EPL: Who benefits from Financial Fair Play?

With the powers of Financial Fair Play being gradually implemented by UEFA over the next 3 years, and the Premier League seriously considering implementing one of their own, the financial health of your Premier League team could become almost as important as its results. UEFA currently have the ability to temporarily prevent teams being paid tournament winnings, and will soon have the power to actually remove teams that consistently operate at a financial loss from the league.  In short, the FFP stipulates that clubs cannot spend more than they earn.  It is not a salary cap structure, whereby all clubs would be capped at the same figure; rather, it’s dependent on the individual financial position of each club.

A wealthy sheikh bought Manchester City a title

This was deemed necessary because, for the most part, football CEO’s are fans; they (quite rightly) value trophies above a balanced cheque book.  Last year alone saw Premier League clubs collectively lose £361million, in an attempt to keep pace with the top of the league, with only six clubs posting a profit,.  Whilst this can be great for fans, who want only to see their club be successful, it is a gamble.  Often, the only way to make a team substantially more competitive is to spend an obscene amount of money to bring in stars (like Manchester City) or to keep hold of established players (unlike Arsenal).  The best way for clubs without a wealthy sugar daddy to make this money is to win, or take out a substantial loan and hope the players brought in are enough to make a club win.  But if they’re not, the club can find itself in a far worse position than before.  Leeds United is a prime example of this.  Once a formidable club, threatening the “Big 4”, it gambled its way into the Champions League in the mid-90’s, before a succession of dodgy loans and poor form saw them not attain the lofty goals they had set themselves.  This left them with a smaller revenue and therefore, they were unable to afford the wage demands of their players, forcing them to sell cheaply and tumble out of the Premier League altogether.

Nobody wants to see their club following in the footsteps of Leeds, or more recently, Rangers in the Scottish League.  It is because of this that the majority of European clubs have praised the measures taken by UEFA. Many believe it is the step required to make football viable in the long-term and allow clubs to compete without having to go into debt.  However, nobody is entirely certain what effect it will have on individual clubs, or even how successful the measures will be at reducing spending.

The Premier League has long struggled under the burden of inequitable income distribution, with the richest

The brilliance of manager David Moyes has kept Everton competitively for a decade

“Big 4” clubs sharing the majority of the titles amongst themselves (although Manchester City, with it’s oil sheik money has recently forced its way in).  It was hoped that the FFP might limit the spending of the big clubs and allow the smaller clubs -the Everton’s, the Fulham’s- to have a proper shot at the title, or at least at top 4, rather than constantly setting goals like “mid-table” or the dreaded “avoid relegation”.

Recently, when the FA put the proposal of a domestic FFP to the clubs, only 2 clubs staunchly opposed it.  Manchester City, for obvious reasons, and, perhaps surprisingly, Everton.  Everton has never really been a heavy-hitter in the Premier League, and yet they have still been playing well above what would be expected of them.  For the most part, the Premier League ladder is very similar to a list of biggest to smallest spenders –except for Everton.  Based on their financial position, Everton should be constantly embroiled in a relegation battle, and yet more often than not, they find themselves mid-table.  This is due to David Moyes’ nous and ability to find cheap, quality players and squeeze every drop of talent out of them.  Despite this, Everton are still living beyond their means.  If FFP were implemented, Everton would have to reduce its costs significantly to comply, meaning it would likely drop down the table.  This shows how the FFP has the potential to actually widen the gap between the rich and poor clubs.

Eden Hazard was just one of Chelsea’s big off season signings

Whilst the FFP is designed to curb the spending of clubs above their means, it does nothing to successful clubs already operating with a profit.  Chelsea, for example, spent over £80 million in the last transfer period, yet due to the windfall that winning the Champions League brought, they still managed to comply with FFP.  Manchester City is perhaps the single club that stands to lose the most.  In 2012, Manchester City lost a record-breaking £197m –a sum that was completely bankrolled by Sheikh Mansour- and as such, has already begun experimenting with ways of rorting the system to ensure they can continue to be financially supported from abroad.  They recently signed an overly lucrative sponsorship deal with Etihad, with whom Sheikh Mansour has close ties, and it’s believed this may have merely been a way of the Sheikh increasing the profit margins of the club to allow for continued spending, despite FFP.

Any system that allows one club to spend £80million whilst punishing another for consistently selling more than it buys (Everton are forced to sell players each year to cover costs) cannot possibly make for a fairer competition.  So it comes down to a trade-off; would you rather see your club risk it all and strive for success, knowing that failure could mean losing your club altogether, or watch them wallowing year after year in, essentially, the same league position?

James Kolacz is a first year Bachelor of Science student at the University of Melbourne.

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2 thoughts on “EPL: Who benefits from Financial Fair Play?

  1. Slight problem in your comments about Everton, as Man U/Arsenal/Chelsea have huge turnovers £200m to £300m then Spurs/Man City/Lpool on over £100m then a bit of a gap to the rest. The rest seem to turnover £90m- £20m and guess what Everton are towards the top of this group which should suggest fighting for the European places.

    Just look at http://www.telegraph.co.uk/sport/football/competitions/premier-league/9255617/Revealed-the-financial-health-of-the-Premier-League-laid-bare.html. Everton finished where the should in terms of Income and Wages.

    However Everton have been/are badly run look at the the kitbag and JJB kit deals and look at the commercial income the raise. Bill Kenwright is an idiot, seems hes doing his best to out Billy Boswell the job David Moores did at Lpool

  2. In terms of income and wages, you’re right, but I was more referring to how accessible their cash is (sorry that I didn’t make that clear). Yes, they have a reasonably large turnover, but it’s insolvent cash, so they can’t really use it as they’d like, or even properly deal with their debts (providing i understand solvency right- i won’t lie, i’m not an economist).
    http://www.telegraph.co.uk/sport/football/competitions/premier-league/9255869/Exclusive-Why-our-solvency-index-is-the-best-indicator-of-the-current-health-of-the-Premier-League.html
    if you look at the table, you can see Everton’s down the bottom of the table with clubs that were struggling to avoid relegation, and man city who have the oil money to prop them up.
    But yeah, it does seem Everton are quite poorly run given the stats you linked. They probably are where they ought to be if they were run properly.
    Kenwright: “When David started I told him: ‘I’ll make you a promise, I’ve got no money but we’ll move heaven and earth to give you £5m a year.’ On average we give him £5.6m every year. Nine years that’s £45m we haven’t got. Add that to the overdraft [and] you can see what trouble we’re in.” (2011).
    They’ve improved slightly since then, but not a great deal. He also claimed that the £5.6m per year was in addition to their overdraft, which would imply a larger debt than what was in your link, and i think that’s where the majority of their cash is going. It means that they probably wouldn’t really be able to compete strongly with FFP because they couldn’t afford new transfers, higher wages etc.

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