FFP Regulations in Football – Solution or a Complete Scam? (2024)

Introduction: FFP in Football

Financial Fair Play (FFP) is a set of regulations implemented by UEFA in 2011 to address concerns about the financial sustainability of football clubs. This article examines the rationale behind FFP, its rules and enforcement, and the ongoing debate surrounding its effectiveness.

Why was FFP implemented?

Prior to FFP, some clubs were spending heavily on transfers and player salaries, often financed by unsustainable debt. This created an uneven playing field where wealthy clubs gained an unfair advantage. FFP aimed to:

• Promote financial stability: By requiring clubs to break even over a three-year period, FFP discourages excessive debt and protects clubs from financial collapse. Examples like Portsmouth, Rangers, and Leeds United serve as cautionary tales of the consequences of financial mismanagement. More recent cases like Barcelona's financial struggles further highlight the need for responsible financial practices.
• Ensure fair competition: FFP levels the playing field by preventing clubs from using financial muscle to dominate. However, critics argue that FFP disproportionately affects smaller clubs, hindering their ability to compete with financial giants. Addressing these counter-arguments is crucial for a balanced discussion.

How does FFP work?

For FFP regulations to take place, the following must be respected:

• Break-even requirement: Clubs must break even over a rolling three-year period, meaning their total expenses cannot exceed their total revenues during that period. If a club fails to meet this requirement, it may face penalties.
• Monitoring: UEFA monitors the finances of all clubs participating in its competitions. Clubs must submit annual financial reports to UEFA, including details on the club’s revenue, expenses, and any outstanding debts. UEFA then reviews these reports to ensure that clubs operate within their financial means.
• Reporting and disclosure: UEFA requires clubs to provide accurate and transparent financial reporting, and any material changes to the club’s ownership or financing must be disclosed to UEFA.

The rules prevent clubs from spending more than they earn and require them to disclose their financial information to UEFA annually. Clubs breaching FFP regulations, including fines, transfer bans, and exclusion from UEFA competitions, can face penalties.

How is accountancy used in FFP?

UEFA encourages clubs to invest in their infrastructure and youth systems for long-term sustainability. Therefore, stadium development expenses and all costs related to youth development are not considered when clubs disclose their financial information to UEFA. However, clubs are required to provide evidence of these expenses.

So let us look at what counts i.e. the transfer fees. These are not paid straightforwardly, and that is why many clubs found some ways to go past FFP rules.

For example - a club signed a player on a four-year contract for €20 million. This €20 is not paid straight forward from one club to the other once all papers are signed. Instead, the transfer fee is amortized over the length of the player’s contract. In our case, it is four years. Remember how clubs have to disclose their financial situation every three years? That means the club will report that they only spent €5 on him. This is how Chelsea has managed to get around the FFP rules. People have been expecting them to be punished after spending more than €1 billion in a year. However, the Blues signed the likes of Enzo Fernandez, Nicolas Jackson, Moises Caicedo, Mikhaylo Mudryk and Andrey Santos, on eight and half year contracts, allowing them to spend more than all of the Serie A, Ligue 1, and Bundesliga clubs COMBINED during the last three transfer windows.

Evolution of FFP:

In 2022, UEFA introduced the Financial Sustainability Regulations (FSR) to replace the previous FFP rules. This marked a significant evolution in financial regulations for European clubs. Here are some key changes:

• Focus on long-term sustainability: FSR places greater emphasis on a club's long-term financial viability, considering factors like historical financial performance and future projections.
• Squad cost control: FSR introduces stricter limitations on squad spending, expressed as a percentage of a club's revenue.
• Debt restrictions: The new regulations impose stricter limits on club debt, with tougher sanctions for breaches.
• Increased transparency: FSR requires clubs to provide more detailed financial information, enhancing transparency and accountability.

Enforcement and Penalties:

Clubs breaching FSR regulations face sanctions, including fines, transfer bans, and exclusion from UEFA competitions. Recent examples include:

• Everton: In 2023, Everton received a ten-point deduction in the English Premier League for breaching FFP regulations (pre-dating the FSR implementation).
• Sheffield United: The club faces a potential point deduction in the English Championship for similar reasons.
• Barcelona: The Spanish giants are facing significant financial difficulties, raising concerns about potential FSR breaches.
• Inter Milan: The Italian club was fined for failing to comply with the break-even requirement in 2022 (under the previous FFP rules).
• PSG, Juventus: These clubs were also fined in 2022 for similar offences (under the previous FFP rules).
• Manchester City: The club is currently under investigation for alleged FFP violations, highlighting the ongoing challenges in enforcing these regulations.

Benefits and Drawbacks of FSR:

The new FSR regulations aim to address some of the shortcomings of the previous FFP system while maintaining its core objectives. However, similar debates regarding benefits and drawbacks remain:

• Benefits:

1. Enhanced financial stability: FSR's focus on long-term sustainability and stricter financial controls aims to prevent clubs from falling into financial jeopardy.
2. Fairer competition: Squad cost control measures could potentially level the playing field for smaller clubs, although concerns about established clubs' advantages persist.
3. Increased transparency: More stringent reporting requirements promote greater financial transparency within clubs.

• Drawbacks:

1. Limiting investment: Stricter spending controls could still hinder smaller clubs' ability to compete at the highest level.
2. Potential loopholes: Concerns remain regarding the effectiveness of enforcement and the potential for clubs to exploit loopholes in the regulations.
3. Impact on player transfers: The new regulations could potentially restrict player movement and impact the overall transfer market dynamics.

Youth Spending and Big Clubs:

A significant criticism of FFP, including the new FSR, is its exclusion of youth development spending from financial calculations. This disadvantages smaller clubs who may rely heavily on developing their own talent due to limited financial resources for transfers. Conversely, established clubs with substantial revenue streams can invest heavily in both transfers and youth academies, potentially exacerbating the competitive imbalance.

Examples like Chelsea and Manchester City, known for their extensive youth academies and significant transfer spending, highlight this concern. While these clubs may comply with FFP regulations, their financial muscle allows them to develop and acquire talent at a much larger scale compared to smaller clubs struggling to meet both ends financially. This raises questions about the true level of competitiveness fostered by FSR and the potential need for further adaptations to address the challenges faced by smaller clubs in developing young talent.

Conclusion

FFP, now FSR, aims for financial stability and fair play in European football. While it helps prevent financial collapse and potentially levels the playing field, challenges remain. Addressing concerns about youth development spending and ensuring effective enforcement are crucial for a truly sustainable football ecosystem. The debate continues, but continuous dialogue is key to finding the right balance.