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Uefa to Curb Club Spending

By Tim Luke :  03/06/2010 :  Comments (22) :
I’ve noticed that hardly anyone on TW has discussed the new curbs that Uefa will be imposing on European football clubs to curb the excessive spending and to end the era of so-called "financial doping."

In summary, the new rules aim to set limits on wealthy club owners subsidizing losses incurred by paying high transfer fees and salaries. Under Uefa's new rules, owners will be allowed to cover losses of up to a maximum of $55 million over an initial three-year period starting in 2012. In the three years from 2015, just $37 million in losses can be covered. Bail-outs would only be allowed with "committed funds" of capital and not by borrowing. Clubs without a wealthy patron would be allowed $6.1 million in losses over three years.

To encourage clubs to develop their own players, Uefa has set no limits on clubs' investment in youth academies, training facilities and stadiums. The financial accounts of clubs will be examined by a Uefa panel of financial and legal experts, chaired by former Belgium Prime Minister Jean-Luc Dehaene.

What all this means is that clubs in UK and across Europe will be re-assessing their financial positions now in preparation for the move towards the new rules by 2012. So for clubs re-negotiating new player contracts, as we are with Pienaar and Arteta, will need to think through very carefully whether they can commit wages that will bear scrutiny by Uefa come 2012 onwards.

I think Everton will be on firm ground as we’ve had to be prudent with our transfer spending and wage structure since we don’t have a “sugar-daddy”. However, for clubs like Chelsea, Man Utd and Man City, they will need to totally re-assess their wage structure and develop a wage bell-curve for their entire squad, paying their players based on their importance/value to the team. This will mean that not everyone in their first eleven will get an inflated salary.

So, if a club like Liverpool wants to have a 40+ man squad, they will have to make cuts across the board in order to keep their wages within the bell-curve. That means, for example, they may only be able to have one £80k a week player, five on £50k a week, fifteen on £25k a week players, and the rest will be on below £15k a week. Their buying and selling will have to be predicated on balancing this bell-curve.

So, moving forward, clubs will have to live within their earning means, and not go hand-in-glove to their rich benefactors or to their ever compliant banks for funding that ‘must-have’ player. How does all this affect Everton?

Well, for one, players like Pienaar and Arteta may find that there will be fewer clubs willing to put them in their top tier wage structure as these clubs may already have their full suite of players in this tier. So the £60k a week that Everton is offering them will now look even more attractive to them.

Secondly, clubs like Chelsea and Man City who may be looking to buy up rival team players, not for their first team, but merely to weaken their rivals, may have to think again as doing so would push their wage structure over of the curve and bring them to the attention of the Uefa financial and legal panel. So no more paying over the odds for a Scott Parker or Joleon Lescott, giving them a huge salary, and then leaving them on the bench. This will give teams like Everton and Aston Villa a better hold on their top players, as well as on their up-and-coming young players.

With the new financial guidelines in place, I think the new battleground will be in youth development. And here is where teams like Everton could benefit. We have a good scouting network, excellent youth training facilities, and a track record of blooding young talent early and giving them a run in the team. The latter will be something that clubs like Chelsea, Man Utd and Man City will find hard to do, given their need to have high profile players in their teams to keep their ‘instant-gratification’ fans happy.

If Chelsea, Man Utd and Man City start having teams like the rest (i.e. with a mix of top imports, good British pros, and up-and-coming youngsters), how different will they be from the Evertons, Aston Villas and Fulhams of this world? If they do go in this direction, then the levelling of the playing field that would result is certainly to be encouraged.

So the future, if not evidently brighter, is certainly looking more interesting for clubs like Everton.

Reader Comments

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Colin Potter
1   Posted 03/06/2010 at 14:44:29

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Thanks for that, Tim. I'm not very clued up when it comes to understanding money matters like this, but it looks likely that there maybe some financial sanity creeping back into football, which can only be good for the game. Good article.
Dave Smith
2   Posted 03/06/2010 at 14:49:17

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Very well put across. And if it works as you say it will, then it is certainly a step in the right direction.

But how long before one of the clubs directly affected by this new rule finds 'another way'? Money talks, simple.

Just a thought but, I wonder if this may prove the catalyst to the 'European Super League' becoming a reality?
Alan Clarke
3   Posted 03/06/2010 at 14:54:59

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I think overall it's a good thing but once it stabilises you'll still see the same structure to the league. Man U, Liverpool and Arsenal all generate income from ticket sales, shirt sales and other merchandise that outstrips every other club in the league so they will still be able to offer bigger wages and they will still be able to attract the top players. Likewise we'll be able to offer bigger contracts to players in comparison to the likes of Wigan and Fulham. So the status quo will be maintained. I also think you will find those top clubs will start to fight for their own TV rights if they are restricted to pretty much spending what they earn meaning you'll get the same situation as Spain.

It's good that the fiasco at Portsmouth won't be repeated but I don't think it will suddenly put Everton in a position where they can win the league.
Timothy Sebastian
4   Posted 03/06/2010 at 15:16:09

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Alan, I beg to differ. I think the new UEFA rules will level the playing field and probably take us back to how things were in the 1960s and 70s when any one of 8 to 9 teams had a chance of winning the league at the start of each season. The top 8 for this new era will be Chelsea, Man Utd, Man City, Everton, Liverpool, Aston Villa, Arsenal and Spurs. I agree that most of the big players will probably end up playing for these top 8 teams, but there will also be a chance of a dark horse from outside this top 8 to emerge from time to time. This is because with the new rules, top teams won't be able to hog all the big name players. So a good number of them will end up playing for the teams outside the top 8, and this will make these teams more competitive.

If you recall in the 60s and 70s, every team outside the top 8 had their big name players. For instance, Terry Paine at Southampton, Trevor Brooking at West Ham, Derek Dougan at Wolves, Tony Currie at Sheff Utd, etc. So the bottom line is that the new rules will broaden the group of teams capable of winning the league, and get rid of the current unfair situation where only two teams — Man Utd and Chelsea — have a realistic chance of getting the top prize.

Ciarán McGlone
5   Posted 03/06/2010 at 15:34:37

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More holes than swiss cheese.
Timothy Sebastian
6   Posted 03/06/2010 at 15:48:42

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Care to elaborate, Ciaran?
Ian Stewart
7   Posted 03/06/2010 at 15:56:15

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I'm not so sure these rules will accomplish much. I've not studied them in any detail. However, the simple fact that no clubs are complaining about these proposals, Chelsea / ManCity with mega rich owners or the rs / Manure with vast loans to service, indicates to me, that they will find ways around it.
Jeff Magee
8   Posted 03/06/2010 at 16:13:22

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Check this article out - if Martin Samuel is to be believed its just another scam to help the French and won't affect our sugar daddied clubs.

http://www.dailymail.co.uk/sport/article-1282674/MARTIN-SAMUEL-Take-running-jump-Michel-Platini--right-plan.html
Ciarán McGlone
9   Posted 03/06/2010 at 16:18:31

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For a start they're pissing about with company law, EU law and contract law Timothy...

I'd be willing to bet that this finds itself in the high court pretty swifty, quickly followed by the European courts of justice...
Jay Harris
10   Posted 03/06/2010 at 16:43:43

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Ciaran;

Not only that but what, for example, would stop a club paying a huge signing-on fee payable to the agent over the period of the contract?

You were spot on with the Swiss cheese analogy. We really need to have control over agents and all aspects of finance — not just one club's "theatrical accounts".
Dennis Stevens
11   Posted 03/06/2010 at 17:47:42

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Interesting link, Jeff. I think the piece further down about the lure of foreign shores, especially Spain, for the very highest earning players in the Prem may be more significant. The tax situation in the UK could prove to be the greatest leveller for the Premier League in the long run.
Michael Brien
12   Posted 03/06/2010 at 19:08:20

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A very interesting article indeed, Tim, if it ends the dominance of the mega rich clubs and means that there will be 8 or 9 serious contenders for trophies then it will be a good thing.

I can't help feeling though that Uefa have been part of the problem themselves. They kept changing the qualification rules for the Champions League, until we have the present far from ideal situation. The title "Champions League" is at best a joke and at worst an insult to the spirit of the game. Uefa have developed the Champions League (if developed is the right word) until the actual competition itself has become one of the main sources of income for these mega rich clubs. Indeed the Champions League, with its associated income streams of TV rights etc has been one of the chief means by which the rich clubs have been able to get even richer.

If Uefa have a "road to Damascus" like conversion and are trying to work for the overall good of the game then that is good news. Personally I think they have much to answer for and I still have some doubts as to their sincerity.

Alan Kirwin
13   Posted 03/06/2010 at 19:53:19

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Long overdue and I, and others, have lauded Platini's smart manouvres many times. I think it was Wenger who labelled what Chelsea and City have done as financial doping. It's a gross distortion, not only of the sporting model but of the business model.

No business would ever be allowed to operate as Chelsea and City have done, or indeed as Liverpool are now doing. The normal recourse is to be acquired by another, more successful & efficient company, but that can't happen in sport (another fracture of reality).

It breaks no law whatsoever. Uefa are simply saying that clubs will have to operate as viable businesses in order to compete in their closed competition. It will not accept clubs that cannot pay their way. Uefa have the legal authority, whilst I don't think the moral authority would ever be in doubt.

It ticks all the boxes for common sense, sporting fairness, competitiveness, commercial viability and giving football back to the supporters, at least in part.

It is unfortunate that some see Uefa as a problem, and even Platini (he being French) accused of being anti-English. The real problem is the ridiculous, greedy, self-agrandising and morally detached crap that has permeated the EPL, Scudamore and some of the bigger clubs in the past 15 years.

It's overdue and very welcome. I applaud it.
Michael Parkes
14   Posted 03/06/2010 at 22:40:40

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Is this the reason for charging £80 for the new kit for a 5-year-old and £50 for a 4-month-old?
Steve Pugh
15   Posted 03/06/2010 at 22:47:04

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Apparently there is an executive box at Eastlands that costs £10 million pounds per game, the sheik has hired it for his cousin for every game so that they are well within their means.

And Ciaran, football has been operating outside of regular business laws for decades, why do you think this will be any different.
Ciarán McGlone
16   Posted 03/06/2010 at 23:43:21

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Uefa hae no legal authority whatsoever Alan - I don't know where you get that crazy idea from. What they do have is organisational autonomy... but I think you'll find there's an entire pillar of community law based on compeititon... I'm sure once we see the fine detail of these plans there'll be significant problems with it... just as there was with the much heralded 6 + 5 rule, before the European Commission told them to grow up.

But then again, I suppose he could bribe the big boys to keep it from going to court.

You seem to think Platini is some sort of saviour; I'm not so sure.
David Hallwood
17   Posted 04/06/2010 at 01:04:36

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Ciarán McGlone (#16): You're right about Uefa having no legal authority; however, like all organisations, it can expell members for transgressing the rules. Obviously it would need to grow a large pair of balls to take such drastic action, and it can also take action if the million pound executive box or the £50k kit or any other body swerves that might be thrown.

All of this is highly unlikely, but if any more football clubs go belly-up, especially a high profile one, there would be a lot more appetite to make the new rules work.

Eric Myles
18   Posted 04/06/2010 at 07:28:44

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I think Platini means well but his hands are tied by the fact that, if the super rich (aka super in debt) clubs don't like his new rules, then they'll just take their ball and set up a new European Super League outside of Uefa.

So he has to be seen to be doing something while in fact maintaining the status quo.

Michael Brien
19   Posted 04/06/2010 at 08:25:01

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The richer clubs have always been able to use the threat of a breakaway European Super League. But does anyone think this is a possibility? Manchester United v Porto may seem a great crowd puller – but they can't all be trophy contenders can they? Let's see if a mid-table European Super League game would draw the crowds and the TV audience.

These super rich clubs do need the rest, it's good to see Uefa seemingly trying to do something, but they need to accept their share of the responsibility as well. They have created the cash cow that is the Champions League – in doing so, they created one of the main reasons why the rich clubs have got richer over the last 15 years.

Over the last few seasons, I have to admit I have found the same old faces in the Champions League to be boring. Yes Chelsea v Barcelona is a special match – but when it's happening every season, it loses it's attraction. I like chocolate fudge cake – but if I have every day I would soon get sick of it.

Let them try and start a Super League Eric. I don't think it would last and deep down I think they know it. But if this is a sign of Uefa standing up to these super rich clubs then it's about time – let's hope that it is genuine and not Platini just acting for the sake of image.

Stewart Littler
20   Posted 04/06/2010 at 11:21:16

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Ciaran, whilst you may be right that Uefa have no legal authority, they do have an awful lot of power. For instance, there is no law (to my mind anyway) that would prevent them excluding clubs from competing in Uefa competitions if they fail to observe Uefa rules.

Read the F1/FIA situation, where the big boys (Ferrari, McClaren) are less than happy at the raft of recent changes, but can do little about it — 3 years ago, Ferrari would have put Alonso in the spare car after he mangled his Ferrari at Monaco, enabling him to qualify and potentially better his eventual race position — they couldn't and he had to start from the pits.

They faced a simple choice: comply or leave the FIA, and if that same choice is presented to the big boys, we will either see compliance or a creation of some sort of European Super League; either is better than what we have now.

Ciarán McGlone
21   Posted 04/06/2010 at 12:22:36

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Stewart,

That's a piont I made in my post — they have 'organisational autonomy'... Doesn't mean they have to be the only European football organisation.

It also doesn't mean they can apply whatever rules they like — such rules usually have to abide by the law of the land.
Matthew Lovekin
22   Posted 07/06/2010 at 13:18:47

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I agree with the idea in principle, but every angle needs to be covered.

It could just make the big clubs richer. For example if Man Utd have an annual income of say £270m, they can in theory spend £270m, whether it be on transfers, wages or anything else. If Everton's income is say £70m, we can only spend £70m on everything including transfer fees, wages, etc.

Just a point to make; it takes away the risk of a big club like Liverpool falling behind a team like Man City who may gamble a bit more to overtake a flagging big side. The big clubs will forever stay big if the others can't take a risk every now and then.

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