UEFA’s plan to introduce a Financial Fair Play initiative in time for the 2013-14 season whipped up an enormous amount of speculation, including claims that evil Frenchman Michel Platini was deliberately targeting English clubs to get them excluded from European competition.
An interview by Reuters of UEFA general secretary Gianni Infantino makes a mockery of all that, and provides a wealth of detail on how the initiative is being put together and what the details will be.
Read the whole thing if you can, but we’ll extract some of the most interesting parts here, and I’ve bolded particularly key sentences for the even lazier amongst you.
The basics:
REUTERS: Can you explain what Finanical Fair Play is exactly?
UEFA: Essentially it is not a difficult thing. The main reason for financial fair play is that it is a tool to help improve the long-term stability and the financial health of European club football. It should help the clubs live within the revenues that they generate and one important element of this is that this whole concept was agreed last August in Monaco by all the stakeholders: the clubs, the leagues, the players unions and the national associations, they are all behind this concept.
This was approved by the Executive Committee and now we are in the middle of elaborating the rules. By ‘we’ its not just UEFA, but also external experts, members of the Club Financial Control Panel, in a broad consultation process.
So it’s all these folks against the big clubs? Nope.
REUTERS: The owners of the clubs are also in favour of this? Michel Platini has said that the owners of the big clubs have approached him.
UEFA: Absolutely. Reading some of the things recently I am puzzled, because this is very much a joint project from the beginning. Some of the club owners have said to Michel Platini “help us”. So it is not something that UEFA is imposing against English clubs or whatever, it’s not the case.
The whole media echo to some extent — not only in England but also across Europe — has contained so many inaccuracies.
We are doing this after very detailed research which we will publish next month. A report has analysed 650 clubs all over Europe, and it shows that around 50 per cent of those clubs are making losses every year — and 20 per cent are making huge losses — every year. Huge losses mean more than 20 per cent of their revenue. It also shows of these 650 clubs more than one third are spending 70 per cent or more of their income on salaries only — which is worrying.
The other element, which is again worrying, is that last season, revenues in in European football generally went up by 10 per cent which is very positive. But, on the other side, the increased costs — basically on the players’ salaries — have gone up 18 per cent.
So these are all trends that are worrying and which are saying to us, ‘we were right’ and by ‘we’ I mean the all the stakeholders had to take some action and move in the direction of Financial Fair Play.”
A salary cap, then? Nope, but clubs will be restricted to spending what they make.
REUTERS: Are you then looking at the possibility of putting some sort of limit on the percentage of revenue the clubs can spend on salaries?
UEFA: No, there will be some indicators, but the limit would be the break-even rule. You could spend 80 per cent on salaries, if the rest of your costs are 20 per cent, travel costs, for example, everything. But if your other costs are higher then the salaries have to go down. As a kind of indicator 60-65 per cent for example, you should be in the green zone; if you are not there, then we might have to look a bit closer — this would be the task of the Clubs Financial Control Panel to evaluate.
Debt, then. Will clubs like Manchester United and Liverpool automatically be banned from European competition, as some have presumed? Well, no.
REUTERS: What is the situation regarding clubs being in debt? Will they be banned from European competition when the new rules come in?
UEFA: If they owe money to other clubs or if they owe money to their players and non-playing staff and they are not paying what they should be paying, then that would be a reason to take a sanction. But the sanction would not necessarily be a ban in the first instance. We are still formalising the rules. So it is a bit premature to say this.
But this is only one thing. There are other elements to the rule like the “break-even” element which means that for the 2013-14 season, that clubs must basically break even. The rules are being written now and hopefully will be ready in the summer. But break-even basically means of course, the revenues that you generate you can spend but not more. You cannot have losses.
Now to define losses. You can have losses for one year, because perhaps you had one bad season, and you did not qualify. So we are looking at losses over a “multi-year” basis, for example over three years. So one year you can make a loss, but not over three years. So this is also a distinction — and this has been wrongly reported — because we are not speaking about debts. We are speaking about losses.
Debt, per se, is not necessarily a bad thing. The problem with the debt is the cost of the debt, for example the interest you have to pay, and this can create a loss. We are focusing on the losses.
But we are also also saying losses can be admitted, if the money is invested for long-term purposes — developing a youth academy for example or infrastructure. This of course can lead to a loss in the short-term, but in the long-term it will be beneficial for the club, help increase the revenues. So it is not true to say that if a club is in debt it will be banned from Eureopean competition.
What will be the positive effect? Why would clubs support this? Essentially, to force themselves to engage in collective restraint and not bankrupt themselves.
REUTERS: The President has often said that clubs in debt who carry on buying players they cannot really afford, are, in effect, “cheating.” Will the FFP stop this ?
UEFA: This is certainly one of the key objectives — to decrease the pressure on players salaries and transfer fees and to limit the inflationary effect. Everyone with normal common sense, would not engage in something they cannot afford. Sometimes, and especially in football, emotions come in and people act in an irrational way, but if you have a rule, which helps you to stay within some boundaries then of course you should respect the rule and this sort of inflationary effect will stop
Fascinating stuff. One interesting question not raised by Reuters is the issue of benefactor funding by the likes of Roman Abramovich, and whether that can be used to cover losses under these rules (see this discussion). That may be the biggest question mark remaining for the future of finance in football and especially for this initiative to receive support from English clubs. Overall, though, one can hardly say this isn’t a serious, substantial effort by UEFA to formulate some wide-ranging rules to straighten up the economics of European football.
So UEFA is saying if you have losses you can be thrown out of European competition, unless you aren’t thrown out because you can show that your loss isn’t a loss but rather a ‘debt’, which isn’t bad after all.
Prediction: what we’ll eventually see here is what we always see from UEFA — being seen to take a stand when in reality they aren’t doing anything at all. Witness any of a laundry list of racism complaints that have drawn laughable sanction. It’s all about the image with these people. They’ll ban who they want to ban, if they ban anyone at all.
Not aimed at English clubs? As we say here in the States, ‘that dog ain’t gonna hunt’.
Bulk — as UEFA’s general secretary said above, their research showed half of 650 clubs examined were making losses. This clearly isn’t an English problem alone, even if England have been on the cutting edge of giving their clubs enough rope to hang themselves.
Is it just me, or is anyone else getting the impression that UEFA don’t really know what they are getting at with this – do they want to (1) limit wages, (2) limit debt levels or (3) force clubs to operate at a profit. I get the impression from this interview that Mr Infantino is just bulking the above into one category, despite the fact that they are totally different concepts (and in my opinion, are problems in football independent of each other).
Also, the fact that there will be a “panel” that ultimately makes the decisions does not fill me with a lot of confidence.
Barry, I don’t think that’s the case. It seems to me that what UEFA wants is to ensure that for the good of the game (which they oversee in Europe), clubs aren’t constantly over-stretching themselves in any area and risking their futures, whether that’s due to too much debt or inflated wages. The way to do this is quite simple, to simply look at whether clubs are breaking even or not, all those factors included.
They aren’t saying you can’t have debt or limiting it specifically — obviously, businesses need to be able to go into debt to invest for the future (as with Arsenal and their new stadium). But when the debt is at levels that are crippling the club, that’s a different thing. The simple way for UEFA to deal with this is to say to clubs not that debt “per se” is bad (as Infantino says above), but that they will have to break even over a period of years and clubs thus must bear this into account when going into debt. Simply, they are forcing clubs to limit how much they mortgage their futures.
Same goes for wages. Clubs are not limited in what they spend, but will have to ensure that it does not mean they are constantly running massive losses for years. If you can afford to pay Ronaldo $200,000 a month, good for you. If you can’t, don’t destroy your club’s future over-reaching yourself (hello, Leeds).
This is all so sensible I’m really surprised people still see this as far-out.
But debt and profit are two massively different things in terms of accounting. You can make a profit (break even) while having massive debts, and you can make massive losses while having zero debt. My issue is how UEFA seem to be lumping them both together as one and the same, when they are completely different and need their own separate solutions and initiatives.
But that’s what they’re saying….what matters is breaking even (or not), whether you have massive debt or don’t have massive debt. The bottom line is, well, the bottom line:
Wouldn’t it be a lot more complicated to treat them separately? What would be the advantage of doing so?
Well.. my club is massively in debt, but I think this is a great idea. This would save the game. All these clubs would stop going bankrupt. Rich foreigners would stop buying up local clubs and pumping them full of money. It will be a rough transition, but I think it is best long term.
This whole concept is fantastic as an idea but ……
But what are the rules?
What is the formula?
Pre tax or post tax?
How will owner contributions be classed?
Will clever owners become sponsers of their own team?
Why a committee and not an accountant?
I personally hope this initiative comes to fruition but until its more than a shadow of just words how can clubs plan for the future of Financial Control.