FINANCIAL FAIR PLAY: HOW CHELSEA HAVE AVOIDED FFP SANCTIONS

In just two transfer windows, Chelsea have spent in or around £650 million on new players under Todd Boehly’s ownership. In the recent January transfer window alone, Chelsea signed eight new players, taking their spend to over £300 million, which included a British transfer record. The question on everybody’s lips; how are Chelsea able to stay within the remit of Financial Fair Play after expending such amount of money in a relatively short space of time?

Financial Fair Play (FFP)

 

In a bid to combat and control the financial capital of the world’s richest clubs, FFP regulations have been introduced by UEFA in the past decade. Such rules have been laid out to facilitate sustainability and prevent financial doping.

 

UEFA FFP REGULATIONS

 

The FFP regulations were introduced by UEFA in 2009 and brought into force at the outset of 2011/2012 season. The basic principles of the FFP is to ensure that football clubs are not spending more than they earned and also prevent football clubs from getting into financial trouble that could potentially affect their long term survival.

 UEFA’s FFP regulations only allow a £53 million loss over a three year rolling period along with a newly introduced soft wage cap which limits spending on wages, agent fees and travel expense to an initial 90% of revenue commencing in the 2023/2024 season.

 

PREMIER LEAGUE FFP REGULATIONS

 

The Premier League has its own laws regarding club finances and Premier League FFP regulations, as clubs are allowed to lose £105 million over a three year period.

Large fines and/or point deductions can be given as punishment for clubs that do not comply with the rules as can be seen in the recent case of Manchester City, with the Premier League charging the club for breaching more than 100 rules over multiple years.

 

How have Chelsea complied?

 

In simple terms: Amortisation. Chelsea have spread the cost of each transfer across the length of the contract of the player, to prevent extensive single year expenditure. For instance, the £88.5 million signing of Mykhailo Mudryk would be valued at around £11 million per year over his eight and half year contract. The same would apply to the transfer of Enzo Fernandez, who joined on a British transfer record of £107 million on an eight and half year contract.

There is a risk element to offering such large contracts. Each of the players signed on long term contracts are likely to be on high wages, leading to the wage bill increasing.  With the new soft wage cap coming into force from the 2023/2024 season, this will mean that clubs will only be able to spend 90%, then 80% and then 70% of their income on wages, agent fees and net transfer costs.

Further, clubs are only allowed to register 25 players in the Premier League, with only 17 non home grown players allowed, potentially leading to a squad size dilemma. In Europe, clubs are also allowed to register 25 players at the outset of the season, with 3 new players being registered for the knockout phases, meaning Chelsea had to omit Pierre-Emerick Aubamayeng from their European squad for the remainder of the campaign.


Criticisms of FFP


The most notable draw back of the FFP regulations is that it deters competition by protecting the wealthy, established clubs and disenfranchising the less wealthy clubs. Essentially, the teams fighting to secure European football are denied an opportunity to attract investment that could enable them to challenge and compete with the richer clubs.

The regulations are stringent with many clubs finding ways to be creative around the regulations. Nevertheless, various clubs have broken FFP regulations since they were introduced. Most recently and as mentioned above, Manchester City are the latest side to break FFP rules with more than 100 breaches over multiple years. In 2022, eight clubs, including PSG, Inter, AC Milan, Juventus and Roma were fined for failing to comply with UEFA’s “break even” requirement, effectively meaning the said clubs outspent their income.


Response and Next Steps 


UEFA have responded by moving to close the loopholes around stretching transfer fees over long contracts. From the summer of 2023, clubs will only be able to spread transfer fees over a five year period. Under UK regulations, English clubs will be able to offer longer deals but will not be able to stretch transfer fees beyond five years.

The questions to be answered are various; Has FFP been able to achieve its desired effect? The regulations have not been able to curb high wages and transfer fees inflation. This has led to UEFA introducing sustainability regulations as mentioned above, set to come into effect in the 2023/2024 season with gradual changes over a three year period.

It will be interesting to see the impact that the new rules have. Whilst UEFA is looking to redress the imbalance created by salary overspending, something which the FFP regulations have proven to be ineffective in addressing, focus should not be lost on other issues, which include the unsustainability of soaring transfer fees, another aspect creating unfair competition on the transfer market.