Playing ball with Financial Fair Play?

Are clubs taking FFP seriously? What will UEFA do about non-compliance?

Published 20 October 2012 | Authored by: Karish Andrews, Iain McDonald

In September 2009 UEFA's Executive Committee unanimously approved a new Financial Fair Play (FFP) regime for European football. The principal motivation for these groundbreaking regulations is to prevent European clubs from pressing the self destruct button in what has become a race to the bottom in terms of financial recklessness.


Fuelled extensively by spiralling player wages, some of Europe's most famous clubs have veered towards complete financial meltdown. Indeed, UEFA general secretary Gianni Infantino has stated that FFP is imperative "to safeguard the long-term health of European football".

With the aim of redressing the balance, FFP has at its heart a "break-even" requirement which essentially states that clubs' outgoings (primarily player wages and transfer fees) cannot exceed their income from football related activates.

From the 2013-14 season UEFA will have, as part of its club licensing regime, the authority to sanction clubs who fail to "break-even". However, this requirement is already relevant as the assessment of whether clubs are breaking even will be determined from their 2011-12 and 2012-13 accounts.

Whilst there is little argument surrounding the logic of imposing a greater degree of financial prudence across European football, two key questions have emerged as the first FFP monitoring period progresses: are clubs taking FFP sufficiently seriously and, if not, is UEFA willing to take tough action against those in breach?

A refresher on FFP

First and foremost, the FFP rules are only relevant to clubs competing in UEFA competitions, namely the Champions League and Europa League. They do not relate to domestic competitions, although English Premier League clubs are currently consulting on whether to bring in similar rules.
Secondly, while popularly referred to as the "break-even" rules, there are a number of exemptions and exclusions available to clubs that can enable them to break-even for the purpose of the FFP rules without breaking even in the pure accounting sense. In an effort to promote clubs' investment in youth development and infrastructure any expenditure on stadium, training ground and/or academy development will not be counted in the break-even calculation. Additionally, UEFA has recognised that it may take time for clubs to adapt to FFP. In light of this, it has incorporated a threshold of "acceptable deviation" within which clubs may fail to break-even. For the 2013-14 calculation, clubs will not be sanctioned if they fail to break even by up to €5 million over the previous two years (or up to €45 million if the shortfall is covered by equity investment). From 2015-16, the acceptable deviation thresholds reduce to €5 million (non-equity) or €30 million (equity) over the previous three seasons, effectively a maximum of €10 million per season.

Are clubs taking FFP seriously?

Since the introduction of FFP most interest has surrounded the activities of clubs with rich benefactors who have invested huge sums in the pursuit of success. The most notable examples in England are Manchester City and Chelsea.

Manchester City

Manchester City's 2010-11 accounts reported that its wage bill stood at an eye watering 114% of turnover. According to the football finance blog Swiss Ramble the club's loss for the same accounting period stood at £142 million (even taking into account the various FFP exemptions and exclusions). This situation has been recognised as precarious by City's sporting director Brian Marwood who is reported as saying "we've got a huge amount of work ahead of us to make sure we are sustainable."

It could be argued that City has done little to address its huge wage expenditure in the period since its 2010-11 accounts were filed. Concurrently, although transfer spend has decreased significantly in recent years, this summer's player expenditure still considerably outweighed any player sales. City spent approximately £54 million and recouped £21 million (effectively an outlay of £33 million).
No doubt City will point to increased revenue growth as evidence of efforts to comply with FFP. Its sponsorship deal with Etihad is worth a reported £400 million over 10 years while increased TV revenue will be on offer following the Premier League's £3 billion domestic broadcasting rights deal with BT and Sky. However, even with unprecedented revenue growth it would seem unlikely that City will be able to make up its shortfall by 2013-14.


Chelsea's 2010-11 accounts show a loss of £67 million which should represent a more manageable task in terms of FFP. This is particularly so when considering Swiss Ramble's assessment of that loss. Of that £67 million, £42 million is attributable to exceptional items which, theoretically, should not recur in future accounts. Additionally, with £18 million of Chelsea's loss attributable to depreciation of fixed assets and youth and community development (which fall outside the FFP calculation), Chelsea's projected FFP loss could arguably be as low as £8 million in future years. Such a loss would fall within the acceptable deviation threshold provided that Mr. Abramovich makes the appropriate equity investment into the club.

The Rest of Europe

Whilst English clubs struggle to varying degrees to come to terms with FFP, this summer has seen the emergence of what appears to be two FFP basket cases. In France, Paris St. German has spent an unprecedented £127 million on Ibrahimovic, Silva and Lavezzi. Meanwhile in Russia, Zenit St. Petersburg's £64 million transfer deadline day swoop for Hulk and Witsel raised sceptical FFP eyebrows. It is almost impossible to envisage how these clubs could offset such huge expenditure with comparable revenue growth and has to be taken as a sign that these clubs are set for a FFP face off with UEFA come 2013.

In Italy, clubs are also struggling to comply. AC Milan, Inter and Juventus reported losses on average of more than £70 million (before FFP adjustments). Milan vice-president Adriano Galliani has admitted that "FFP hurts Italy. There will no longer be patrons that can intervene. Until now people like Berlusconi and Moratti would be able to support us, but with the fair play it will no longer be possible."

Will UEFA have any 'teeth' on FFP?

So with some clubs clearly struggling to comply with FFP, what fate does UEFA have in store?

The FPP rules allow for eight possible sanctions that UEFA might impose, including reprimands/warnings; fines; deduction of points; withholding of revenue from UEFA competitions; prohibition to register new players for UEFA competitions; restrictions on the number of players that a club may register for UEFA competitions; disqualification from a competition in progress; and/or exclusion from future competitions.

Many doubt that UEFA will deliver in imposing the harsher of these penalties. Arsenal manager Arsene Wenger has stated that "UEFA want to create a situation where clubs with deficits cannot play in the Champions League, but I question whether they will be able to force it through" and Liverpool owner John W Henry has commented that "the question remains as to how serious UEFA is regarding this".

Clarification on this issue has been provided by Alasdair Bell, UEFA's director of legal affairs, who says that any club that exceeds the break even limit by more than 20% will face the most severe punishments. In the first instance, UEFA will force offending clubs to withdraw up to five players from their 25-strong Champions League squads for the 2013 competition. Repeat offenders will face being thrown out of the Champions League from the following year.

This stance avoids the scenario of UEFA excluding clubs from the Champions League in the first instance, by offering them a second chance before enforcing its ultimate sanction. To exclude marquee clubs from the Champions League would be a case of UEFA cutting off its nose to spite its face and would surely increase the prospect of a European breakaway league.
UEFA President Michel Platini has insisted that adherence to FFP will be harshly implemented. Indeed UEFA has already flexed its muscle by imposing suspended exclusions from UEFA competitions and fines on Turkish clubs Besiktas and Bursaspor, and Hungarian club Gyori for failing to pay creditors when due (decisions which have effectively been upheld by CAS).

It is clear that many of Europe's elite clubs face significant challenges in adhering to FFP and some of its leading lights are unlikely to remedy past excesses prior to 2013. If UEFA follows through on its promise to enforce FFP rigorously then it is likely that we will see some trimmed down Champions League and Europa League squads in the 2013-14 season. Beyond that, only time will tell whether clubs will test UEFA's threat to exclude persistent offenders from their competitions and, if they do exclude them, whether the legitimacy of FFP is challenged through the courts or by a breakaway league.

Iain McDonald is an associate and Karish Andrews is a senior associate in the Sports Team at law firm Lewis Silkin LLP ( You can follow Lewis Silkin's Sports Team on Twitter (@SportsLS).

About the Author

Karish Andrews

Karish Andrews

Karish is an associate at Lewis Silkin. Karish acts for top level football clubs, rugby clubs, agents, players and investors in football.  His expertise includes buying and selling clubs, player transfers, sponsorship, representation and services contracts, endorsement contracts, financing deals, football regulation and investment in football clubs and players.

Iain McDonald

Iain McDonald

Iain is an associate at Lewis Silkin. Iain's work involves advising sports clients on commercial issues including broadcasting rights, branding, image rights, sponsorship and performance contracts. He also assists Lewis Silkin's sports employment group with sports governance, compliance and the commercial aspects of player transfer.

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