Wednesday, May 26, 2010

UEFA Say Fair Play To Arsenal

Some time tomorrow in a nondescript, modern building overlooking Lake Geneva in Switzerland, football’s great and good, also known as UEFA’s Executive Committee, will meet to implement the snappily titled Club Licensing and Financial Fair Play Regulations. This vision was first given the green light in UEFA’s September 2009 meeting and they are now expected to approve their March 2010 draft proposal, which requires clubs to break-even from the start of the 2012-13 season, if they wish to qualify for European competitions like the Champions League. In the slow-moving world of football bureaucracy, it is striking how quickly UEFA has managed to translate the initial concerns of President Michel Platini, who had described clubs borrowing to buy sporting success as “financial doping”, into a practical, workable document.

UEFA’s aim is no less than “protecting the long-term viability and sustainability of European club football”. Under this financial fair play concept, clubs will have to balance their books and operate within their financial means, thereby helping restore stability to the European game. Clubs will be required to spend no more than they earn to “introduce more discipline and rationality in club finances and to decrease pressure on players’ salaries and transfer fees.” They will be forced to settle their liabilities on a timely basis, but will also be encouraged to invest for the good of the club in areas such as youth development and infrastructure (stadium, training ground).

"Only thing bust about Arsenal"

This is probably all beginning to sound very familiar to Arsenal fans, who have observed the club investing in these themes over the last few years, but wait, it gets even better. In order to ensure a level playing field, UEFA have also targeted the influence of wealthy benefactors. General Secretary Gianni Infantino baldly stated, “It will not be possible for the big sugar daddy to just write-off a cheque at the end of each season”. President Platini went further, encompassing clubs financed by mountains of debt, when he called the initiative the end to “success on credit”.

In recent seasons, many clubs have reported repeated financial losses, which have been getting worse. The wider economic situation has created difficult market conditions for clubs in Europe, negatively impacting revenue generation and creating additional challenges for clubs in respect of availability of financing. Many clubs have experienced liquidity shortfalls, for instance leading to delayed payments to players, other clubs and even the tax authorities (Portsmouth) with auditors questioning the ability of some to continue as a going concern (Liverpool, Hull City).

In February UEFA published a mighty tome entitled “The European Club Footballing Landscape”, a financial survey of more than 650 clubs all over Europe, which contained some jaw-dropping statistics. Gianni Infantino reported, “We found that 50 per cent of those clubs are making losses every year, and 20 per cent of them are making huge losses, spending 120 per cent of their revenue every year.” He said that the primary reason for the losses is wage and transfer inflation, driven by clubs relying on owner finance or debt, “Around one third of the clubs are spending 70 per cent or more of their revenues on wages. Revenues across European football grew by 10 per cent last year, but the salaries of players and coaches have gone up by around 18 per cent.”

"Gianni Infantino looking through the books"

While such over-spending “may be sustainable for a single club, it may be considered to have a negative impact on the European club football system as a whole.” As Infantino said, “The problem is that all clubs try to compete. A few of the biggest can afford it, but the vast majority cannot. They bid for players they cannot afford, then borrow or receive money from their owners, but this is not sustainable, because only a few can win.” In other words, the richest clubs drive up players’ salaries and transfer costs, forcing smaller clubs to over-stretch their budgets to compete. Intriguingly, UEFA’s draft proposal states, “clubs will therefore be assessed on an individual basis as well as in the wider context of the European club football environment.” Not sure how they are going to achieve that, but it sure sounds good.

Debt may be a four-letter word for UEFA, but apparently loss is an even worse one, as the break-even requirement is described as the “cornerstone” of the new regulations. Gianni Infantino again, “We are not speaking about debts. We are speaking about losses. Debt per se is not necessarily a bad thing. The problem with 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.” The key principle is that a club should always aim to at least break-even excluding expenditure for the long-term benefit of the club and must not repeatedly spend more than the income it generates.

So how do England’s finest fare under the new regulations? Of the seven teams that qualified for Europe this season, four of them fail to break-even – and by a long way. As we can see in the table above, Chelsea, Manchester City, Aston Villa and Liverpool are the offenders. This should come as no great surprise, as three of those clubs are funded by rich owners, most obviously with Roman Abramovich at Chelsea and Sheikh Mansour at Manchester City, but also to a lesser extent with Randy Lerner at Aston Villa. In marked contrast, Liverpool are not, having to bear the considerable burden of loans arising from the Hicks and Gillett takeover, which resulted in £40m interest payments last year.

That leaves just three clubs making a profit (Arsenal, Manchester United and Tottenham), but even this is misleading and over-states the situation. United’s profit only arose after last summer’s £80 million sale of Cristiano Ronaldo to Real Madrid, which is hardly likely to be repeated every year. Without this once-off factor, United would have reported a hefty loss thanks to their crippling £70 million interest payments. Despite this, United’s Chief Executive David Gill has claimed that the club would not fall foul of the new regulations, “We have seen what the proposals are and we would meet the financial break even rules.” Hmm. His confidence was not shared by the club’s bond prospectus, where the risk factors included the following, “These rules are intended to discourage clubs from continually operating at a loss. There is a risk that, in conjunction with increasing player salaries and transfer fees, the financial fair play initiative could limit our ability to acquire or retain top players and, therefore, materially adversely affect the performance of our first team.”

"David Gill - trust me, I'm an accountant"

What about Spurs? Although they don’t have to make huge interest payments, they are actually in a similar position to United, as their profit was only due to significant player sales of £57 million (Dimitar Berbatov to United and Robbie Keane to Liverpool). Without this, they would also have made a loss. Indeed, in the subsequent interim accounts for the six months up to 31 December 2009, Tottenham reported a loss before tax of £8.3 million. It looks like Harry Redknapp is beginning to work his magic on another club, as the impact of all his player purchases begins to bite. Sooner or later, this strategy will feed through into higher player amortisation, as, like all clubs, Spurs have to capitalise the cost of acquiring a player and then write-off that cost over the period of the player’s contract. To place this into context, Tottenham’s amortisation costs of £38 million are higher than United’s, but their revenue is only 40 per cent of Old Trafford’s franchise.

No, the only one of these clubs that is genuinely profitable is Arsenal, even after excluding the money made from property sales. Again, this should not raise too many eyebrows, as UEFA had already advised that Arsenal was the only major English club that would meet the financial fair play criteria today.

"Away From The Numbers"

The more financially astute will already have noticed that UEFA’s break-even template is subtly different from a regular profit and loss account. As they almost said on Star Trek, “It’s a P&L, Jim, but not as we know it.” The UEFA template introduces the concept of relevant income and expenses, which looks complicated, but is essentially a variant of the good old “carrot and stick” incentive that tries to achieve two goals: (a) encourage clubs to make sensible long-term investment; (b) close any loopholes which might allow clubs to artificially meet the break-even target.

Let’s take the positive aspect first. Clubs will still be permitted to borrow for “good” projects like improving the stadium or training facilities. Any costs associated with this investment, like interest on loans to fund the construction or depreciation on the resultant fixed assets, are excluded from the break-even calculation. In other words, an excess of expenses over income may still be allowed if the excess is solely related to costs that are for the long-term benefit of the club. As Infantino explained, “We are 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 the costs of building the Emirates Stadium would be removed from Arsenal’s relevant expenses, as indeed would the depreciation. Eagle-eyed observers will have noticed that this guideline appears to greatly benefit Manchester United, as they can deduct £44 million of depreciation and amortisation, largely because they report £35 million amortisation of goodwill. In accounting terms, goodwill arises after the acquisition of a subsidiary and represents the difference between the purchase price and the fair value of the net assets. This is capitalised like any other asset and amortised over the estimated useful economic life. This deduction makes a huge difference to United’s profitability. Maybe this is why David Gill was so confident of United meeting UEFA’s new regulations?


On the other hand, UEFA are clearly no mugs, as they have addressed some of the more obvious ways of getting around the new regulations. Many clubs these days have an intricate inter-company structure and there were fears that a club like Liverpool could argue that the football club was profitable, as their massive interest was paid out of the club’s holding company. Clearly, that does not make sense to any reasonable man and UEFA have caught that one, “For the calculation of relevant expenses, management must include any expenses incurred in the reporting period in respect of the activities of the club that are not otherwise recorded in the audited annual financial statements of the reporting entity that forms the basis for preparation of the break-even calculation.”

Next, they have anticipated the possibility of a wealthy owner paying a ridiculous £200 million to sponsor his team by embracing the concept of “related parties” and “fair value” so beloved of tax authorities when reviewing inter-company transactions. In short, if an owner over-pays for services, this income will be adjusted down to a fair value, i.e. what the club would have received if the transactions were conducted on an “arm’s length” basis. Enough tax jargon for you? The guidelines list specific examples like sale of sponsorship rights and use of executive box, but I wonder whether this regulation might also apply to interest-free loans? After all, banks don’t usually provide loans without charging interest.

UEFA wish to exclude any income and expenses from non-football activities, which are “clearly and exclusively not related to the activities, locations or brand of the football club”. This might be a factor for Arsenal, as any profit made from future property sales at Highbury Square, Queensland Road, etc would presumably be excluded from the break-even calculation. On the other hand, this might benefit a club like Barcelona, if they can eliminate the £24 million losses they make on other sports (basketball, handball and hockey).

However, you would not expect UEFA to be too tough on their meal ticket and, sure enough, they revealed the velvet fist inside the iron glove by making a number of concessions to Europe’s top clubs. The most significant is that there will now be a phased implementation over five years. The scheme will still kick-off (if you’ll excuse the pun) in 2012, but there will be a three-year transitional period and it will not be fully operational until 2015. As David Gill said, “If clubs are not complying now, then there is time for them to get their house in order.” Or, as cynics might say, there will be time for clubs like Manchester City to accelerate their spending before the regulations take full effect.

Furthermore, in the same way that British transport classifies trains as being “on time” if they are only ten minutes late (or something like that), UEFA have stretched the definition of break-even to include an “acceptable deviation”. Losses that are not underwritten by club owners are allowed up to a total of €5 million over three seasons. To be fair, Infantino’s explanation makes sense, “You can have losses for one year, because perhaps you had one bad season and you did not qualify (for Europe). So we are looking at losses over a multi-year basis. So one year you can make a loss, but not over three years.”

Less justifiable is the acceptable deviation for billionaire owners, who will be allowed to absorb aggregate losses of €45 million over three years from 2012, so long as they are willing to cover the club’s losses by making equity contributions. To be fair, the maximum permitted loss then falls to €30 million from 2015 and will be further reduced from 2018 (to an unspecified amount). This means that in the transition (weaning-off) period, owners can pump in an average per season of €15 million up to 2014 and then €10 million up to 2017. After that, who knows? Perhaps break-even will actually mean what it says by then.

Maybe the soft landing is why the top clubs have given UEFA’s initiative their support. The European Club Association (ECA), which represents the 137 leading clubs in Europe, voted unanimously to approve the proposal at their General Assembly with their chairman, former German international Karl-Heinz Rummenigge, declaring, “these measures will shape the future of European club football into a more responsible business and ultimately a more sustainable one.” According to Platini, “The owners are asking for rules, because they can’t implement them themselves. Many of them have had it with shoveling money into clubs. They asked me to do something – Roman Abramovich asked me, the owner of Manchester City agreed – and I think it’s very moral. And it’s not just the biggest clubs – it’s all the clubs.”

"Pointing the way"

The owners might also have been stunned into action when Portsmouth went into administration. If a club from the world’s richest league could crash in this way, what about the rest? Inter’s Chief Executive, Ernesto Paolillo, admitted, “The old times are finished. Sometimes you need a shock and this is it.” At the same Soccerex Forum, Sevilla’s vice-president, Jose Maria Cruz, said that half a dozen Spanish clubs faced bankruptcy. Whether clubs are a going concern is clearly in UEFA’s thoughts and the regulations specifically require a club to “prove that it has no payables overdue towards other football clubs arising from transfer activities and towards employees and social/tax authorities.” This is evidently a major issue with the Footballing Landscape report listing €1,650 million of transfer debts, including €550 million over 12 months old. To put this more bluntly, clubs are fielding players that they have not paid for.

Although UEFA will come down hard on clubs that owe money to those in the “football family” (other clubs or players) and the unforgiving tax man, they appear more sanguine about debt in general. Platini and Infantino have both said that debts will be permitted if clubs can service the payments, so the issue is not so much the level of debt as whether the interest payments can be covered. UEFA have effectively acknowledged that debt can be an important tool for funding growth, but they want it to be manageable. However, they have expressly commented on the debt at Manchester United and Liverpool, “Just over half of the Premier League’s commercial debt has been placed into the clubs as a result of leveraged buy-outs, acting principally as a burden rather than to support investment.”

Some have argued that this UEFA initiative is one reason why the owners at Chelsea and Manchester City have wiped out their clubs’ debt by converting loans into equity, but I’m not sure that it makes much difference. Given that the loans were effectively interest-free, in terms of the break-even calculation, this is simply moving money from the left pocket to the right.

"Stuck in the middle with you"

However, it does affect one of the financial ratios used by UEFA as “warning signs”. A red flag will be raised if net debt exceeds annual turnover and the club will be asked to provide additional information, including proof that the debt level is sustainable. UEFA helpfully define net debt as “the borrowings of the club less cash” with borrowings including loans from banks and the owner. Journalists, please note that it does not include accounts payable or trade creditors.

Although they have resisted calls for a salary cap, another warning sign occurs if the wages to turnover ratio is over 70 per cent. In a slightly contradictory statement, Infantino explained the thinking on salaries, “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. But if your other costs are higher, then the salaries will have to go down.”

Monitoring of the clubs and their adherence to the rules will be overseen by the newly-formed Club Financial Control Panel, which will be made up of financial and legal experts, who will conduct audits to ensure that the system is applied correctly. Chairing the panel will be former Belgian Prime Minister, Jean-Luc Dehaene, which is an example of how seriously UEFA is taking financial fair play. Michel Platini described Dehaene as being “very experienced in financial matters and a great football fan. He is the ideal person to take charge of the economic destiny of European football.” We shall see. If this Panel believes that the requirements have not been fulfilled, it can refer the case to the scary sounding Organs for Administration of Justice with the ultimate sanction being a ban from UEFA competitions.

"Jean-Luc Dahaene - a formidable figure"

Obviously, the introduction of such a scheme will not be without difficulties. Platini himself admitted, “It is not easy, because we have different financial systems in England, France and Germany. In England you can have debts; in France you’re not allowed to have debts; and in Germany you get relegated to the second division (if you have debts).” As always, the devil is in the detail and we can already anticipate many tedious arguments from lawyers and accountants. Nevertheless, the break-even analysis is based on accounts that have been audited and we must hope that common sense is applied during any disputes.

The other major concern is that far from making football fairer, all this initiative will achieve is to make permanent the domination of the existing big clubs: survival of the fattest, rather than the fittest, if you will. The argument goes that those clubs that have already reached the promised land of the Champions League will continue to benefit from the highly lucrative broadcasting revenues, while the challengers will no longer be able to spend big in a bid to catch up. This may be why Abramovich’s support may be considered a tad hypocritical, as he has already spent his millions to join this exclusive club.

"Back off, Europe!"

This is one of the reasons why the Premier League has reservations. Chief Executive Richard Scudamore said that he was opposed to any limits being set on the ability of owners such as Sheikh Mansour to invest money in their clubs. A spokesman went further, “The benefactor model of investment is not one the Premier League wants to see outlawed. We don’t want to discourage investment in our league, which has benefited clubs of all sizes.” There is something to this, but, for me, the financial fair play regulations are the lesser of two evils. They might make it more difficult to gatecrash the party, but they will stop clubs like Portsmouth (and Leeds in the past) gambling their future to “live the dream”. As Platini argued, being financially supported by a single backer is not sustainable, as he might run out of money (or might never had any). Of course, an Arsenal fan might also point out that their club has managed to qualify for the Champions League for many years without spending any money.

The Premier League contends that it has introduced its own financial criteria, which give them increased powers of scrutiny and intervention and will go a long way to preventing another “Portsmouth”. Clubs will have to submit annual accounts and budgetary information. Scudamore explained, “If the board believes the club is at risk of not being able to meet its obligations, then it has to step in and agree a budget for the running of that club. It has the ability to embargo any transfers or, and I think this is a first, to stop clubs renegotiating upwards any player contracts and remuneration.” Not sure about you, but his words don’t exactly inspire me with confidence.

"Ivan Gazidis - fair comment"

Will all these regulators have the bite to go with their bark? Expelling teams from European competitions works fine on paper, but would it ever happen in reality, especially when you consider that Europe’s most indebted teams are among those that attract the largest television audiences. Would UEFA really bite the hand that feeds? Indeed, one of the members of the Club Financial Control Panel admitted that there was a risk that aggrieved clubs “could fly off into the ether and form their own competition.”

Let’s end on a positive note and leave the last word to Arsenal’s Chief Executive, Ivan Gazidis, “The fundamental issue that we all face is do we have the courage and fortitude to control our spending in a fairly irrational environment. If we can manage that, there's no reason why anyone can't have a long-term stable business in football.” Can’t say fairer than that.


  1. Another excellent, well researched, informative article! Keep it going please!

  2. I'm in awe at the quality of your articles and the amount of research you did. Thanks a lot for explaining the subtleties of finance to the common man, it's amazing how clearly you expose all this. I've a much better understanding of Arsenal masterplan thanks to you.

    Back to your post, indeed it's unclear how far UEFA is ready to go to enforce the rules but it will still put pressure on clubs to get as close to compliance as possible, which can only benefit us. If you ponder that with the League's homegrown players quotas, we're definitively in the very small minority of clubs in copmliance of both. Fortunately for us because adjusting for either will make teams less competitive in the short-to-medium term. The pieces of the puzzle are falling in place at the right time for Arsenal, our final push to the top won't take too long now!

  3. Just in case you need some inspiration I am exteremely curious to understand how Real Madrid manages to pull off a second era of Galacticos madness despite what I assume was a financial fiasco in the last decade. I know the UEFA rules should limit them eventually but still managing to break transfer and deficit records season after season is beyond belief. Do they make that much more money from TV and Ronaldo's shirt sales and image rights?

    And of course if you could predict the exact date of United's demise that would be cool too ;)

  4. @Wildcat, Matt

    You're too kind. Thanks.


    Funnily enough, I would like to dig deeper into the financials of some more clubs outside the PL. It's more difficult than English clubs, as it's not always so easy to get the actual accounts. There is also a language issue, though I do speak French, Italian and German, which helps.

    United are interesting. I saw a report today where they again expressed confidence that they would meet the financial fair play requirements. They did confirm that they would exclude goodwill, as I suggested above, but also that they would exclude the interest on the exorbitant PIK loans, as these are not paid out, but accumulate on the debt. Can't see it myself, as: (a) United's own accounts report them as an expense; (b) it's against all laws of common sense.

  5. Another sensational post. I am a recent arrival at this blog, having linked here via Untold Arsenal. The sheer effort involved, the financial detail, the quality of the research is fantastic. Thank you so much for all your efforts, please keep up the good work.

  6. Why is suddenly everyone so worried about wealthy owners? AC Milan, Inter, Juventus, Rangers, PSV, Marseille, Lazio, Chelsea, Blackburn and countless others have or have had sugar daddies in the past who helped buy them success. All of Platini's medals won at Juve came about because of the Agnelli family's wealth.

    Arsenal do things the right way? maybe, but it certainly helps when you get a guarenteed 40-50 million more than 88 of the other league clubs every season through their champions league participation (and guess what, every year they come above 88-89 clubs).

    (As for Wenger moaning about financial doping, he didn't seem to mind when he was at Monaco and they were competing with europes elite on gates of less than 20,00)

    UEFA are only concerned about maintaing the status quo and trying to ensure the dominant clubs of the last 50 years dominate forever more.

    In general the less rule made in aministrating a sport the better, but now their are going to be vast armies of accountants and lawyers going through all the clubs books, ruling on how much is an acceptable amount for a sponsor to pay to Man City or Man Utd for naming rights, teams will be paying players under the table and when teams win trophies people will wonder how they can manage to have all those stars and still be adhering to the rules.

    It is all so unnecessary.

  7. @TSR:
    Thanks for another fantastic piece! I hope Wenger continues to serve Arsenal FC through either coaching or management to see this rule come to fruition. It would be amusing to see him giving the usual "I told you so" cheeky grin :>

    I believe football has to change because it's beginning to reflect a bubble economy like the one we've been going through the sub-prime fiasco.

    Too many clubs are operating beyond their means and not all of them will be getting the graces of an Abramovich or a Shiek.

    It's going to be hard for clubs not competing in Europe to break through, but anything can happen in this game given the right set of manager/player/boardroom and their efforts to progress the club.

    Honestly those clubs probably have better, realistic issues to tackle because even if these "outsiders" qualify for Europe, they may have to sacrifice the league campaign to go for a continental glory like Fulham.

    They should try to adopt what Arsenal has been attempting in recent years. Find/groom and attract the best local talent, perform good first team football to increase fan base/revenue, be shrewd in the transfer market to get the best value in their businesses.

    It's not a bullet-proof solution, but like Platini said, the clubs themselves wanted a solution over competing in a "fairly irrational environment". I think this is better than nothing.

  8. Scudamore should be sacked, the reason clubs like Portsmouth go to the wall is they over-spend trying to compete with the false inflation on wages/fees created by the likes of Abramovich and the camel jockies in Manchester. Frankly I'm sick of the Premiership circus.

  9. What's the 3.6 under "player trading" for Arsenal that isn't covered by profit on sales?

    Whether or not Spurs stay in profit next year will, surely, be determined by whether or not they blow the CL qualifier. If not, their broadcast income will be similar to Arsenal's. Not sure what City, Villa and Liverpool can do to boost their income, though.

  10. To be perfectly honest i didnt understand 99% of what was being talked about here. Although the bits i did understand are very enlightening! Fantastic website, keep up the good work.

  11. Thanks for another informative article! One interesting aspect, is the fact the "break even" rule would lessen the possiblity for "wage caps", even if that would be a measure against the congelation of big/small clubs you mention.

  12. @countryman,

    Thanks. Untold Arsenal is a fine site with some excellent, thought-provoking articles.

  13. @Manacle,

    I understand your point about the significance of Champions League revenue to maintaining the status quo among the top clubs. I touched on this concern in the article, but I still believe that the UEFA regulations are the lesser of two evils. Even if it means that I may end up having nothing to write about :-)

  14. @Tom,

    I also wondered what the £3.6m revenue for “Player Trading” represented. In the Financial Review in the accounts, it’s described as “fees from the loan of players”.

    I’m not sure that the Champions League revenue will be enough for Spurs to remain in profit, even if they get past the qualifying round. We don’t yet know the UEFA participation/performance fees for next season, but we do for season 2009/10. If we assume that Spurs are eliminated at the group stage, winning 2 matches, drawing 2 and losing 2, that would give them participation/performance fees of €9.5m plus TV pool (estimate) of €15m, giving €24.5m (£21m). They would also receive matchday income for 4 home matches (1 qualifier plus 3 group), but their last accounts included matchday income for 4 matches in the UEFA Cup, so there would only be a small uplift there. There could also be clauses in their sponsorship contracts that give more income for playing in Europe’s premier competition. Let’s be generous and say an additional £25m from the Champions League.

    Like all other Premier League clubs, they will also receive an extra £7.5m for the new TV overseas rights deal.

    So, in total an extra £32.5m.

    Against that, their costs will increase through wages and amortisation after the many player purchases. Nor are they likely to make another £56.5m from player sales.

    Of course, there are other factors, but I’m not sure that the Champions League necessarily ensures a profit for Tottenham.

  15. @bossman,

    These articles inevitably include a lot of accounting jargon, which is not always completely straightforward. I will try harder to make future posts easier to understand :-)

  16. @DS Helder,

    My guess is that UEFA initially wanted to go for salary caps, but have been persuaded away from that by the top clubs.

  17. What does Arsenal's £135.3m other expenses entails?

  18. @cecil,

    The £135m other expenses is the total from the football segment £55m and property development £80m, so is a little misleading. Once the property costs are excluded, the £55m is much more in line with the other clubs. Arsenal do not provide a break-down of the £55m, but it would cover costs like running the stadium, training, travel, etc.

    The cost of the property sales is excluded in the break-even calculation (as is the property income).

  19. What another great article Swiss!

    Thanks for this.

  20. TSR, you seem hellbent on outdoing yourself each time! Kudos on another fine piece.

    I think Arsenal are the perfect example for all the small clubs who feel Champions League money will prevent them from competing. In the 2004-2009 period Arsenal had the lowest net spend of all the 20 clubs that competed in the Premiership this season. The small clubs just need to find another Wenger, sadly for them another Benitez or Mourinho or even Ferguson will not do!

    If you don't mind can you tell me where you got the complete financials of the other clubs. I've searched for these but didn't have any luck. I guess I just don't know where to look.

    It's not that I doubt your work in any way. Just that I enjoy reading these reports so if you can point me in the right direction or share the files here it would be a great help.

    Thanks again.

  21. @desigunner,

    I have worked in the financial services sector for many years, so I have some very good contacts!

  22. @ The Swiss Rambler

    "I understand your point about the significance of Champions League revenue to maintaining the status quo among the top clubs. I touched on this concern in the article, but I still believe that the UEFA regulations are the lesser of two evils."

    It's rather easy to hold this view when your club is already sitting at Europe's top table.

  23. @anonymous (9:24),

    True, but it's not as if Arsenal can be accused of spending their way towards the Champions League. Many fans would argue exactly the opposite.

    In any case, there's nothing in the rules to prevent a club from producing a good team without opening the cheque book, e.g. developing players from the academy, good coaching, etc.

    For example, I recently read that Sampdoria had qualified for the Champions League in Italy with an incredibly modest wage bill – the annual combined salary of the entire first-team squad was only €24m (£21m) at the start of the season.

  24. What could be said about these (now approved) rules effect on third party ownership of players? What is UEFA's opinion on that (re Tevez/Mascherano)?

  25. @DS Helder,

    Interesting question. These regulations don't address third party ownership of players at all. In my opinion, their thinking would be that this is a separate issue and would only be covered by the fair regulations to the extent that there was a financial implication.

  26. Fantastic blog. Mature and intelligent.

    Such a welcome break from all the tedious and moronic anti Wenger, anti everything blogs out there!

    Gada I found this - keep up the good work!

  27. "stuck in the middle with you" - what an amazing snap!!! I am in love with ur blog...

  28. @ Swiss Ramble

    "True, but it's not as if Arsenal can be accused of spending their way towards the Champions League. Many fans would argue exactly the opposite."

    anonymous (9:24):

    In terms of transfer fees Arsenal are probably the most frugal of the "Sky-4" which is hardly a ringing endorsement, but in terms of the ability to pay players (total wage bill circa £100m) Arsenal can better all but a handful of clubs in Europe, so perhaps it's a moot point.

    "In any case, there's nothing in the rules to prevent a club from producing a good team without opening the cheque book, e.g. developing players from the academy, good coaching, etc."

    anonymous (9:24):

    This is true but relying on academies and good coaching to produce a chunk of one's team is notoriously hit-and-miss.

    Manchester City, perhaps the world's most hated club, is the most successful team in the PL in terms of first team graduates - it's just that most of them aren't very good.

    Arsenal's academy is to be admired but one must remember that some of this talent has been bought and assembled at - relatively - huge cost. Your Villas and Evertons could not, with their revenue streams, afford to do this on the premise that it MAY work out.

    "For example, I recently read that Sampdoria had qualified for the Champions League in Italy with an incredibly modest wage bill – the annual combined salary of the entire first-team squad was only €24m (£21m) at the start of the season."

    anonymous (9:24):

    Using 07/08 figures the only clubs with a wage bill lower than £21m were Stoke and Hull. It's safe to say - in England - you wouldn't be qualifying for the Europa League with that sort of spending power.


    Listen, I've got no beef with Arsenal Football Club. The transformation from "Boring, Boring TM" to THE football team in London has been amazing. It's a well-run club but also it has accrued many advantages, mainly monetary (that other clubs don't have), through it's perennial participation in the Champions League.

    Michel Platini is trying to close the shop. By linking football-related earnings to a clubs ability to spend he's making it nigh on impossible for clubs like Newcastle, Leeds, Everton, Villa to gatecrash the party. A club sells itself on the pitch and new consumers will hardly be turning up in droves to fund Mid-table Rovers rise to glory if there's nothing but mediocrity on show.

    Platini's plan is

  29. what happens if before these regulations take effect Sheik Mansour has an equity buyout resulting in cash in the bank at city to be £5billion pounds?

  30. what would happen if Abu Dhabi FC buy all citys players and loan them back with city just paying wages?

  31. @jaime,

    If the owner injected £5 bln into the club, that would certainly produce a strong balance sheet, but then what? Assuming your intention is for this money to strengthen the squad, this would happen in two ways: (a) buying a shedload of new players, in which case the amortisation costs would significantly increase the expenses; (b) increase the salaries to attract better players, again increasing the expenses. In both cases, the result would be a huge rise in expenses, which is unlikely to be matched by revenue growth. As I explained in the article, some losses can be covered by the owner, but only up to a maximum of €45m over three years, which soon falls to €30m.

    Your second example would fall foul of the related parties and fair value tests.

    If I can give you an analogy from my own personal experience, I once wrote a 50 page expenses manual for my company (yes, I am that sad), but when I presented it to the executive board, I said, "You know what, this can all be replaced by just two words - be reasonable".

  32. Hi brilliant piece, appreciate all the hard work you've put into this, made for a very entertaining and enlightening read! Will have to read through the rest of your blogs and check out the other work you've done. One thing I'd request, I fully appreciate if the answer is a no, is a breakdown of Everton's finances and their chances of fitting the criteria?

    As an Evertonian I know we have debts and they grow but with recent investment in the new training facilities and not too much spent, without first recuperating money, on player transfers I'm interested to see how we fare and also just a bit nosey at our general account details! I understand completely if you're not up for this and look forward to your other articles, cheers,

  33. @Rory,

    I wrote a piece about your club a few weeks ago entitled "Why has nobody bought Everton?", though I'm afraid that it wasn't too positive about the financials. In short, the club never makes a profit - unless it makes a big money sale, e.g. Rooney.

    Having said that, they are not too far short of break-even and they are even closer under the new UEFA regulations. As you rightly suggest, they should be able to adjust for investment in new training facilities. Anyway, I've run the numbers for the last set of accounts (up to 31 May 2009), which gives the following info (£ mlns):

    Match day 21.9
    Broadcasting 48.6
    Commercial 9.2
    REVENUE 79.7
    Profit on Player Sales 3.8
    Finance Income 0.1

    Staff Costs 49.1
    Player Amortisation 13.0
    Depreciation 1.8
    Other Expenses 22.5
    Finance Costs 4.1
    Depreciation (1.8)
    New stadium project (1.3)


    Note - Reported Profit Before Tax (6.9)

    So, pretty close. Figures would dramatically improve, if Everton could: (a) increase commercial revenue to levels earned at other clubs; (b) build a new stadium or expand Goodison, as the match day revenue is on the low side. The other good news is that they will get another £7.5m a year from the new Premier League TV deal for overseas rights.

    Hope that helps.

  34. Rory,

    It is an excellent article, well-written and clearly explains Platini's devious plan. The author, on balance, agrees with the plan because AFC stand to benefit.

    Platini, I think I'm correct, first broached this issue from the debt angle. But... when he realised - and perhaps had his ear bent - that Real, Barca, United & Liverpool would all fall foul he changed tact.

    Now we have a plan which links spending to earnings. This will allow the big boys, who earn more through revenue and exposure gained as a result of the CL, to continue spending at levels higher than the chasing pack.

    Football's finances are a disgrace but this crock of s*** tinkers around the edges and is designed to maintain the status quo. No wonder there hasn't been a peep out of any of the former G14.

    I wonder if it would stand up in the European Court ?

    Anonymous 9:24

  35. @Rory,

    Just for full clarity, Everton's projected loss of £3.7m (under the UEFA guidelines) would still meet the accepted deviation criteria of €5m loss (over three years), assuming that they did not make losses in the other two years.

  36. @Anonymous (9:24),

    Thanks for the kind words on the article. May I also give you credit for your articulate comments, which are clearly well-considered.

    As I said above, I do understand your concerns about what I described as "survival of the fattest", even though we obviously disagree on our conclusions.

    Funnily enough, I was mulling this over this morning, when Sky Sports News did a small piece on the financial fair play initiative, which was immediately followed by the news that Portsmouth have offered their creditors just 20p in the Pound and that Crystal Palace have made 29 of their 60 staff redundant. Both clubs were unlucky enough to follow the owner/benefactor model, but in one case the money ran out and in the other there never was any money. Even when the owners appear to be incredibly well-funded, there is always the possibility that their financial status will change (see Dubai) or they might just lose interest.

    I still believe that my example of Sampdoria qualifying for the Champions League is relevant to England. Yes, their wage bill of £21m is unlikely to get them far, but my point was one of relative spend: Samp's wage bill is only the 11th highest in Serie A. On a similar point, Bayern Munich have by far the highest revenue in the Bundesliga, but failed to qualify for the Champions League a couple of years ago.

    Your point about the distorting effect of Champions League revenue is a valid one. If you would like to know the exact details, may I refer you to my article, "What is the Champions League worth to Arsenal?". It's obviously written from the perspective of an Arsenal fan, but hopefully a balanced one :-)

  37. @The Swiss Rambler

    What an article! I am a new visitor who got to this site on following the Barca-Cesc article from a site I consider the best Arsenal fan site - Untold Arsenal. I personally am a finance student so these jargon go pretty easily get into my head. The analysis you've done and the financials taken are enthralling. I must say I'm impressed and hooked to your blog.

    This provides an opportunity for clubs run like Arsenal FC to show their prowess and also encourages the clubs to go for spotting and raising talent rather than opening the cheque book. It will significantly improve the price range in the transfer market and the lower clubs can purchase players within their means as the inflation in rates is cut down. But the most significant aspect is that the club has to turn to growing of players more which would benefit football on the whole. This is my view of the issue! Hopefully my views do hold good. :P


  38. @ The Swiss Rambler

    Can I use an analogy ?

    There's a company called Manchester City Steel Works (MCSW). They've won 9 awards in their history (still top-10 on England's all-time list) but have had a lengthy period of decline. In 2003 they move to a new plant with a lot of room for expansion / diversification and have a young, enthusiastic workforce. This sees them rise to a mid-rank A-grade company but their owners having taken them as far as the can, think they need better, more modern skills and investment to take them further. So... they sell to a dodgy Thai investor who in turn makes a quick buck by selling on to an Emirati company, who have real aspirations to be world players in the steel world. MCSW then attract the best steel workers they can afford for their "new steel project" and they rise to finish 5th in the national industry ranking. Fuelled by this they have ambitions to improve their ranking even further over the coming years but then Mr Platini at the European Steel Company Association says that from 2012 all steel companies can only re-invest money from direct steel-related business to expand their companies.

    Can you see the unfairness in this ?

    "Survival of the fattest", like it or not, is the reality in England. It's far from ideal but the PL & UCL has dictated this. Manchester City, often described as killers of football, are merely playing by these rules. The more apalling thing is that City will HAVE to spend close to £1b to reach the "UCL promised land".

    I'm not against the policy of addressing unsustainable finance in football but I am against regulations that seek to create a buffer between the haves and have nots and cement the places of the current elite - all under the guise of "financial fair play".

    If Platini & UEFA had any real b**ls he'd go after the big boys but as politician he won't as to do so would risk UEFA's operation of Europe's major club competition.

    I can see as a Gooner how this plan would enthuse (urrgh) you as it may finally see Wenger's parsimony paying dividends

    Anonymous 9:24

  39. 95% of the rules UEFA have made in the last 18 years have been for the benefit of the clubs who were in the G14.
    Meaningless Champion’s League group games, extending the qualifiers from 1-4 in Europe's bigger countries, seedings based over 5 years. All of these rules were designed to ensure that the bigger clubs would basically always qualify and have easy games once they got there, thus ensuring they would earn enough money to keep their domestic rivals yards off the pace (eg Arsenal turnover 313m, Spurs 113)
    Yet this wasn't enough, despite many of the G14 clubs having sugar daddies themselves, they got scared when first Chelsea and then Man City starting outspending them.
    New rules had to be put in place. Luckily after 18 years of dividing all of the money amongst themselves and investing in larger stadiums and increasing their merchandising operations a simple answer appeared.
    Allow clubs to only be able to spend what they earn. With larger stadiums, bigger fan bases and also the extra 40-50 million pounds CL money no clubs outside Europe’s elite will be able to challenge.
    This is nothing to be proud of. Once great clubs like Bayern Munich, AC Milan and Arsenal have become nothing but cowards. Instead of trying to take on new threats head on they have campaigned to keep their unfair advantages.
    UEFA and the leading clubs no longer care about how to make tournaments more exciting (eg returning to knock out football) but only care about making as much money as possible and safeguarding their position through either fair or foul means.
    One final word of warning though, Liverpool, one of the leaders of the G14 have somehow managed to miss out on the gray train for once. Now the very rules they used to safeguard their position could very well cause their demise if they don’t succeed in qualifying again straight away.

  40. @Anonymous 9:24,

    Nice analogy, but if the company were really a steel works, would the owners/shareholders be content to produce the best quality steel if that meant they had to bear huge losses year after year? Or how would the employees feel if their owner suddenly said, "You know what, I'm bored of steel. I think I'll switch my investment into copper". Or if that generous owner suddenly lost almost all his net worth in a stock market crash? Etc, etc.

    Yes, I am indeed an Arsenal fan, but if you believe that my support for the UEFA initiative is driven purely by parochial loyalties, you are sorely misguided. As an example of my "Swiss" neutrality here, I can't help noticing that the other team in North London has also qualified for the Champions League (or at least a qualifying match for the Champions League) without spending a £1 bln.

    I think we'll have to agree to disagree on this one. While understanding your point of view, I'm not going to suddenly change my mind. I dare say that the same goes for you.

  41. @manacle,

    I won't disagree with you that football is more of a business now than it ever was, but just a couple of points.

    If the G14 set up the Champions League to ensure that they would always qualify, they didn't do a particularly good job, as there have been plenty of occasions when these teams have not qualified. If you want an example, look no further than your own "final word of warning" about Liverpool. Given that they have indeed not qualified for the Champions League, some might see this as less of a warning more a case of you shooting holes in your own argument.

    As I'm sure you are aware the G14 was disbanded in 2008 to be replaced by the ECA (European Clubs Association), which represents 144 clubs from every single one of the 53 national associations in Europe. This group voted unanimously at their general assembly to support the UEFA proposal.

    Michel Platini has also stated that Romand Abramovich and Sheikh Mansour both supported the new proposal, so either this is a case of turkeys voting for Christmas or they genuinely think that the initiative has some merit.

  42. @ The Swiss Rambler

    In any other business there wouldn't be a problem with investors using infinite amounts of their own personal wealth to fund ventures. Football is now a multi-billion pound business, so I don't see why it should be any different.

    Personally, I don't know how your view could be seen as anything other than parochial when you're lending support to regulations that will institutionally allow the elite, of which Arsenal are one, to spend more than the Evertons, Villas, etc. purely because their football-related revenues are greater. You will also have the wherewithal to outbid them for for the best young talent available as well, so how are they supposed to catch up ?

    I'm with Manacle on this one. I don't really expect you to change your view but I'd love to see you flesh-out how the chasing pack can usurp the "Sky 4" without outspending them.

    Anonymous 9:24

  43. Good blog by the way, the press in the UK haven’t been half as thorough in looking at the pros and cons and reasons behind this significant change in UEFA rules.
    144 clubs from 53 countries?
    From my understanding they are generally the top/largest teams from each country. So we are talking about the top 1-4 clubs in each country voting for the biggest clubs being able to spend the most, possibly not very surprising.
    I would say the G14 clubs did a very good job (certainly the English ones) for themselves. The one thing they didn’t count on though was the rise of Chelsea backed by a Russian billionaire.
    The benefits of Premier League and Champions League prize money in the last 14 seasons has seen Utd and Arsenal in the top 4 every season and Liverpool 10 out of 14. I don't think anyone at the time fully realised the snowball effect of CL qualification and Premier League success, but is has greatly changed the landscape and it is now all but impossible to move from 8th to 4th without major investment (which will now be banned)
    Possibly City aren't bothered about the new rules as they expect to have done all their major spending within 2 years (buying mainly younger players and investing in their academy) and fully expect to be earning CL money by then. They also have plans to increase their stadium capacity which will generate even more money.
    It’s going to be one helluva game of musical chairs and teams won’t want to be left standing when the music/spending stops in 2 years time, because if they are they may be kept standing for a very long time.

  44. Good blog by the way, the press in the UK haven’t been half as thorough in looking at the pros and cons and reasons behind this significant change in UEFA rules.
    144 clubs from 53 countries?
    From my understanding they are generally the top/largest teams from each country. So we are talking about the top 1-4 clubs in each country voting for the biggest clubs being able to spend the most, possibly not very surprising.
    I would say the G14 clubs did a very good job (certainly the English ones) for themselves. The one thing they didn’t count on though was the rise of Chelsea backed by a Russian billionaire.
    The benefits of Premier League and Champions League prize money in the last 14 seasons has seen Utd and Arsenal in the top 4 every season and Liverpool 10 out of 14. I don't think anyone at the time fully realised the snowball effect of CL qualification and Premier League success, but is has greatly changed the landscape and it is now all but impossible to move from 8th to 4th without major investment (which will now be banned)
    Possibly City aren't bothered about the new rules as they expect to have done all their major spending within 2 years (buying mainly younger players and investing in their academy) and fully expect to be earning CL money by then. They also have plans to increase their stadium capacity which will generate even more money.
    It’s going to be one helluva game of musical chairs and teams won’t want to be left standing when the music/spending stops in 2 years time, because if they are they may be kept standing for a very long time.

  45. @manacle,

    Cheers. I can't argue with any of that :-)

  46. well here is the thing, lets take chelsea for instance as they regularly show a loss, but each season for a while there have been a steady increase in turnover(same for manCity). couldnt you possibly say that this investment in buying players is a way for the brand to build itself up? By bringing in quality players and winning things they have bought in more followers and money to the club, without the initial spend they wouldnt have been able to make headway.

    At one point is investment in infracture and investment in players 2 different things. Much like a big company bringing in the best CEO's, engineers or whatever in higher salaries can cause a ripple effect but cause short term losses im guessing improving the brand, having the youth team play against high calibre players could all be seen as investment and not pointless spending.

    For instance i can see chelsea falling into the category because with quite a few more expensive players off the books they will wipe 10 million+ from their staff expenditure, also add in the fact that they didnt sack ancelotti and thats another 15 million save compared to last season. The 7.5 million from extra tv revenue will make up for the loss at quarter final level so that even out. They are still at a loss but now its closer to that ideal fairplay level. Chelsea have turned it around, what right do UEFA have to tell manCity that they cant invest in players as a way to make money in the long run.

  47. @anonymous (2:40),

    Sure, investment in new players, creating short-term losses, might make sense if it leads to future success. I, for one, have no problem with that. My concern is if there is no move towards self-sustaining profit.

    Chelsea have made huge losses every year since Abramovich took over. Admittedly, their losses have been getting smaller every year, but that's not so difficult when you start with a loss of £140m. You could well be right that Chelsea get to break-even in the future. As you rightly say, their last reported loss of £47m included a severance payment of £13m and their TV money will increase by at least £10m. They will also benefit from being able to deduct around £9m of depreciation on fixed assets. On the other hand, their accounts also included a £29m profit on player sales (ironically, largely made on transfers to Man City), which they're unlikely to repeat, unless Mourinho takes Lampard and/or Ashley Cole off their hands. Of course, with UEFA's "acceptable deviation", they don't actually have to get to break-even, just get close.

    Your point about improving the brand is a really good one in the sense that Man City earn a pitiful amount of commercial revenue at the moment: only £18m a year, which is £52m less than their Manchester neighbours. I strongly believe that Premier League clubs have a lot to learn from their continental counterparts in terms of maximising commercial revenue, having got lazy of the continual increases in TV revenue (including the Champions League).

  48. I think the Fair Play rule is devised to take some of the lunacy out of football.

    There's a huge bubble in player transfers and wages because some clubs operate on a different stratosphere and on different rules.

    Take the recent Milner transfer stories. Aston Villa refused City's £20 million offer because they didn't want him to leave and supposedly they want £30 million to let him go.

    I'm sorry but £20~30 million for James Milner? Liverpool paid £22 million for Fernando Torres and he's one of the best strikers in the world!

    Then we have the Cesc Fabregas stories where Barcelona values him around £30 million but supposedly Arsenal sees him as a £50~80 million player due to his talent, remaining contract years, and future potential.

    The big clubs pay big bucks to win transfers from the smaller clubs. The smaller clubs with transfer kitty to spend are having to deal with tougher negotiations for new players because the other clubs know they got money in the bank.

    Then we have talented prospects in mid/smaller clubs requesting ridiculous wage bills because they could be getting ridiculous offers from bigger clubs.

    I don't think this "industry" can sustain such practices in the long term.

    I see this as a vicious cycle where all parties involved end up screwing each other over due to inflated transfers/wages which the majority of the clubs can't even afford.

    Football is a sporting entertainment BUSINESS. This is not how a respectable industry/business should be run.

  49. By the way, I meant to say Professional Football, not Football in general. Thanks again for The Swiss Ramble for a great read!

  50. Martin Samuel's take on Monsieur Platini's plan:

    Take a running jump, Michel Platini... we can see right through your plan

    Hello and welcome to part 137 of an irregular feature entitled How Football Works.

    Last Thursday, Michel Platini, president of UEFA, finally pushed through his fabulous plan to cement all the richest, biggest clubs in Europe into the top league positions for the next 200 years, starting from 2012.

    He calls this financial fair play. In short, it means that Manchester City have two years to spend £300million on players and ensure they are in the top four, after which the drawbridge will be raised and any future investors in football will not be allowed to incur debt.

    So, if Everton were to find a buyer, his spending power would be limited proportionately to the turnover of the club, which would again be limited by the fact that Everton are mired in mid-table and need to invest in success before receiving any financial return.

    That is what happened at Chelsea. Roman Abramovich put in big money, the club grew, became part of the elite and may soon be self financing.

    No wonder Abramovich is such a fan of Platini’s law; it stops a potential rival mimicking his method and bursting through the glass ceiling. Now he is on the right side of it, Abramovich wants the whole thing double-glazed and reinforced.

    To continue with the Everton example, even if sold to Sheik Mansour’s wealthier cousin, the club would not have as much money to spend as Liverpool, owned by the two biggest cowboys since Alias Smith and Jones.

    This is fair, apparently.

    Then, on Friday, the 2016 European Championship was awarded to France. It will be the third major international tournament the country has hosted in 32 years.

    Naturally, Platini made all the right noises, said his loyalties were divided as he had played so long in Italy and had many friends in Turkey, who were also bidding, but it was inescapable that UEFA had delivered the right result for their French president.

    For just moments after the decision had been announced, Platini revealed its very handy byproduct.

    ‘France can now upgrade all their stadia to make them the same standard as other countries in Europe,’ he said.

    And with money conveniently provided by the state, too. So this is how it ties together. French football gets a total government-financed refit just as UEFA is introducing strict financial controls.

    Platini says ground improvements will not be part of debt calculations but that does not matter as most major English clubs have already rebuilt stands and facilities themselves and are still paying off the loans.

    Fortunately, their French equivalents will not be so encumbered because as a result of hosting the first 24-team European Championship, they will benefit from increased capacities and other revenue-generating schemes, such as improved corporate areas, leading to additional turnover and therefore greater spending power under Platini’s rules for financial — ahem — fair play.

    Only a cynic would not support UEFA on tighter economic controls, I am regularly informed, yet only a fool could not see through them. Unless, of course, this is all just a happy coincidence.

    Quelle chance, as they would say in France, no doubt with increasing regularity since the scrupulously fair Monsieur Platini took charge.

    Anonymous 9:24

  51. @anonymous 9:24,

    Oh dear, another one that believes you can only succeed by splashing the cash. Still, it's not entirely unexpected that the Daily Mail manages to introduce a xenophobic element to the discussion: it's all a cunning, anti-English plan by the dastardly Frenchies. Do me a favour.

    Of course, no team in any league has ever succeeded without spending big (I think £1 bln was your estimate). Good management, tactics, team spirit, youth scheme, etc have never been worth a thing. Nope, the only solution is to whip out the cheque book and buy your way to success.

    By the way, I'm sure you didn't notice it and almost certainly did not care, but that very same Martin Samuel column ended with a paragraph on Crystal Palace's administration. I wonder whether their fans are so enamoured with the wealthy benefactor model today?

    Just one other thing. Before you decide that Samuel is your guru, please remember that this is the man who once wrote, "Manchester City are all that is wrong with English football".

  52. I think the evidence would suggest in recent years in England you can only succeed by splashing the cash (either through transfer fees or staff costs)

    Apart from Portsmouth every one of these winners would have been in the top 4 for that season for "staff costs".

    FA Premier League Champions 1996-2010

    1996 Manchester United
    1997 Manchester United
    1998 Arsenal
    1999 Manchester United
    2000 Manchester United
    2001 Manchester United
    2002 Arsenal
    2003 Manchester United
    2004 Arsenal
    2005 Chelsea
    2006 Chelsea
    2007 Manchester United
    2008 Manchester United
    2009 Manchester United
    2010 Chelsea

    FA Cup winners 1996-2010

    1996 Manchester United
    1997 Chelsea
    1998 Arsenal
    1999 Manchester United
    2000 Chelsea
    2001 Liverpool
    2002 Arsenal
    2003 Arsenal
    2004 Manchester United
    2005 Arsenal
    2006 Liverpool
    2007 Chelsea
    2008 Portsmouth
    2009 Chelsea
    2010 Chelsea

    Critics should be more disgusted not by Manchester City spending 250 milion pounds in trying to crack the top 4 but by the fact that that is how much they have had to spend (and still not succeeded,yet)

  53. Since 2000:

    Premier League Champions 2000-10

    2000–01 Manchester United
    2001–02 Arsenal
    2002–03 Manchester
    2003–04 Arsenal
    2004–05 Chelsea
    2005–06 Chelsea
    2006–07 Manchester United
    2007–08 Manchester United
    2008–09 Manchester United
    2009–10 Chelsea

    FA Cup Winners 2000-10

    2000–01 Liverpool
    2001–02 Arsenal
    2002–03 Arsenal
    2003–04 Manchester United
    2004–05 Arsenal
    2005–06 Liverpool
    2006–07 Chelsea
    2007–08 Portsmouth*
    2008–09 Chelsea
    2009–10 Chelsea

    League Cup Winners 2000-10

    2000-01 Liverpool
    2001-02 Blackburn Rovers*
    2002-03 Liverpool
    2003-04 Middlesbrough*
    2004-05 Chelsea
    2005-06 Manchester United
    2006-07 Chelsea
    2007-08 Tottenham Hotspur*
    2008-09 Manchester United
    2009-10 Manchester United

    Premier League Podium 2000 -10

    Manchester United

    Manchester United

    Manchester United
    Newcastle United*

    Manchester United

    Manchester United

    Manchester United

    Manchester United

    Manchester United

    Manchester United

    Manchester United

    So... in the last 10 years, of the 30 domestic honours available, 4 trophies have gone to teams outside the accepted top-4.

    And... if we look at the automatic Champions League places, only Newcastle has broken up the hegemony - for one pitiful year !

    Does it look like there's been any REAL financial fair play in operation over the last decade ?


    I posted the article in full because it's topical and relevant. Aside from the key issue, Samuels makes an important point in that French clubs - including Lyon, Bordeaux, Lille & Marseille - will benefit from modernised or new stadia with increased capacities and increased earnings potential - at zero cost.

    I'm Irish and I didn't see any xenephobia or anti-English paranoia, so...

    On to the real issues:

    Of course there are many factors that contribute to success but IMHO money has become the overriding factor in the last 10 years and my list would seem to indicate this.

    I'm sad that the Premier League's upper-echelons have almost become a closed shop. I'm sad that a well-run club like Everton with managerial stability, sensible player acquisition policy and good fanbase has had such meagre success over the last decade. And I'm sad that a decent club like Manchester City have required such enormous wealth to have a realistic opportunity of winning silverware.

    Where was the cries of anti-competitiveness as Liverpool, Chelsea and Arsenal sprinted futher and further away from those in pursuit ?

    And now UEFA want to regulate a buffer between the haves and have nots, keeping them in their place and all under the guise of "financial fair play.

    Do me a favour !

    Anonymous 9:24

  54. P.S:

    The Crystal Palace situation is a sad one. It's never nice to see a club on the verge of extinction as it's the fans who suffer.

    This Platini plan has really got my goat because it presents itself as something it's not.

    Anonymous 9:24

  55. Wow a 50+ comment :D
    Shows how lively this place is :)

    I think some of us have to see this rule in a broader perspective. This rule will not cause well-run, but financially pegged clubs like Everton to lose the chance of ever breaking into the top four.

    Rich investors can simply focus their efforts on improving their clubs' revenue such as stadium expansion/construction, facilities improvement, and other operations.

    Bigger revenue, better staffing and more transfer kitty. More transfer kitty, more quality players. More quality players, (hopefully) better results. Better results, more exposure. More exposure, more fan base. More fan base, more money. More money, more revenue. Rinse and repeat.

    I think that's exactly how Arsenal grew into a modern "big club".

    Therefore, I argue that this Financial Fair play rule will actually enhance the quality of clubs by encouraging wealthy benefactors to invest in healthier areas of the club to allow them to grow bigger on their own.

  56. Manchester City still have a chance to become successful despite the FFP rules;

    a) they are tying to buy the stadium (so far Manchester City Council are trying to resist) and can afford to increase capacity and corporate facilities. This will eradicate the cost of rent and increase ticket sales.

    b)Qualification for Champions League wpuld boost turnover significantly assuming they qualify out of the group stages.

    c) Commercial revenue could be oosted significantly especially in the Middle East.
    Abu Dhabi have purchased the rights for the Premier League TV rights for the Middle East, paying I think three or four times more than the last deal so their profile will be raised over the coming seasons.

    It's not inconceivable that in say five years time they could have a turnover similar to Chelsea's which should be enough to compete at the highest level.
    Simlarly if Spurs come up with a viable new stadium plus Champions League money etc they cold become financially competitive.
    Chelsea have a big enough turnover to compete and are now established as a club players want to play for so I don't see where the problem is with these new rules certainly in England.

  57. @Steven,

    I think you're absolutely right.

    My own belief is that the English clubs have lagged behind the continental teams in making the most of their commercial opportunities. To be fair, they have not really needed to, given the rise in TV money, but the financial fair play regulations should encourage them in this direction.

    If I were a crafty owner trying to get round the rules, I would certainly look at providing my team with a new sponsorship deal. The fair value clauses would not allow ridiculous amounts, but there are plenty of high-paying deals out there that could be used as a comparative which would significantly increase a club's commercial revenue.

    Similarly, the rules allow for investment in the stadium, which can help boost match day income.

    The Champions League revenue should then be icing on the cake. Actually, the way that Champions League revenue is distributed means that most of the revenue is allocated just for reaching the group stages. Further progress obviously helps, but it's not that big a differential.

  58. @SwissRambler

    Thanks for your reply.I didn't realise most of the money for the CL was allocated in the group stages because I found how the pool money was allocated quite difficult to understand.
    Regarding your comment regarding sponsorship it was a question I meant to ask but you have answered it. Two or three sponsorship deals worth a combined total of say £100m plus would raise eyebrows and scrutiny but let's say a dozen contracts worth on average £5m per annum could be difficult to disprove. Add to this a nice £15-20m shirt sponshorship plus a £10m stadium naming rights deal, plus lucrative summer touring deals and hey it's not that difficult to have commercial deals worth £100m per year.

  59. @steven,

    You've got it. In fact, my next article will focus on a continental team that legitimately earns £135m a year from commercial revenue.

    If you want a detailed explanation on how UEFA distribute the Champions League revenue, I wrote about this a couple of weeks ago:

  60. @ Swiss Rambler

    Look forward to seeing your next article on the continental European team that earns an annual revenue of £135m.

    Perhaps you'll also explain how a provincial club like Blackburn Rovers or Stoke City can reach beyond their natural hinterland to create a revenue stream capapble of realistically challenging the "Sky 4".

    (Anonymous 9:24)

  61. Hi again, thanks so much for putting up the details regarding Everton, sorry for late reply to the post been offline for far too long! I'll check out your other blog 'Why has nobody bought Everton' and give it a good read, thanks again for your very quick response!

    I stupidly left here without bookmarking your page (it's ok, I've slapped sense into myself again!) and won't make that mistake again, thanks again for your hard work!


  62. A couple of late thoughts on this: I believe the regulations will make football a fairer competition - at least among the "best clubs". The critical voices here - as I understand them - points to the possible consequence that "lesser clubs" will find it harder to become one of the "best". Your thorough presentation above gives reason for such a fear. But still, as strong "brands", large fan bases and sponsorships counts for much of the financial status of a club, I see small changes from the traditional pattern: Big teams come from large cities (more fans, stronger (local) sponsors, brands with traditions).

    It would be interesting to read an article about Leeds United's chances to come back to the top: What are the chances they will be among England's top 4 in - say - ten years? Quality football aside, what must they do to get there? I believe this would be an interesting test to the effects of the UEFA regulations - and probably a good read on football finances as well. ;)

  63. @DS_Helder,

    Yes, I think that you're essentially correct.

    Although it does not deflect from your large cities argument, one interesting statistic for you: no London team has ever won the European Cup or Champions League, which is quite surprising, given the financial potential.

    I must say that your suggestion about an article on Leeds is also a good one. I may take a look at that if I can be dragged away from the World Cup :-)

  64. Sorry for the late comment, but a quick note. I see you describe these rules as 'the lesser of two evils', but I think you've missed the downside. In principle, the objection is as you suggest, but in practice there is a much bigger issue.

    The regulations as phrased basically leave arbitration of disputes in Platini's pocket. I don't believe for a moment that he won't try and use that for political gain - in future, he will decide how much of their actual budget each club will be allowed to spend.

    At a stroke, this turns UEFA from a nominal democracy into a virtual dictatorship.

  65. @Dave,

    I understand why someone would be suspicious of the motives of organisations like UEFA (and FIFA), but I would point out that the European Clubs' Association (representing 137 leading clubs) voted unanimously in favour of this proposal, so it's not completely undemocratic. Whether the "smaller" clubs would agree is another question.

  66. As an arsenal fan, I am impressed by how Wenger has maintained CL status consistently on a low transfer/high wage policy during the stadium financing era that may be drawing to a close. We can take some pride in already adhering to the coming financial fair play regulations. But one aspect of the soft landing you note that concerns me is that Chelsea, Liverpool and ManU have won many more trophies during this same period and will have ample opportunity to adjust their practices to conform to the regulations.

    Hasn't Arsenal lost an opportunity to make strategic acquisitions that might have led to greater on field success and still have been capable of adhering to the coming regulations when it becomes necessary? One way to build greater commercial success is through identifiable stars and sporting success. Arsenal have done well and there is no guarantee that some greater spending would have led to trophies the last five years. But as a policy, do the coming of these regulations in a phased in manner validate Arsenal's strategy or indict it for not making the most of the possible opportunities available during the last five years for ambitious pursuit of trophies? Similarly, will Arsenal really benefit once the rules are phased in? Having more experience managing a club in this manner might be an advantage of some sort, but there is plenty of time for clubs to adapt before the regulations could be applied.

  67. @limestonegunner,

    Once the club made the decision to move to a new stadium, taking on significant loans, they did not really have a choice financially, especially when the property market turned sour. Having said that, they are now in a very solid position and definitely have a large pot of money available for transfers.

    I take your point that a couple of marquee signings would be beneficial, both on the pitch and from a commercial perspective. To my mind, the biggest threat to Arsenal financially is if the fans become fed up of no trophies and do not renew their season tickets. If that were to coincide with the completion of the property development (and the exceptional profits from that side of the business), there may be a few question marks about the business model.

    On the other hand, that is the point when Arsenal should be in a position to negotiate vastly improved commercial contracts, as the relatively poor deals that were linked to the front-loaded funding for the stadium come to an end.

    It's difficult to judge Arsenal's policy at this moment. As I wrote in another article, to my mind, there are effectively two policies: what might be termed the youth policy and the extreme youth policy. It is only really when the later generation reaches the first team, that we can properly assess it. I'm talking about Wilshere, Lansbury Emmanuel-Thomas, etc.

    There is plenty of time for other clubs to adapt to the Fair Play regulations, but in practice they can only do this by reducing costs, which means lower wages and transfers and/or better academy. As you rightly say, Arsenal are much more experienced with this approach, so theoretically will cope better. Let's hope so.

  68. @swissrambler, again, thanks for your very thoughtful response. You are right, that the jury is still out. There is also an opportunity cost for recruiting new fans that an extended period without trophies. Happily, we also play an exciting and appealing brand of football that attracts enthusiastic support.

    We certainly do hope that the advantages of fiscal prudence and youth investment will be evident in the coming years and that we can think of the last several as a short period of sacrifice (only in relative terms, after all we still make the CL and go deep regularly in that tournament) and preparation with the building of the stadium that laid the foundations for years of future dominance.

  69. alex marc, a.marc@hispeed.chNovember 3, 2010 at 4:30 PM

    Dear Kieron,
    I was able to put a name to your wonderful work by listening to a podcast on BTP.
    We share quite a few things:
    - we are Arsenal fans...I had my season ticket before I had an appartment when I moved to London a few months before Wenger was appinted!
    - we live around Zurich...Horgen is not far from Feusisberg.
    - we are both strangers (I'm French originally)who have adapted and truly enjoyed Switzerland over the years and are married to locals (my wife is from Liechtenstein!)
    - we both work(ed) in the world of finance...I have spent my entire career in banking.
    - we are both passionate about football...all leagues, all players, how it works, how it should not be working etc...

    The difference is that you have channelled that interest in a masterpiece: your blog/website!

    All I have managed to do is coach kids team where my son is playing.

    Bottom line is that I cannot get enough of football: any nation, any level, any age group, etc...

    At your convenience I would really enjoy inviting you for lunch somewhere around our common neighborhood or around the Emirates (food is too bad there though!) as I assume you must be going from time to time (I still have 2 season tickets).

    please let me know what suits you best.

  70. Hi there,

    Just stumbled upon this post while doing some research on the Financial Fair Play regulations, and I have found this to be most insightful.

    I do have a query though. May I know where the following rule which you had quoted may be found in the FFP regulations:

    “For the calculation of relevant expenses, management must include any expenses incurred in the reporting period in respect of the activities of the club that are not otherwise recorded in the audited annual financial statements of the reporting entity that forms the basis for preparation of the break-even calculation.”

    Thank you!

  71. @Jie Ming,

    Thanks for the kind words.

    This article was based on an earlier draft of the FFP regulations, the UEFA Club Licensing Discussion Paper from March 2010, where that quote was located in section 13.5 Other potential disclosures and adjustments.

  72. Excellent article, which I think could have been named "Everything you wanted to know about FFPR but were afraid to ask".

    I can see your point in responses that though it is fair to say that these rules look like the big boys have built their own lifeboat and are not prepared to let anyone else on board, these rules might be better than the current status quo.

    In spite of this, it is fair to say that those outside the lifeboat will have a lot of swimming to do before they can catch up. One concern that I have is that I don't believe that Abramovich is in this for the love of Chelsea and it is a question of prestige for him. I was originally under the impression that if club like Chelsea made huge losses and these were written off by the generosity of their "sugar daddy" owners, this could circumvent the rules, but it appears not.

    Having said that, I do have a question which I don't know if you are qualified to answer. On a couple of occasions, the European Union has intervened in football to rule that certain practices were illegal, such as Bosman and the number of foreign players that could be fielded in a match. I am aware the EU has rules on both "free movement of capital" and "free movement of persons". If (e.g.) Abramovich decided that he wanted to sign most of Europe's top players (again), what is there to stop him writing off the debts owed to him, and then saying that these rules breached EU law (if indeed they do).

    With regard to "free movement of persons and capital", I have often thought that the "transfer window" might be illegal, but I am aware that the EU will generally only act if there is a complaint from a person with standing.

    My concern is that the sugar daddies are in this for the prestige rather than the money, and there is no prestige in having an unsuccessful team.

    I am aware that the EU has the power to grant block exemptions if all parties are agreeable, which raises the point has UEFA sought such an exemption?

  73. @SpurredoninDublin,

    UEFA has certainly been in discussions with the EU over the possible legal implications of FFP rules, but I'm not a lawyer, so I cannot comment with any great confidence on that issue.

    You can find an article examining the issues at this website in the Regulatory section.

    By the way, if you want to further examine the financial implications of FFP, I have written two later pieces, which you can find here and here

  74. Interesting to hear that there has been discussions with the EU, as that suggests a number of scenarios including the possible grant of a black exemption.

    I worry that without the block exemption, if a sugar daddy isn't happy, he can complain to the European Court that the rules MIGHT infringe the EU rules on free movement on capital. It would not be the first timne a rich man set the rules to favour himself, and when the rules didn't guarantee him success, sought to change him.

    Thanks for the links. They are on the "to do" list.

  75. Hi all,

    Just thought I could suggest a couple of little points on top of what had been pointed out in the legal article that Kieron had linked to, which would apply to more than just competition law. I do apologise if I am mistaken in anyway, for I am not a student of European law.

    That article had, in arguing against EC intervention against FFPR, mentioned the proportionality of the FFPR to securing its objectives of financial fair play. This seems to be turning point as far as the ECJ is concerned: the Bosman ruling was made because of the disproportionate impact that the then transfer rules had on the free movement of labour within the EU (going beyond the need of football clubs to ensure some form certainty of their squad makeup).

    It is suggested that proportionality will be more easily argued from UEFA's side in this day and age, where the football industry has vastly expanded since Bosman's 1995, such that there is a necessity for regulated capital flow, to ensure the long-term well-being of the industry, as well as perhaps related industries such as media and tourism.

    Further, the Lisbon Treaty now recognises the "specific nature of sport", which is an institutional recognition of sport as an activity serving important social, educational and cultural functions. The elevated status that sports enjoys (as, again, compared to 1995) would probably also help the FFPR fend away legal challenges, should they somehow arise or make their way to the ECJ at all. While the Bosman ruling would probably still have been made if decided at the present moment, I would think that the bar for "disproportionality" has been set much higher than before.



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