Friday, February 3, 2012
Impact of FFP is overplayed
The January transfer window was the predictable damp squib, with flawed transfers such as Carlos Tevez's escape from Manchester City taking up far more column inches than the excitement of Bradley Orr's move to Blackburn Rovers.
UEFA's Financial Fair Play (FFP) initiative, which begins with the 2011-12 accounting period, is being heralded
as the reason for clubs' new-found frugal ways. Last January's £215 million outlay and the drop in spending to £55 million this year is used as concrete proof of FFP's early impact.
The figures were skewed 12 months ago by Liverpool's £58 million purchase of Andy Carroll and Luis Suarez as well as their offloading of Fernando Torres to Chelsea for £50 million. Those three deals alone accounted for half the spending in the entire 2011 window and double that of 2012. They were not representative of regular spending.
In 2010, Premier League clubs spent only £30 million between them. So the supposed "reduction" is actually double the outlay of two years ago, contradicting those reports that FFP is already a success.
Each window is more about individual projects rather than collective exuberance. It is not FFP which will eventually slow down the market, but austerity measures forced upon clubs by falling transfer prices across the entire continent by a collective belt-tightening in every industry and not the tub-thumping of UEFA president Michel Platini and general secretary Gianni Infantino.
Football clubs are having to concentrate on paying off their previous over-spending rather than adding to it because this "paper money" simply no longer exists, while other clubs are no longer prepared to match the fees paid out in past for losses to be recouped.
That's not to say clubs are ignoring UEFA's new rules, which allow clubs to make a maximum loss of £37 million over a rolling two-year period. It is more that certain clubs are buying for specific reasons.
This window it was Queens Park Rangers and Newcastle United who were the big movers, Newcastle still reinvesting the cash from the sale of Carroll and Jose Enrique to Liverpool and QPR aiming to secure a second season in the Premier League.
Some fans hope that Manchester City and Chelsea, the two English clubs most at risk, are targeted when UEFA comes to examine lavish ways and heavy financial losses.
The ultimate penalty will be expulsion from European competition.
That is seen as the final sanction among a range discussed by UEFA at last week's summit on finance in football, which revealed clubs lost more than £1.33 billion in 2010 - a 36% increase. UEFA also plans to restrict squad sizes for European competitions, ban new signings taking part in the European competition and also impose points penalties on offending clubs.
But UEFA has had to face accusations that FFP does nothing more than protect the status quo. Chelsea and Manchester City have only been able to break into the Premier League's top four and compete in the Champions League due to the millions of owners Roman Abramovich and Sheikh Mansour bin Zayed Al Nahyan respectively. Manchester United and Arsenal had effectively enjoyed a monopoly on the English game in the modern era until Abramovich arrived.
UEFA's master plan is that its measures cool the transfer market over time, leading to a greater emphasis on youth development and community operations and, consequently, a reduction in the wage burden on all football clubs. It doesn't sit well with football's modern image, or the dream of rags to riches.
Manchester City are already taking steps to move to a more self-sustaining model with plans to invest over £100 million on the Etihad campus which will house a new state of the academy. It's a crucial project not just for the long-term financial stability of the football club, but a tool to work within the boundaries of FFP. Spending on a club's infrastructure, community projects and academy facilities can be offset against operational losses.
UEFA believes that wealthy owners looking for a play thing will be far more likely to invest in football if they no longer have to shell out £30 million on a player and £200,000-a-week in wages, instead ploughing cash into the local economy on what is, essentially, a level playing field.
But while some defend the possible negative effects of FFP, there is no denying that oligarchs get involved in football as a status symbol of success, not to rejuvenate derelict industrial areas as City will with the land adjacent to Eastlands. The likelihood of a team being bankrolled into the elite has undeniably been reduced.
"These rules are not excluding new investors," said Jean-Marie Aulas, president of Lyon. "But I believe that new investors can come into the market attracted by rules that mean there is a stop to losses and debts. It's a very good condition for an investor to come to knowing he can't lose more than a certain amount."
Would Sheikh Mansour have bought Man City if he would first have to build an Academy and spend at least 10 years seeing that project come to fruition with high-quality youth talent producing valuable players which could raise transfer funds to reinvest in the team? There is only one answer, and it does not match the views of Aulas.
It is yet to be seen whether UEFA's newly-created Club Financial Control Body will approve the £400 million, 10-year sponsorship deal City signed with Etihad, a deal many believe was falsely created to circumnavigate the new rules, an accusation strongly denied by the club.
The agreement is worth more than twice the previous world record, JP Morgan Chase's £187 million sponsorship of the new Madison Square Garden in New York. Arsenal's deal on the Emirates in 2004 was valued at £90 million over 15 year - £48 million for shirt sponsorship and only £2.8 million-a-year on stadium naming rights. UEFA insists it will make stringent checks on all revenue streams to make sure they do not "cheat" the rules.
There were in fact only 13 clubs monitored based on 2010 accounts that would have failed UEFA's FFP test. Most these clubs have worked in great detail on the regulations, in tandem with UEFA, to make sure they get their books in order.
UEFA may have acted in the past, previously banning Real Mallorca from the Europa League for entering administration, but no matter what the facts show on paper FFP will doubtless be seen by some as a white elephant unless there is a notable, big name scalp.