By Nick Harris

27 May 2010

Under proposals for ‘Financial Fair Play’ in European football, approved by Uefa’s executive committee today, clubs aspiring to play in European club events will apparently need to start balancing their books from next year, the 2011-12 season.

The word “apparently” is appropriate because it is not yet clear when the balancing must begin; different news reports and agencies claim a variety of dates and Uefa won’t provide final, specific detail until next month.

The cornerstone of the new regulations is that clubs will only be allowed to spend what they earn, although some “benefactor losses” will be permitted during the early years of the scheme.

Sportingintelligence believes the “balancing” begins in 2011-12 on the basis of the report on Uefa’s own website, which states: “After a phased implementation over three years – 2010, 2011 and 2012 –  the main cornerstone of the regulations, the break-even requirement, enters into force for the financial statements of the reporting period ending 2012, to be assessed during the 2013/14 UEFA club competition season.”

Nobody from Uefa was able to clarify dates with certainly today, nor say, yet, on the record, what leeway will be given over specific losses in the years ahead. These details and others will be made public next month.

However, it has been unanimously reported that clubs’ affairs will be monitored on a three-year rolling basis, and that the first year a club could be banned from competition is 2014-15.

From this, we assume the first three “monitored” years will be the three years before 2014-15, or in other words 2011-12, 2012-13 and 2013-14. This would also tally with Uefa’s report today and the phrase “enters into force for the financial statements of the reporting period ending 2012.”

With such a monumental change in the rules, flexibility and consistent monitoring will be the order of the day, but a few key points of the new rules are:

• clubs will be allowed to make total losses of €45m, aggregate, over the first three monitoring years, so, for example, losses of €30m, €15m and nothing would be fine.
• clubs will be allowed to make total losses of €30m over the next three years.
• any money spent on stadium development, facilities and player development is “deductible” from losses.

Using the most recently available accounts of the current Premier League clubs, Manchester City (£93m annual loss in 2008-09), Liverpool (£55m loss), Chelsea (£47m) and Aston Villa (47m), would have fallen foul of the proposed three-year losses in one year alone.

They need to get in shape, fast, or face being banned. The challenge for Chelsea especially is that they are not giants in an economic sense, have a massive wage bill out of all proportion to their income, and remain sustained by a sugar daddy.

Chelsea’s stated aim of a few years ago of being self-sufficient around now is as much of a joke as it ever was. Roman Abramovich has bought the Premier League title three times, failed to conquer Europe and is still bleeding cash at Stamford Bridge at alarming rates. Chelsea also actually registered a decline in income in their last accounts. Unless they start earning much more from sources yet to be discovered, or cut their wages (and face the related decline in performance), they will fall foul of Uefa.

Manchester City are following a similar pattern now. Aston Villa need to cut wages, as do Sunderland (losses £26m), while Liverpool don’t necessarily: their losses come mainly from interest on debts arising from the leveraging of the club by its owners to facilitate their buyout.

Also using the latest financial figures available, clubs with no problems meeting the rules would be Manchester United, Arsenal, Blackburn, Tottenham, Stoke, and, bizarrely, debt-ridden Hull, because they all posted profits last year.

Bolton, West Ham and Birmingham would be “borderline” having made losses of between £13m and £20m each, which after deductions for investment, would probably see them get inside the €45m three-year limit. Portsmouth, as bizarrely as Hull, would be borderline.

Fulham, Everton, Wigan, Wolves and Burnley would all be comfortably within the losses allowed.

It should be stressed the Uefa rules must only be adhered to by clubs aspiring to play in Uefa competitions, namely the Champions League or Europa League.

If a club believes they have no chance of getting into those events, there is nothing to stop them spending as freely as they like. Equally, should a billionaire want to “buy success” for a minnow team from League Two to the Premier League before getting frugal, there will be nothing to stop that person doing so. No doubt arguments will rage if anyone tries, and umpteen legal skirmishes lie ahead as clubs claim massive investment in facilities and youth squads.

The FA and Premier League released a joint statement today saying: “The FA and the Premier League are fully supportive of the principle of sustainability and of football clubs living within their means.

“The vast majority of what has been agreed by Uefa is in line with current domestic regulations and English football will respect any rules put in place for clubs competing in Europe.

“We recognise the difficult task undertaken by Uefa in this process and we have asked that certain issues be monitored so as to ensure these rules do not create unintended consequences such as preventing smaller clubs from having the opportunity to invest the resources required to compete at a higher level.

“We look forward to continuing to work with Uefa as these rules are gradually introduced over the next few seasons.”