UEFA Financial Fair Play

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The new UEFA Financial Fair Play regulations might seem a bit complicated to the average football fan, but if you’re able to read between the lines, UEFA’s objective is pretty simple: “Let’s not let what happened to the global economy, happen to football”.

Indeed it seems the UEFA Financial Fair Play regulations are less concerned with financial fair play and are in fact a lot more concerned with European football’s financial stability. The fair play element comes in almost collaterally. Let’s have a look at the main points.

Every year until the 2015-16 season, each club will be allowed to suffer a financial loss of up to £45 million, as long as it is covered by equity contributions, otherwise the limit is no more than £5 million. This means that unless the club’s owner or any other generous contributors are willing to donate £45 million to the club, the club will not be allowed to spend anymore than £5 million on transfers. It is indeed important to note that only the money spent on transfers will be counted here, not wages, training facilities or youth academy costs.

From the 2015-16 season onwards, that number will be reduced to £30 million per season, and as of next year (2013-14), UEFA has warned that they will start imposing very serious sanctions on any club that fails to meet these regulations.

Depending on the infraction and how long it is taking the club to make amends, sanctions could take any of the following forms: the club may be reprimanded or given an official warning; the club may be fined; the club may have competition points taken away from their total; the club may have revenues (prize money) from UEFA competitions withheld; the club may be prohibited from registering new players for UEFA competitions and have restrictions imposed upon their current number of players allowed to register; the club may be disqualified from a competition in progress or even excluded from future competitions.

So what impact will this have on clubs? Well first and foremost, it will avoid undesirable financial disasters like when Portsmouth F.C. went into administration leaving many of its creditors, players and staff unpaid for several months in a row.

Secondly, the financial fair play regulations will hopefully put a cap on the ridiculous inflation rates in the transfer windows. Inflation has primarily been the fault of billionaire investors upsetting the standard values of players by pumping money into clubs, allowing managers to buy any star player they fancy without the club needing to actually generate money on its own. This makes it very hard for other clubs to place competitive bids.

Once UEFA starts threatening clubs with serious sanctions over the implementation of these rules, clubs will still be allowed to make outrageous bids for players, but they will need to show that their revenue (from tickets, TV rights, winnings, sponsorships etc) in addition to some equity contributions balance it all out.

So will it work? And is it fair for these rules to come into play now that clubs like Manchester City have already spent the last five years spending half a billion pounds in transfers? It does feel like clubs that have been spending outrageous amounts of money have just been oddly handed a guarantee that no one else will be allowed to do the same in years to come. But it’s also important to remember that this is a long term plan, and that if a club is used to buying its talent, it will probably be a lot harder for it to produce its own. Whereas other clubs like Arsenal F.C. who are at the opposite end of the scale in terms of balancing their books, are famous for their home-grown talent.

One thing is for certain, it won’t take long before much of the playing field levels itself out. Much, but not all of course. Indeed there is some doubt as to whether the biggest european clubs (Real Madrid, Barcelona, Manchester United, Bayern Munich, Inter, A.C. Milan etc) who make a lot of their money by virtue of being big and recognisable on an international stage will ever stop bringing in a significantly higher amount of revenue thanks to all the years of permitted large equity contributions. These clubs can gather crowds (and thereby revenue) simply by turning up somewhere. So do they need UEFA’s approval? Or is it UEFA that needs them? It’s hard to tell how seriously UEFA’s sanctions would be taken.

The ‘big’ clubs are unlikely to form any sort of cartel but they have already started looking for ways around the regulations to discretely inject more money into their clubs through loopholes such as Manchester City’s Etihad sponsorship deal and stadium buyout.

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