 point disadvantage – a swing of 30 points (a figure which last season is the difference between champions league qualification and relegation)
The rules are designed to help clubs be more competitive who don’t have excessive wage bills and who have good youth setups – beneficial to a club like ours.
Focus is on penalising those spending vast amounts on transfer fees and wages – as our usual transfer bid is 2 tickets for Blood Brothers with £5 down and the rest in monthly instalments – along with our comparative low wages – means we won’t be hit hard.
The reduced amount of spend on transfers and wages would reduce the spend on agents and the money currently going from fans into clubs and back out into agents pockets

Negatives of FFP

Doesn’t redistribute wealth across the league
Since the ruling clubs have been spending more and more cash before the rules come in – short term this means the gap in squad depth between us and top clubs gets wider.
Leagues which already comply with the finances such as the Bundesliga will increasingly become a more financially more enticing to players – meaning better quality foreign players such as say, Fellaini and Arteta, who would have been attracted to the EPL for the financial wages and league reputation might be more likely to choose a club in the Bundesliga > the overall quality of the Premier League will probably decline.
The Potential sugar daddy our club have been craving for 4-5 years will no longer be possible, meaning that the chance of us ‘buying’ the title like Chelsea have done and which Man City should achieve in the next 2-3 years will no longer happen.
The ruling will not stop clubs further down the table with ‘mid-range’ wealthy owners. e.g those who have now emerged as bigger spenders than the Toffees in recent years, such as Stoke who are backed by Peter Coates’ family owners of the online gambling company bet365, have invested £43m in Stoke City while US private equity investor Ellis Short has ploughed in £60m+ into Sunderland

Sunderland’s Cash injection and Everton’s non spend has seen them narrow the points gap with the Blues by 20 points in the last 2 seasons.

As youth academies are not in scope here, there is nothing to stop Abramovich/Mansour doubling the spend on their scouting network and academies and blowing clubs like ours of the water to secure the top young kids
The move will benefit clubs who can generate huge income from marketing ventures, sponsorship deals – the stadium is crucial here – we certainly can’t compete stadium wise – we get £900k revenue per game whilst Arsenal/Man Utd generate treble this – thats a £250m disadvantage over 5 seasons.

Conclusion

In the short-medium term the Blues will continue to be adrift from the top places as top clubs with finance continue to strengthen while they can still make losses. The legislation should mean that in the long term there is more of a chance of use competing at the top table of the divison and potentially Europe, replacing the current scenario where even the more optimistic Blues know 6-7^th place is as good as its going to get.