Is Financial Fair Play really fair for all?
The 2011/12 football season saw UEFA introduce the now controversial Financial Fair Play Regulations (FFP). Upon its inauguration, Michel Platini, President of UEFA, enthused “we don’t want to kill or hurt the clubs; on the contrary, we want to help them in the market”. 3 years later, the time has come to assess whether FFP has been in fact been in football’s best interests. UEFA implemented the FFP regulations in reaction to the plight of several clubs spending above their means, and consequently endangering their future survival.
One notable example is that of Leeds United. Under the leadership of Chairman Peter Risdale, Leeds spent heavily following the turn of the millennium, on the premise that they would qualify for the Champions League. They aimed to recoup their significant expenditure in the ever-rising Champions League TV and sponsorship deals.
However, in back to back seasons, Leeds narrowly missed out on Champions League qualification. Floundering in unpaid debts and loans, Leeds had no choice but to sell off their prize assets, including the promising centre back partnership of Jonathan Woodgate and Rio Ferdinand. A decade has now passed since Leeds United were last seen in the Premier League.
By limiting each club’s losses, FFP seeks to ensure that clubs do not mirror Leeds and overspend to such an extent that their survival is called into jeopardy. Financial responsibility is effectively written into the laws of the game. The debts are controlled by imposing a limit of £105M worth of net loss every 3 years. Should a club run a debt larger than this figure, sanctions include fines, financial restrictions, and transfer embargos.
On top of assisting with financial responsibility, FFP has a secondary function of restricting unfair financial disparities between clubs. Prior to FFP’s implementation, the likes of Abramovich at Chelsea, and Sheikh Mansour at Manchester City, had been able to inject excessive amounts of funds into their clubs, hence preventing fair competition between clubs.
Teams on tight budgets such as Everton, West Brom, and Fulham (during their Premier League tenure), have been unable to compete with the rich elite. In limiting losses, FFP prevents owners from funding extravagant transfers from their back pocket, instead limiting teams to the finances generated themselves.
FFP seeks to ensure that clubs do not mirror Leeds and overspend to such an extent that their survival is called into jeopardy
However, rather than creating a more level playing field, critics argue that FFP has succeeded in doing quite the opposite. Some clubs earn significantly more than others. For example, in 2013 Chelsea achieved a turnover of £255.8M, in comparison to West Brom’s £69.7M. When certain teams have considerably larger income than others, this gives them more leeway to spend heavily on transfer fees and other expenditures without exceeding the loss limit.
Moreover, while teams such as West Brom cannot compete financially with the likes of Chelsea, nor can the owners inject large sums of money into the club without risking surpassing the loss limit. This effectively outlaws financial competition between the bigger, and smaller teams.
During the course of the 2014 transfer window, Southampton clearly highlighted this issue. After finishing the 2013/14 season in 8th place, with their highest ever Premier League points total, they appeared to be gaining ground on the traditional ‘top 7’. However, unable to compete financially with the top 7, they began their summer by selling 5 first team players, and losing their manager.
The sale of Luke Shaw in particular, arguably, was assisted by FFP. Having received a bid of £27M from Manchester United for the young left back, Southampton were in no position to reject the offer. £27M, for a club such as Southampton, is simply too large to refuse.
Perhaps without the FFP regulations, Southampton could have retained Luke Shaw over the summer, as well as the likes of Dejan Lovren, Adam Lallana, and Calum Chambers, all sold to ‘bigger’ teams this year. FFP entails that Manchester United will have considerably more spending power than teams than Southampton, and hence will be able to poach their players at will. Southampton themselves are in no position to bid £27M for players; the top teams are given the pick of the bunch.
Moreover, on top of transfer fees, bigger teams can afford to pay substantially higher wages than those with a more humble reputation, owing to their greater revenue. This furthers the difficulty that smaller clubs face in retaining their best players, when competing with clubs who can far surpass their maximum wage boundary.
£27M, for a club such as Southampton, is simply too large to refuse
However, while FFP may have had a part to play in the growth of the divide between the Premier League’s elite, and everyone else, the positives of FFP must be acknowledged.
As previously discussed, FFP aims to reduce the amount of clubs spending over and above their realistic means. In the 3 years since FFP was introduced in August 2011, the Premier League down to the Football Conference have seen 5 clubs enter administration. In the 3 years prior to FFP’s inauguration, 12 clubs entered administration. This represents a success for FFP. English football is finally starting to look financially healthier after a concerning period in which 8 clubs entered administration in 2009 alone.
Nevertheless, the growing chasm between England’s best clubs and the rest of the league appears to pose a real problem for FFP. Harry Redknapp recently spoke out about the injustice of smaller clubs, such as his own QPR, being prevented from spending to the extent of the elite. But perhaps the issue lies deeper than FFP.
Clubs at the top of the league generate far more revenue than those further down, which is what allows those at the top to consequently spend more. Perhaps the source of this inflated revenue is the real menace, as opposed to FFP itself. If all teams earned the same, or similar amounts of revenue, FFP would be successful in giving all teams a financial level playing field. This, however, is not the case.
Primarily, inflated TV and sponsorship deals provide the elite with funds inconceivable to those further down the league. For example, Chevrolet are paying Manchester United £45M each year in order to be their shirt sponsor. In stark contrast, Burnley are being paid a measly 900K this season for the same right. Furthermore, Manchester United pocketed approximately £35M last season through the televisation of their Champions League matches; money which, of course, is unavailable to the majority of the Premier League.
Considering the positive impact FFP has had on the very survival of many English football teams, it would be foolish to suggest that FFP has been a complete failure. However, we cannot ignore the disparity created between the spending power of those at the top, and the bottom, of the Premier League. This disparity, though, is not the sole result of FFP. It would be lazy to use FFP as a scapegoat for the gulf between the top and bottom of the Premier League. Without inflated TV and sponsorship deals, this issue would be far less significant.
Thus, before jumping on the anti-FFP bandwagon, it may be worth considering the impact of these deals, and whether we can do anything to suppress them.
Comments (1)
There is another regulation that is unfair, and that is the issue of what might be called apprentice players. Clubs such as West Brom and Southampton run very good academies that gives young players the chance to have professional training at the same time having their normal education. Just when they are coming of age and are showing signs of becoming top class players, they can be snapped up by the big clubs for a max £300,000. Mr Peace when Chairman of WBA did consider closing their academy for that very reason, over a player Chelsea signed from the academy. It did become a legal case, which of course the big club won.