Financial Fair Play or Financial Unfair Play?

Andy Osborne 02/06/2017  36 Comments  [Jump to last]

A comment I made on a recent post has got me thinking that the subject deserves an article in its own right.

The last game of the season has passed, the transfer window hasn't opened yet, but speculation is rife, rumours abound, and the traditional press are making a fortune in selling half-truths, rumours and innuendo.

Welcome to the off-season. I love it, but I also realise that 99% of it won't happen.

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Anyway, to my point: Financial Fair Play (FFP). I have researched, read and read again. I still can't work it out.

Many posters are complaining that we are not spending big on the marquee players we all know are wanted and needed... but what happens if it is not as simple as that?

From my (limited) understanding of FFP, a club has to make a profit, in order to buy. If there is no profit, a club must "sell to buy". So this raises a couple of interesting points.

1. How much profit did Everton make, and how much money can we spend without the need to sell?

TW posters have commented on the desire of Moshiri, his money and why aren't we offering big money to get big players? Maybe the reason why we are not able to offer £87 million for Griezmann is because we didn't make enough profit to allow us to do that, without breaking FFP rules. Maybe to offer the big money, we actually have to "sell" first?

2. If my understanding of FFP is correct (and I am not sure it is), then it shouldn't be called FFP, it should be called Financial Unfair Play (FUP).

It's a circular argument. If you make a big profit, you can spend more on big players, if you have big players your chance of winning titles is increased, and therefore you make bigger profits... so on and so forth.

Conversely, if you make small profits, you can't afford big players, your chances of winning titles is reduced, which means your chances of making big profits are reduced. The only way of breaking through, is to do a "Leicester". And even Leicester, didn't capitalise on doing a "Leicester".

Financial Unfair Play rules are exactly that, unfair. The big get bigger, the small/medium stay small/medium. How is that a level playing field?

I understand why FFP was introduced, to restrict the ability to "buy" a title. But the gene is out of the bottle. The choice is to let the "market" decide, and every team will be bought by a billionaire, or to create a structure where teams can compete fairly. I don't know what that looks like, and I am sure the various governing bodies don't know what that looks like either. But I am pretty sure some of my fellow TW posters will have the answer.

Anyway, all of the above may explain why Moshiri is not just throwing money at every £50 mil player, maybe he can't.

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Robin Cannon
1 Posted 02/06/2017 at 20:18:57
I think that's absolutely right.

FFP does also work to avoid a situation where teams go massively into debt to try and buy success; and I think that was part of the plan.

But it absolutely undermines any ability to get "into the club" by protecting the clubs that already have large revenues from competitors spending to catch up.

And there's a big loophole for clubs that spent a bunch prior to 2012-13.

You can increase your wage bill ٥m based on prior year; and any further increase beyond that is only allowed if the club can demonstrate a revenue increase.

Or... you can use 2012-13 as a baseline and have your salaries 㾿m higher than that baseline.

Which means if you were Manchester City and had a huge wage bill in 2012-13 listed as 𧶡m... inflated by counting Mancini's pay off as "wages"... hen you can have a wage bill of 𧵺m last season and scope to increase it to 𧶴m this season if you want. Meanwhile, Everton have a wage bill of 㿷m and scope to increase it to a maximum of 䀁m...

Will Mabon
2 Posted 02/06/2017 at 21:47:21
Andy, a right can of worms opened here!

I've done some reading on the subject in the past and came to the conclusion that it's hard to make or define precise conclusions! As Robin mentions above, one large effect of the terms and timing of its introduction was to protect the status quo, as given by this from UEFA's own website:

"There are large differences between the wealth of different clubs and countries, which predate and are irrespective of financial fair play. The aim of financial fair play is not to make all clubs equal in size and wealth, but to encourage clubs to build for success rather than continually seeking a 'quick fix'.

"Football clubs need an improved environment where investing in the future is better rewarded so that more clubs can be credible long-term investment prospects."

It all looks very two-tier. Interestingly, four areas of investment that can be excluded from the various calculations to positive effect are stadium, youth development, training facilities and community work... sounds familiar.

If anyone can write an article that can nail it all down in a concise and definitive manner that would give us as fans an accurate reference for the parameters on in and out transfer activity, they're a better man than me.

I guess somewhere there's a financial fair play calculation program into which the numbers could be entered. Accountants will have that but none had made in onto the 'net when I last searched.

Ian McDowell
3 Posted 02/06/2017 at 21:52:28
Financial Fair Play is a complete joke. I wonder how it would stand up in the supreme court. Football clubs are businesses now and I cannot see how it would stand up in court preventing a business from making significant investments for long term growth.
Will Mabon
4 Posted 02/06/2017 at 22:04:45
Ian, there have been challenges using European law in UEFA-related cases, anti-competitive etc. All a lot more messy with businesses (Clubs) being part of football associations.
Thomas Lennon
5 Posted 02/06/2017 at 23:05:28
Simples http://www.financialfairplay.co.uk/financial-fair-play-explained.php
Phillip Warrington
6 Posted 03/06/2017 at 01:50:45
This was set up to protect the big clubs and make sure teams like Everton will never be able to compete financially with the big teams of Europe. Financial Fair Play Barcelona players Neymar and Messi get found guilty and given suspended jail terms for cheating on transfer fees and hiding the true amount they are getting paid by the club.

So how financially unfair can you get but you wont see Barcelona banned from Europe... However, if it was an English or lesser club, you could guarantee there would be a significant penalty.

Andy Osborne
7 Posted 03/06/2017 at 07:01:05
Thomas (#5),

Thanks for the link. Maybe the reason we haven't spent any money yet, is because we are still trying to work out how much money we are allowed to spen !!

Sounds like if a club wants to "break" the glass ceiling, they have to increase profits in other ways that are not related to success on the pitch. So maybe we are trying to increase profits by developing youngsters to sell, and not bring them through into the first team – maybe that's why we are seeing a lot of young players linked with us.

Another way to dramatically increase profits would be to sell "10-year" season tickets, with full payment up front. That would spike the income, increase profit, and allow to us to spend, and then "hopefully" see the success on the pitch which would boost merchandise and sponsorship revenue.

It's a gamble, and I am not an accountant, so maybe there is a reason that we can't do that.

Phil Jeffries
8 Posted 03/06/2017 at 08:12:41
This is why Moshiri has made the ground move an immediate priority. Deadwood has been cut to free up wages, we have a new sponsor for the kit, and even for Finch Farm. Moshiri isn't a billionaire by accident and he is strategically placing Everton into position for the years to come.

The 'buy the title' dream may not be possible. But just think how dire our future would have looked without the Iranian buying into the club. We just need that first decent signing over the line to settle the nerves.

Danny Broderick
9 Posted 03/06/2017 at 10:40:31
How can Man City and Man Utd spend over 𧴜 million every year? FFP doesn't seem to apply to them.
Brian Harrison
10 Posted 03/06/2017 at 12:05:41
Like nearly all the legislation brought in by FIFA and UEFA, it is always to protect the cartel that they unashamedly protect. The FFP was brought in to stop clubs not in the top 4/5 in each country being able to spend their way into that group. So what happened at Man City was a threat to the cartel so now that cant happen again.

Just like how they changed the format from the European Cup to the Champions league. Ironic that they renamed it the Champions League as the change was it would be open to non-champions of their domestic league. Then the rich cartel clubs didn't like the fact that they could be drawn against one another in the first round, and therefore they changed it from a straight knockout to a group format. Again this change was to allow the rich clubs to progress which was put at risk by a straight knock out competition.

Then still not satisfied with these rule changes they then decided that any club finishing 3rd in their Champions League group would automatically enter the Europa League. Whichever way you dress it up, these changes are to benefit the rich elite and nobody else.

Thomas Lennon
11 Posted 03/06/2017 at 12:41:24
UEFA and the Premier League are selling a product for the highest profit. Those with the largest and highest spending groups of supporters will be supported first, so fundamentally the system encourages the status quo or perhaps more accurately stability.

A few clubs have been short term funded for limited success then abandoned with huge debt (and gone bust). If a club is to be encouraged into the elite then they must offer long term funding structures & sustainable business plans. Spurs are well placed after at least five years of building; we can do the same.

Steve Ferns
12 Posted 03/06/2017 at 12:51:21
You're late to the party here. It was already analysed to death by experts after it was mooted and implemented.

FFP ensures no one else can do a Man City or a Chelsea.

It is pulling the trap door up after others have climbed the mountain.

It ensures that, no matter how much investment or how rich our owner is, we can never spend as much as Man Utd or Real Madrid because they get too much commercial income.

Will Mabon
13 Posted 04/06/2017 at 01:38:01
Brian (#10), all correct.
Chris Matheson
14 Posted 05/06/2017 at 10:04:27
Just what Brian said so well at No 10 – a scam designed to keep the rich clubs rich (and, to be honest, we could chuck the Premier League into that category too).
Brian Harrison
15 Posted 05/06/2017 at 13:06:29
I read Andy Dunne's column in the Mirror on Sunday, now we know he is a self confessed Red supporter but his comments just highlight that not only UEFA officials want to maintain the cartel. I quote "Liverpool made 𧴪 million from TV and commercial deals and Stoke made 䀋 million". He then goes on to say "...of Liverpool's 38 games 29 were televised live to Stokes 10".

He then argues that his beloved Liverpool received only 10% more than Stoke yet had 3 times more television exposure. He then says "then factor in the overseas TV deals and we know which clubs attract the biggest overseas audience". He then says "no wonder you hear grumblings from the likes of Liverpool and he wonders how long before the big 6 flex their muscles".

Geoffrey Caveney
16 Posted 05/06/2017 at 13:47:42
Andy, you are right about FFP, it is designed to prevent "new money" at new clubs from spending their way to the top. I think it was mainly in reaction to Man City.

To be fair, the removal of FFP might not really help us that much either, it could lead to 20 billionaires buying all the Premier League clubs and make the league a random free-for-all every season.

Honestly, I think the main thing holding us back in the transfer market right now is not FFP. It is the desire of global players to only play for the same clubs that have been in the Champions League group stages and knockout rounds year after year. It's a shame, but the Champions League has become everything to many players and fans around the world.

Barca or Real always wins La Liga, Bayern Munich always wins the Bundesliga, Juventus always wins Serie A, PSG always wins Ligue 1, and the only real drama in Europe is the outcome of the Champions League. The domestic leagues have become minor sideshows. It is a shame but it is the reality of football in Europe.

We will need to work our way into the Champions League, and then go on a run and make the knockout rounds, probably twice, in order to get many top global players to look to us as a top club to sign with. Again, it is a shame that they see the football world that way, but it is the reality.

Peter Fearon
17 Posted 05/06/2017 at 20:50:05
The current FFP rules are a fraud to keep the gap open between the wealthiest clubs and the less than wealthy.

Real financial fair play should involve a cap on the overall wage bill of clubs so that those who pay over the top wages have to balance that by having fewer players; a rule limiting the number of players any club can farm out on loan; a rule that says any given club has to be in the black 3 seasons out of every five or lose points at the start of the subsequent season; and one that says that transfer dealings have to be paid for by revenue.

That would be financial fair play.

Patrick Murphy
18 Posted 05/06/2017 at 20:59:50
Geoffrey (#16)

Not much by way of drama in the Champions League final either as Real Madrid have won it three out of the last four years, Barcelona have won it three times out of the last ten and only Bayern, Inter Milan, Chelsea and Man Utd have won it during that time. Losing finalists in that period include Bayern (2), Juventus (2), Man United (2), Atletico (2), Dortmund and Chelsea.

Therefore, similar to the domestic leagues it would appear that the Champions League itself is a closed shop when it comes to finding the likely winners.

Lenny Kingman
19 Posted 06/06/2017 at 13:09:13
I think the finest example, if that's the right terminology, of financial mismanagement in recent times was Portsmouth's buying of the FA Cup in 2008. The pits of money they spent, the wages they paid to all and sundry including the devil may care opportunist Harry Redknapp, led to a near total meltdown of the club.

It's now 2017 and the asset strippers have come and gone, after their devious and heartless work was complete. The club had fallen to earth, through the divisions and was broke. However, after winning League 2 this season, the now fan owned club are beginning to pull the Pompey ship around.

It is my view that events at Portsmouth at that time and the FA Cup "win" played a key role in plotting a route to were we are today. The Chelsea experience would have been viewed as another pointer to future "development of the game" by the movers, shakers and plotters at the administrative head of the sport.

Perennial underachievers like the London club, and latterly Manchester City, have become big winners in a very big game played alongside the football. A world of politico ego-tripping and empire building from powerful rich men and dynasties. Teams with classic history and pedigree, but mismanagement from within, such as Everton, have been left a long way behind, lost at sea amongst rusting hulks.

There are signs of revival for the Blues at this time and within the new world beckoning the club, whilst adhering to the FPP, fans will have to be patient and watch the rebirth. Building gradually, a new ground, infrastructure and much else. The years will roll by until a power base can be re-established. Many years distant, I would suggest, down along the Dock Road.

Robin Cannon
20 Posted 06/06/2017 at 18:30:18
I think there's an underlying principle which isn't a bad one; that of teams being able to be self-sustainable as businesses, not propped up by ongoing debt.

But it doesn't seem to account for any kind of short-term debt/investment that allows a club to "jump" a level. And that's what entrenches the rich.

Colin Glassar
21 Posted 08/06/2017 at 07:48:26
FFP is the biggest scam of all time. It was designed to protect football's cartel by the cartel itself. FIFA/UEFA aren't interested in a level playing field, they are there to protect their richest assets.
Dermot Byrne
23 Posted 08/06/2017 at 07:56:00
As long as we don't jump the gun trying to sign Southampton players, like our cousins across the park!
Matthew Ulm
24 Posted 08/06/2017 at 13:05:27
1 @ Robin is right in terms of stated motivation: "FFP does also work to avoid a situation where teams go massively into debt to try and buy success; and I think that was part of the plan."

As an American I'm surprised I'm the first one on here to mention Leeds United, which was one of the primary motivators for FFP regulation. Whether this motivation is pure is a separate question; regardless, the consequences of FFP have certainly been more beneficial to bigger clubs.

The way I see it, if an owner is willing to put liquid assets (as opposed to the club having to take on debt by borrowing from an owner or other source) into the club's coffers they should be able to spend unimpeded.

Dan Egerton
25 Posted 09/06/2017 at 18:55:53
This explains perhaps why Moshiri has brought in all these deals for the club to increase profit, thus increasing the ceiling on transfer kitty and wages.

"Real financial fair play should involve a cap on the overall wage bill of clubs so that those who pay over-the-top wages have to balance that by having fewer players; a rule limiting the number of players any club can farm out on loan; a rule that says any given club has to be in the black 3 seasons out of every five or lose points at the start of the subsequent season; and one that says that transfer dealings have to be paid for by revenue. That would be financial fair play."

I agree. I would just add a salary cap for individual players. Perhaps something a two-tier system, ie, 2 top players earn 𧵄k a week, and squad players earn no more than 㿼k or 𧴜k a week.

And how about top 3 placing teams must loan a young player to the 3 teams that just got relegated or something. Spread the talent around. There also needs to be more support for grass roots football at youth level. A lot of foreign players earn money in the English Premier League, and a lot of their money goes to their home country instead.

John Smith
26 Posted 11/06/2017 at 12:02:27
Oh and also set a limit for the total number of players a team can have. Here is Chelsea FC' list of players:

Abraham Tammy
Aina Temitayo Olufisayo
Ake Nathan Benjamin
Ali Mukhtar Abdullahi
Alonso Mendoza Marcos
Angban Bekanty Victorien
Azpilicueta Tanco Cesar
Baba Abdul Rahman
Baker Lewis Renard
Batshuayi-Atunga Michy
Baxter Nathan
Beeney Mitchell Ryan
Begovic Asmir
Blackman Jamal Clint-Ross
Boga Jeremie
Borges Da Silva Willian
Brown Charlie
Brown Isaiah Jay
Bulka Marcin
Cahill Gary James
Chalobah Nathaniel Nyakie
Chalobah Trevoh Tom
Christensen Andreas Bodtker
(o) Christie-Davies Isaac David Offer
Clarke-Salter Jake-Liam
Colkett Charlie
Colley Joseph
Collins Bradley Ray
Courtois Thibaut
Cuadrado Bello Juan Guillermo
Cuevas Jara Cristian Alejandro
Cumming James Andrew
Da Silva Costa Diego
Dabo Sheik Mohamed Fankaty
(o) Dasilva Cole Perry Offer
Dasilva Jay Rhys
De Souza Nathan Allan
Delac Matej
Dos Reis Carvalho Eduardo
Fabregas Soler Francesc
Familia-Castillo Juan Carlos
Feruz Islam
Gallagher Conor
Grant Joshua
Hazard Eden
Hector Michael Anthony James
Hinckson-Mars Malakai Daylan
Houghton Jordan
James Reece
Jameson Kyle Alexander
Kalas Tomas
Kane Todd Arthur Lucien
Kante Ngolo
Kiwomya Andrew Alexander
Loftus Cheek Ruben
Luiz Moreira Marinho David
Maddox Jacob
Matic Nemanja
McCormick Luke
Miazga Matthew
Moses Victor
Mount Mason
Muheim Miro Max Maria
Musonda Charles
Nartey Richard Nicos Tettey
Nunes Nascimento Robert Kenedy
Oliveira Dos Santos Wallace
Omeruo Kenneth
Palmer Kasey Remel
Pantic Danilo
Pasalic Mario
Piazon Lucas Domingues
(o) Quintero Quintero Josimar Aldair Offer
Remy Loic
Rodriguez Gonzalez Jhoao Leandro
Rodriguez Ledesma Pedro Eliezer
Sammut Ruben
Scott Kyle
(o) Solanke-Mitchell Dominic Ayodele Offer
St Clair Harvey
Sterling Dujon
(o) Suljic Ali Offer
Taylor-Crossdale Martell
Thompson Jared
Tomori Fikayo
Traore Bertrand
Twasam Christian Atsu
Ugbo Ike
Uwakwe Tariq
Van Ginkel Marco Wulfert Cornelius
Wakefield Charlie Mark
Zouma Kurt Happy

EFC Fan
27 Posted 11/06/2017 at 12:05:08
Yes there is a limit to the number of registered players, but there isn't one regards how many players you can pay and keep on the books. Many of those players are young, which shows you how Chelsea maintain a stranglehold on quality youth players and how amazing our own academy is.
Adam Luszniak
28 Posted 15/06/2017 at 07:21:30
There is some confusion here between EUEFA's FFP rules and the FA's STCC rules. FFP is designed to guarantee the long term profitability of a club.

STCC (Short Term Cost Control) rules are focused on a club's wage bill and are essentially designed to stop Premier League teams spending all the TV money on wages.

Each team is allowed to increase their wage bill by ٥m a year plus whatever non-broadcast commercial revenue they can muster. This would include, naming rights for USM Finch Farm, sponsorship deals with Sportpesa, and also player trading profits.

Ernie Baywood
29 Posted 15/06/2017 at 10:59:41
Just out of interest... what does a year constitute in football terms? Is it financial year? Calendar year? Or some other arbitrary period? ie August 1 to July 31?

Just wondering... would it be in our interest to delay a Lukaku sale to the next 'year'?

David Ellis
30 Posted 19/06/2017 at 13:49:55
Ernie,

I guess it would be the financial year of the club in question (otherwise too hard to calculate the numbers)...but I guess you need to look at the FFP rules to know for sure.

Eric Myles
31 Posted 19/06/2017 at 14:14:15
Brian (#15), then his arguments are false.

The Premier League teams get paid a fixed amount per match so, if the RedShite were on the telly 3 times more than Stoke, then they received 3 times the money.

As for the overseas market, the telly companies buy the Premier League rights to show EVERY game. So, in that case, Stoke were on the telly the same number of times as every team in the EPL. So why should any team get more than another?

Ernie Baywood
32 Posted 19/06/2017 at 14:40:48
Thanks, David, I guess it must be the clubs' own reported accounts. In which case, our cutoff would be the end of May and no timing issue with Rom's sale.
Thomas Lennon
33 Posted 19/06/2017 at 15:19:35
Mulling this over in terms of wages – which are after all the best guide to final position in the league.

Our wage bill was of the order of 㿿million this last year. We are only allowed to increase that by ٢ million plus NEW commercial and player trading, so on the face of it it looks like it will be a long time before we catch the 𧶀+ a year spend at Man U.

However we have 㾻 million of new commercial business coming in (does that include new TV deals?) so can spend 𧴜 million this year plus profits from player trading.

Consequently if we bring in 𧵎 million by selling three or four (we all know who they are) and only spend 𧴜 Million we are already able to spend 𧵎 million on wages – so cheap deals with high wages (eg, Sandro) is the way to accelerate spending on wages for us over the next few years?

The following year, we can spend 𧵎 million plus ٢million on wages plus player trading profit and so on.

Conversely, charging our rivals high prices for players effectively cripples their spending power too.

I could be wrong... but this doesn't look as restrictive as you might think if you can buy players cheap and sell them on.

David Ellis
34 Posted 23/06/2017 at 17:20:59
There is an excellent Blue Room podcast that analyzes this.

Basically FFP is a non-issue because it only applies to clubs that are losing money... and we aren't. So it does not hold us back at all. What might hold us back is the Premier League's STCC (Short Term Cost Control) measures. These are designed to stop TV money going straight into wages. Clubs can increase their wage bill by ٥m a year. So not a level playing field because some clubs start from a much higher base.

But there are some big loop holes. One is increase of commercial revenue can be used for wages. The other is so can player trading profits. What I hadn't realised is that player trading profits is not how fans would normally understand it because depreciation is used to reduce the original cost.

So for example buy Cleverley for ٞm and sell for ٦m – profit is ٦m. Easy. But buy McCarthy for 㾶m on a 5-year contract and then sell him after 4 years for 8m then we make a loss right??? Wrong. We still have a trading profit because the original 㾶m would be depreciated at ٠m per year (over the life of the 5 year contract) so that, by year 4, McCarthy's value in the books is only ٠m. So sell him for ٦m and its a trading profit of ٤m for the purposes of the STCC.

Which means its quite easy to make a lot of "profit" on trading players. Although you still need to find the cash! (profit not being cash at all in this scenario). But the point is the STCC rules are not a serious impediment either to bringing in quality players on higher wages.

Brent Stephens
35 Posted 23/06/2017 at 17:29:52
David (#34 - penultimate para re McCarthy), 1st line- should read "buy for 10m"? not 1m?
Alan Smith
36 Posted 23/06/2017 at 20:29:53
Why don't we offer Lukaku an extra £7m a year then.
There are at least 10 big earners going out, to fund Sandro's, Klaassen's, Pickford's, a centre-back's and a winger's wages.

That would constitute a good summer's business.

David Ellis
37 Posted 28/06/2017 at 13:56:45
Alan Smith – the outgoing wages are much lower than the incoming (because wages have been rising since we agreed contracts with the outgoing players) and we have new contracts being offered to others as well. So you can't spend it all on Lukaku.

Anyway, as I explained, there is more than £7m available

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