Financial Fair Play in Championship

[Svlad Cjelli]

Would this not mean some relegated PL clubs having to ship their entire squad to meet the regulations?

Not the whole squad when they have £16M a year parachute payments for the first two years of relegation - so they'd need to trim, but if they were sensible they need to now.

[Tony Le Mesmer]

Would this not mean some relegated PL clubs having to ship their entire squad to meet the regulations?

Not the whole squad when they have £16M a year parachute payments for the first two years of relegation - so they'd need to trim, but if they were sensible they need to now.

With the size of the wage bills being carried by the likes of Sunderland, any genuine 1st teamer would have to go. £16m is peanuts compared to the loss of revenue from relegation.

[ZacNaloen]

If premier league wages weren't so inflated it really wouldn't be as much of an issue, and I think because of the uefa rules anyone who really wants to compete for the Europe places will have to comply with the rules... which basically means all of the premier league as it will be an effect that has to cascade down the league positions because as soon as you like competing you have to pull your wages in order...

[Hoop Blah]

Would this not mean some relegated PL clubs having to ship their entire squad to meet the regulations?

To an extent that already happens and I guess the thinking is that if the clubs competing in Europe are having to follow a similar set of rules then the rest of the division won't be too far out of line with it either.

It'll be interesting to see the impact of the rules in the Premier League where those not competing in Europe will (unless I've missed something) be free of the finacial controls those unlike those in Europe. You could see someone like Newcastle not qualify one year, with for example Liverpool qualifying, and being able to spend more on wages and signings than than Liverpool.

It might make the mid-table Premier League teams concentrate on the top of the league instead of just not getting relegated.

[Row Z Royal]

It might make the mid-table Premier League teams concentrate on the top of the league instead of just not getting relegated.

Would this not drive them to further excess than merely staying in the Prem has already? It might push financial midgets over the edge.

[Svlad Cjelli]

It all depends how vigorously it's enforced in the PL - by which I mean how serioulsy clubs are bovvered about European competition and stick the the UEFA version.

You may be right though that relegation-threatened clubs bet the farm even more on staying up because they know that going down will cripple them.

And this doesn't really say what will happen to clubs which *already* have massive debts.

[Row Z Royal]

And this doesn't really say what will happen to clubs which *already* have massive debts.

For starters, it'll stop them increasing the over draft. Surely servicing the debt would hit the "outgoings" side of the balance sheet and fall within the UEFA bracketing.

Further down the line, with missed CL places or whatever, the debt will be a greater demand on the outgoings and playing staff/other costs will have to be cut to meet the rules.

[Terminal Boardom]

Somewhat ironic that the AGM which will include a discussion on finances should be held in Cyprus

[Svlad Cjelli]

They always have it abroad - and it's always at zero cost to them - Thomas Cook pay for it as a sponsorship deal.

[Sarah Star]

http://swissramble.blogspot.com/2010/10/how-manchester-city-could-break-even.html

That was the article I was thinking of, though on re-reading it doesn't cover what I was talking about. Still, I am absolutely certain I read somewhere that clubs can't artificially turn "gifts" from the owner into revenue by massively overcharging for something, the owner or major shareholder needs to receive equity.

But they don't need to - "gifts" are allowed to be counted as income under FFP rules - just as long as they are given and not lent.

This isn't about restricting income, it's about making sure that what is "income" is legitimately that - and that no more than a certain proportion of that realistic income is spent.

How does this work with the money SJM has invested in Reading as I understood that was a loan he could recall at anytime if he wanted?

[ZacNaloen]

It was converted to shares long ago now

[Svlad Cjelli]

http://swissramble.blogspot.com/2010/10/how-manchester-city-could-break-even.html

That was the article I was thinking of, though on re-reading it doesn't cover what I was talking about. Still, I am absolutely certain I read somewhere that clubs can't artificially turn "gifts" from the owner into revenue by massively overcharging for something, the owner or major shareholder needs to receive equity.

But they don't need to - "gifts" are allowed to be counted as income under FFP rules - just as long as they are given and not lent.

This isn't about restricting income, it's about making sure that what is "income" is legitimately that - and that no more than a certain proportion of that realistic income is spent.

How does this work with the money SJM has invested in Reading as I understood that was a loan he could recall at anytime if he wanted?

It is - but this wouldn't be retrospective, so any new money put in would have to be non-loan to could as "income".

[Hoop Blah]

It might make the mid-table Premier League teams concentrate on the top of the league instead of just not getting relegated.

Would this not drive them to further excess than merely staying in the Prem has already? It might push financial midgets over the edge.

The way I was looking at it the top clubs wages would be brought back into line, to an extent at least*, and so the mid to lower clubs would have a target that is more achievable in sight. If Liverpool are restricted to 60% of revenue but Newcastle aren't then Newcastle's current wage bill might be more than Liverpool are allowed and for someone like Villa or Bolton it might mean that a small extra gets them much closer than the £30-50m they're probably behind at the moment.

* unless the sugar daddies are ready to just gift the money instead of loading up with debt etc

[Row Z Royal]

I don't think it'll address the spending=success culture we have though.

[Svlad Cjelli]

I don't think it'll address the spending=success culture we have though.

People are already starting to realise that's not valid, though.

[Sarah Star]

There was an article in The Independent which gave some interesting info on this. Annoyingly, they have taken down (don't know why), but here's a copy:

Championship clubs gamble futures on promotion jackpot

Differing experiences of Preston and Blackpool illustrate the precarious nature of finances in the second tier.


When, three years ago, the Labour government of the time scrapped plans for a super-casino in the north-west it seemed Blackpool would have to do without big-time gambling.


However, at Bloomfield Road they were pushing all their chips on to the bet marked "Premier League". The latest Deloitte Report into football's finances reveals that in their 2009-10 promotion season the Tangerine dreamers oversaw a 123 per cent increase in the wage bill to a level that was a frightening 134 per cent of revenue. That is clearly unsustainable – unless a club won promotion, and the £80m windfall that entailed.

Blackpool's gamble paid off, though it was a very close-run thing given going up only followed a late run into the play-offs, in which they overturned the odds to defeat Nottingham Forest and Cardiff City.

Unlike many gamblers Karl Oyston knew when to quit. The Blackpool chairman refused to blow his Premier League cash, instead imposing a wage ceiling for players of £12,000 a week last season. His reluctance to invest in the playing budget contributed to Blackpool's relegation but, thanks to the parachute payments, they return to the Championship in much better financial shape than when they left it.

But what if the gamble had failed? Seventeen miles down the road from Blackpool is Preston North End. They also bet on promotion to the top flight. They came desperately close. In 2001 they lost the play-off final to Bolton Wanderers. In 2005 they lost the final to West Ham United. In 2009 they were beaten in the semi-finals by Sheffield United. Preston did not spend heavily on transfers – their record buy remains David Healy, signed for £1.5m in 2000 – but the wages add up on average gates of around 13,000. And, like Blackpool, it is not a wealthy town; attendances are price-sensitive while opportunities for selling corporate entertainment are limited.

According to Deloitte Preston spent 108 per cent of revenue on wages in 2009-10. At the end of that season they faced a winding-up order from the taxman. It was survived only through a takeover by Trevor Hemmings, a locally-born septuagenarian businessman. The funds, incidentally, may have been released through his company selling Blackpool's famous tower a few months earlier.

Hemmings drastically slashed the £11.6m wage bill, bringing in trouble-shooter Maurice Lindsay, better-known for his rugby league links, to cut it to £6.5m. "We had to change the culture. We had to move away from the belief that the club would just carry on and someone would eventually pick up the bill," said Lindsay. There was a price to pay. Last month, after 11 years in the second tier, Preston were relegated.

It is not as if Preston, or Blackpool, were big spenders. Their wage bills (Blackpool's was £12.6m) were both below the division's £15m median. And they were dwarfed by the £47m Newcastle United laid out in winning the Championship in 2010 (incurring a £22m loss). Second-placed West Bromwich Albion spent £23m.

Newcastle are, admittedly, a special case, given their support and stadium, but just as significant is that they, and West Brom, were in receipt of £8m relegation parachute payments which enabled them to maintain the bulk of their Premier League players. These payments will next season be increased to £48m over four years. Other Championship clubs receive £2.3m a year, League One sides £325,000 and League Two clubs £250,000.

Often as not it is the attempt to bridge the gap that brings clubs to their knees. Next season, for example Blackpool will be picking up £13.7m more in TV-related payments than play-off finalists Reading, who might otherwise be expected to be promotion favourites. Reading thus have a choice, push the boat out and keep the likes of Shane Long and Jobi McAnuff, or sell to maintain a balanced budget.

Previous evidence suggests chairman-owner John Madejski will sell rather than put the club at risk, but not all owners are so prudent. Thus the Football League is considering introducing its own version of financial fair play (FFP) to help those who will not help themselves.

Greg Clarke, the League's chairman, revealed yesterday that Championship clubs were likely to follow Uefa's lead, although there had been some resistance. He said: "Championship clubs voted to look at financial fair play, and in principle decided that was the road they wanted to go down. It's a perfect storm in that a lot of things have come together to make this happen, including, of course, the level of debt in the game – £700m in the Football League, most of that in the Championship – and big losses being racked up by the clubs.

"These things are never unanimous, and a couple of the clubs would rather not have constraints on how much money they can spend," admitted Clarke. The proposals will be voted on at the League's AGM in Cyprus today.

One of the factors leading to this development is the spectre of a 26 per cent drop in TV income when the Football League's new deal comes into operation. "Football finances are difficult," added Clarke, "the UK television deal is less than the last one, and there are no signs that the economy is going to recover quickly."

In addition League One is moving towards adopting the salary cap already in place in League Two. This limits wages to 60 per cent of turnover. It may be a while, however, before this is extended further. Based on 2009-10 figures only Arsenal, Burnley, Derby County, Manchester United, Tottenham Hostpur and Wolverhampton Wanderers, of the 44 clubs in the top two divisions, would not exceed this cap. Blackpool and Bristol City more than doubled it. The punt paid off for Blackpool and, as with all gambling, some will look at the few winners, ignore the many losers, and follow suit. The FFP model may be flawed, but it is needed to protect clubs from living their dreams, and suffering a nightmare.

[Hoop Blah]

I don't think it'll address the spending=success culture we have though.

But that is effectively the same culture the world over and throughout time.

I don't think you can change it because to an extent it's pretty true. Over the long term Resources = Success. Resources don't have to mean spending the most money but it will basically mean the better managers and the better players all of which cost money to acquire and keep.

You can't realistically get away from that can you? You just have to try and make sure that those chasing the dream don't do so without the financial resources to back up their spending.

[Svlad Cjelli]

Indeed - it's a more realistic attitude needed.

Instead of spending = success we need spending more likely to bring success, but no guarantees.

[Terminal Boardom]

As in spending to ensure sustainability...

[Wycombe Royal]

It was converted to shares long ago now

The last accounts I saw still had around £30m of loans on it from him.