Can Someone Explain The Financial Fair Play Rules - And How It Impacts Us

[Gemmel]

Does anyone know the ins and outs of this and when it comes into play?

 

Saints seem to be heading the group of dissenters, which implies we (The club) see it as a bad thing, but I have no real understanding of how it works etc.

[Saint Garrett]

I read that we voted against it because if clubs cant run their club in a manor in which they won't go into admin then that's their own fault.

 

I think we can spend but once your wage bill gets to a certain level it can only be increased by a few million a year or something.

 

Calling MLG to the main forum.....

 

http://www.cartilagefreecaptain.com/2013/4/11/4212852/financial-fair-play-english-premier-league-UEFA-Scudamore

[beatlesaint]

No idea. I thought i heard during commentary on a Sky game during the week that the matter was heading for the Courts and might not come to anything in the end......or did i dream that ?

[The9]

No idea. I thought i heard during commentary on a Sky game during the week that the matter was heading for the Courts and might not come to anything in the end......or did i dream that ?

 

UEFA's FFP rules are being challenged by the Bosman lawyer, that only affects the ability to play in UEFA competitions. I *think* as the Prem has its own regulations, driven by UEFA's move and of course self-interest in keeping the profit and not giving it to players and agents, and they won't necessarily get rid of them if the UEFA rules are shown to be anti-competitive.

[The9]

We voted against the FFP rules because it appears Cortese's plan A is to spend shetloads of Liebherr money quickly and that's easier to do when there are no limits on wages as a percentage of turnover and suchlike. We already did this relatively speaking in L1 and, to a lesser extent, the Championship.

 

The stuff he said about clubs choosing to manage themselves sounds like free-market rhetoric from a club with new money, but it's a reasonable point that clubs should be able to get a leg up like Man City and Chelsea have via financial doping and not have the ladder pulled away so others can't do the same. There was a similar discussion about Dave Whelan last week, they overspent to get to the Prem, then he tried to get a Prem 2 started to keep Wigan up there, and supported the FFP rules once he'd already used their absence to his club's benefit.

 

It does of course leave the ability for clubs to "do a Pompey" and spend money they don't have in a quest for the top, before burning out and suffering the consequences, but the argument is that "at least anyone can do that if they want to".

 

But, no, I can't explain the rules.

Edited 20 May, 2013 by The9

[stevegrant]

No idea. I thought i heard during commentary on a Sky game during the week that the matter was heading for the Courts and might not come to anything in the end......or did i dream that ?

That's the UEFA version of it, which has already seen Malaga banned from European competition next season. They're taking the ban to the Court of Arbitration for Sport, while a group of European agents are hoping to take the overall concept to court because they believe the effect of FFP regulations will be to restrict their players' (and, as a direct result, their own) earning potential.

 

Clubs are allowed to make a cumulative loss of £105m over the first three-year reporting period (starting from 2013/14 through to 2015/16), which for most clubs won't be too prohibitive. In fact, using the operating profit/loss figures from 2011/12, only 4 clubs would be in trouble if that season's figures were replicated over the following three years: Aston Villa, Chelsea, Liverpool and Manchester City.

 

 

There are also various things a club is allowed to spend money on which get disregarded when it comes to calculating their FFP compliance. For example, investment in facilities (like, say, a full renovation of the club's training ground) and any debt incurred as a result won't be affected - although that sort of thing wouldn't appear on the profit and loss account anyway.

 

The other key thing is the club's wage bill, and this is where we have a bit of a free pass at the moment. Clubs whose annual wage bill is £56m or more can only increase that wage bill by a limited amount per year over the next 3 years, and that amount is £4m per year (£12m in total, as I think clubs' compliance is only measured over three-year periods, not individual years to allow for natural fluctuations). For clubs whose wage bill is less than £56m, Saints of course included here, they can do as they please with their wage bill until such time as they reach the £56m threshold. However, this limit comes with a MASSIVE caveat. Clubs whose wage bill is above the threshold CAN increase their wage bill by more than the £12m over three years if that increase is covered by an increase in commercial and/or sponsorship revenue. Hence why you've probably seen bits in the news in the last year or two about Man United signing all sorts of "minor" sponsorship deals. It's all with a view to FFP compliance.

 

Of course, it's important to remember that transfer spending isn't immediately accounted for when it comes to the profit and loss account. The amount paid for a player is divided equally over the duration of the player's contract, so to use an obvious example, Gastón Ramírez cost a reported £12.6m and signed a 4-year contract in August, but the payment of £12.6m won't be recorded in the 2012/13 accounts - only a quarter of that amount will be shown, with the rest accounted for equally over the following three years (unless he is sold or signs a new contract in the intervening period). Clubs like Manchester City and Chelsea, who have spent a fortune on transfer fees in recent years, will find they're still effectively paying for those players in the next few seasons, so they'll probably be keen to operate with a significantly smaller squad than they have been used to, as the revenue from transfer sales is accounted for immediately, so offsets the money spent years ago.

[Gemmel]

Cheers Steve

[Matthew Le God]

Calling MLG to the main forum.

 

No need, Steve Grant did a good job.

[buctootim]

That's the UEFA version of it, which has already seen Malaga banned from European competition next season. They're taking the ban to the Court of Arbitration for Sport, while a group of European agents are hoping to take the overall concept to court because they believe the effect of FFP regulations will be to restrict their players' (and, as a direct result, their own) earning potential.

 

Clubs are allowed to make a cumulative loss of £105m over the first three-year reporting period (starting from 2013/14 through to 2015/16), which for most clubs won't be too prohibitive. In fact, using the operating profit/loss figures from 2011/12, only 4 clubs would be in trouble if that season's figures were replicated over the following three years: Aston Villa, Chelsea, Liverpool and Manchester City.

 

 

There are also various things a club is allowed to spend money on which get disregarded when it comes to calculating their FFP compliance. For example, investment in facilities (like, say, a full renovation of the club's training ground) and any debt incurred as a result won't be affected - although that sort of thing wouldn't appear on the profit and loss account anyway.

 

The other key thing is the club's wage bill, and this is where we have a bit of a free pass at the moment. Clubs whose annual wage bill is £56m or more can only increase that wage bill by a limited amount per year over the next 3 years, and that amount is £4m per year (£12m in total, as I think clubs' compliance is only measured over three-year periods, not individual years to allow for natural fluctuations). For clubs whose wage bill is less than £56m, Saints of course included here, they can do as they please with their wage bill until such time as they reach the £56m threshold. However, this limit comes with a MASSIVE caveat. Clubs whose wage bill is above the threshold CAN increase their wage bill by more than the £12m over three years if that increase is covered by an increase in commercial and/or sponsorship revenue. Hence why you've probably seen bits in the news in the last year or two about Man United signing all sorts of "minor" sponsorship deals. It's all with a view to FFP compliance.

 

Of course, it's important to remember that transfer spending isn't immediately accounted for when it comes to the profit and loss account. The amount paid for a player is divided equally over the duration of the player's contract, so to use an obvious example, Gastón Ramírez cost a reported £12.6m and signed a 4-year contract in August, but the payment of £12.6m won't be recorded in the 2012/13 accounts - only a quarter of that amount will be shown, with the rest accounted for equally over the following three years (unless he is sold or signs a new contract in the intervening period). Clubs like Manchester City and Chelsea, who have spent a fortune on transfer fees in recent years, will find they're still effectively paying for those players in the next few seasons, so they'll probably be keen to operate with a significantly smaller squad than they have been used to, as the revenue from transfer sales is accounted for immediately, so offsets the money spent years ago.

 

So basically its pretty toothless and will have limited impact then?

[stevegrant]

So basically its pretty toothless and will have limited impact then?

I expect so - the Premier League had to at least make it look like they were vaguely interested. As a result, I'm not entirely sure why Cortese was against the regulations when they're not going to come close to affecting us.

 

The UEFA ones are much more stringent, so the likes of Chelsea and Man City (less so Arsenal and Man United as their spending is largely organic) will have a bit of a job on their hands to meet the requirements. As I said, they've banned Malaga from next season's competitions already because of financial irregularities, but the key test will be whether Platini goes after someone like Man City or PSG.

[The9]

I expect so - the Premier League had to at least make it look like they were vaguely interested. As a result, I'm not entirely sure why Cortese was against the regulations when they're not going to come close to affecting us.

 

The UEFA ones are much more stringent, so the likes of Chelsea and Man City (less so Arsenal and Man United as their spending is largely organic) will have a bit of a job on their hands to meet the requirements. As I said, they've banned Malaga from next season's competitions already because of financial irregularities, but the key test will be whether Platini goes after someone like Man City or PSG.

 

You have to assume Cortese was against it either because of some deep-seated political feeling about industry regulation, because he feels clubs should be free to throw cash at it and burn up into flames if they wish, or because his plans involve the club getting heftily above that wage limit. All the signs of the last week involve us having more cash to throw at it - though whether that is still intended to be sustainable or not is open to question - we took a loss to get to the Prem, will we try the same approach to jump the top 6 ?

 

We certainly aren't going to maximise our merchandising potential by only selling kit in two stores in Southampton for instance, but the rumours are that that's exactly what we're going to continue to do under adidas... so something doesn't quite add up.

[buctootim]

I expect so - the Premier League had to at least make it look like they were vaguely interested. As a result, I'm not entirely sure why Cortese was against the regulations when they're not going to come close to affecting us.

 

The UEFA ones are much more stringent, so the likes of Chelsea and Man City (less so Arsenal and Man United as their spending is largely organic) will have a bit of a job on their hands to meet the requirements. As I said, they've banned Malaga from next season's competitions already because of financial irregularities, but the key test will be whether Platini goes after someone like Man City or PSG.

 

Interesting thanks. So basically the rules for the PL are laxer than for UEFA? If that is the case won't it mean that the regular qualifiers for Europe (Man U, Chelsea etc) have to operate to more stringent rules than the rest of the PL, or face being denied access to the CL? So potentially the UEFA rules could still have a levelling effect, weakening the top teams but leaving the non Europe qualifiers untouched.

Edited 20 May, 2013 by buctootim

[stevegrant]

Interesting thanks. So basically the rules for the PL are laxer than for UEFA? If that is the case won't it mean that the regular qualifiers for Europe (Man U, Chelsea etc) have to operate to more stringent rules than the rest of the PL, or face being denied access to the CL? It could have a levelling effect.

It could, but a lot depends on how tough UEFA are, or if they're even allowed to impose these restrictions (hence the legal challenge), and of course we won't have a clue how tough they're going to be until a big club's numbers are too far in the red. It's easy enough for them to come down hard on a club like Malaga, it would be a very different situation for Platini to take a swing at Chelsea, for example.

[trousers]

Can an owner 'sponsor' something at their own club to offset wages? For example, could Katherina Liebherr sponsor one of the urinals in the gents under the chapel stand for £30m?

[Batman]

It could, but a lot depends on how tough UEFA are, or if they're even allowed to impose these restrictions (hence the legal challenge), and of course we won't have a clue how tough they're going to be until a big club's numbers are too far in the red. It's easy enough for them to come down hard on a club like Malaga, it would be a very different situation for Platini to take a swing at Chelsea, for example.

 

PSG will be interesting. Seeing that is Platinis club. He is well in with the Qataris, backed their World cup bid and his son is on the board at PSG

[Zurichsaint]

Can an owner 'sponsor' something at their own club to offset wages? For example, could Katherina Liebherr sponsor one of the urinals in the gents under the chapel stand for £30m?

 

It is supposed to be sponsorship that is 'commercially competitive'. So the urinal sponsorship shouldn't be more than you would realistically expect another firm to pay.

This will be one of the big challenges to see how tough UEFA are on the topic. A good example is Emirates sponsoring PSG. If UEFA deem the sponsorship deal to be excessive, they can discount those revenues from the calculation.

Can't see Platini having the balls, to be honest to you, especially when it comes to PSG...

[kwsaint]

I actually agree with it really. Especially at this financial time, when clubs go under a small companies don't get paid, it's unfair. St John's Ambulance didn't get paid by the skates when they went under. This scheme is to stop that happening.

[CB Saint]

Now the french clubs are dropping money here there and everywhere, I wonder where Platini is now...