In a climate of increasing worry about the finances of clubs at all levels, UEFA’s Executive Committee approved in 2009 the concept of Financial Fair Play. Among the stated aims were to encourage clubs to compete within their revenues thereby introducing rationality in club finances, to encourage long-term investment in youth development and infrastructure, and to limit inflation in transfer fees and wages, all to protect the long-term viability of European club football. When these objectives solidified into regulations, to be implemented for seasons from 2011 onwards, it became clear that UEFA had decided it was its duty to save the clubs from themselves in the absence of any sign of restraint as a global economic crisis kicked in.
The regulations specified an ultimate sanction of exclusion from UEFA competitions, through the non-issue of a UEFA club licence, for any club failing to abide by their requirements. The classic scenario of a club over spending to succeed should become counter-productive, the aim for most of qualifying for Europe being denied to those who have not grown their finances first to pay for the increased spending. Firstly, no club must fall behind in an agreed schedule of payments to other clubs, their own employees or the tax authorities. The club must demonstrate through financial documents its ability to continue as a going concern until the end of the licensed period.
The first assessment of clubs will take place in the season ending in 2014, for a period covering from the season beginning in 2011, that is the current one. Thereafter, assessments will take place every season for rolling 3-year periods. If a club cannot break even for any 3-year period it can use a surplus from the preceding two years to offset the deficit. A deficit of more than a specified amount, initially 5m euros, will cause exclusion from competition. To allow for a change in method of operating as the rules kick in, the deficit can exceed the allowable deviation by 45m euros for the first 3-year period and the next year’s if it is covered by owners, reducing to 30m euros for each of the next 3 years’ rolling 3-year periods. Income considered in break-even calculations must be genuine income. Gifts, or over market-value sponsorships by owners are not allowed to count. In addition, if wages exceed 70% of total revenue or net debt exceeds 100% of total revenue the club comes under further scrutiny with possible eventual exclusion.
Many clubs will struggle to meet the requirements, especially when the initial special allowances run out in 2018. No-one knows what UEFA will do in the case of widespread non-compliance, as seems possible. They may back down, the threats may be nothing more than a bluff, but we have to assume they will follow their own regulations and will exclude those in breach, no matter the history or pedigree of the club in question. Of course, many unambitious clubs will sail along without caring, having no ambition to play in Europe anyway. It’s possible that the regulations could be used as a basis for enforcement on domestic competitions too, as was recently suggested at the Parliamentary Committee into Football Governance.
It’s a moot point whether Newcastle have ambition to play in Europe under the current owner. We’ll find out in the coming years, but let’s assume it’s so for the sake of argument. Mike Ashley’s determination to reduce wages and to pay back debt ( mainly to himself it has to be said) would seem to be a useful policy in the circumstances, especially as it goes against the Premier League norm somewhat. In the face of continuing crazy transfer spending, Ashley’s current attitude to spending looks far more likely to result in the desired break-even result. It may not happen this year but it seems entirely possible over the next 3 years up to 2014.
If Newcastle look like being one of the few candidates to meet the FFP requirements with comfort, improving into a regular top-6 or top-7 side where the issuing of a UEFA competition licence might actually matter may prove another matter entirely. As already stated, the route of buying success beyond the means of the club’s income is no longer available. However, Newcastle’s potential for the creation of revenue is surely greater than all but those top clubs. Being restricted to spending only their income gives Newcastle a financial advantage over most. It is again entirely possible therefore, that in an 8-team competition at the top to qualify for Europe, Newcastle could finish ahead of 1 or 2, in which case they would qualify. There is an argument that the very top clubs, those currently commonly occupying Champions League-qualifying spots in the table, have made their purchases already and FFP will merely set in stone their advantage over everyone else, the main beneficiaries being those who previously have supplied open cheque books and won’t in the future need to. Though it won’t help the chances of Newcastle ever breaking back into the top 4, the possibility of that happening by any other means were virtually nil anyway.
Financial Fair Play would seem, in the current situation, to be broadly favourable to the chances of success for Newcastle both on and off the pitch. While this is encouraging for fans of the club, even if it were not, FFP would deserve support. It’s an attempt to limit the excesses of clubs who cannot seem to do it themselves. It will increase the chances of survival of clubs who otherwise might have followed each other to mutual lemming-like destruction, and who knows, perhaps the halting of the inflationary pressures on the game’s finances might one day result in more affordable tickets for fans everywhere.