Financial Fair Play rules not yet ‘set in stone’

Manchester, England: Losses at Europe’s top clubs rose by half during 2010, preliminary research from UEFA has shown. A UEFA survey released earlier this year showed losses of 1.2 billion Euros during 2009 at the continent’s top clubs but Andrea Traverso, UEFA’s head of club licensing, revealed that the figure for 2010 could be up by around 50 per cent, citing problems in Germany, France and Holland.

“We are doing a preliminary analysis of the figures,” said Mr Traverso. “We have done about half and the figures in the major markets have worsened. We will have the full figures in July or August but that is the level we expect.”

Rules can be adapted to market conditions

The revelations of spiralling losses at Europe’s clubs come as UEFA also revealed that the new Financial Fair Play (FFP) measures aimed at curbing excessive spending on wages that have caused much of these arrears are not ‘set in stone’.

Asked at the Soccerex conference in Manchester today (March 30) how UEFA could prevent mega-rich owners of clubs wiping out end-of-season losses through a one-off payment such as a sponsorship, Mr Traverso said: “These rules are not set in stone. They can be adapted from time to time to reflect market conditions.”

The introduction of the FFP will start next season with clubs being asked to provide regular budgets and details on regular payments, such as transfer fees and tax, and be followed by a rule that clubs must break even starting in 2013/14.

Clubs continuing to rack up unsustainable losses under the FFP will be excluded from UEFA’s club competitions.

The new rules come on top of UEFA’s new club licensing system, which - apart from Spanish side Malaga - have seen only a handful of clubs from smaller European members unlikely to challenge for the Champions League or Europa League banned from continental competition.

Worries about ‘fair values’ of sponsorships

Ian Ayre, the managing director of Liverpool, was a last-minute replacement on the same Soccerex panel for Aston Villa’s French manager Gerard Houllier.

“Everyone is keen to see how it will be applied? Will the sanctions be applied?” asked Mr Ayre rhetorically. “The rules should be hard and fast. What will stifle this initiative is people easing themselves into it.”

Mr Ayre was asked what his reservations were about the FFP. In response, he revealed that the Merseyside club is actively looking for a naming rights’ sponsor and he cited concerns over how UEFA would establish a market value this over related transactions between owners and clubs.

“From our perspective that is a real concern as that is something we are talking about now,” said Mr Ayre. “When we renewed our shirt sponsorship deal it was up 200 per cent. Is that the fair value? It’s a real challenge. I can’t say that we can’t achieve it, but it’s a concern.”

A monitoring group to be set up

Mr Traverso revealed that external specialist monitors will be used by UEFA’s Club Financial Control Panel to ensure that additional money put into clubs must be by unrelated third parties or that deals with related parties, such as sponsorships or naming rights contracts for new stadia, would be assessed against benchmarked ‘market values’.

He added: “We are putting in place a team of specialists to monitor all these deals and are monitoring them at European level.”

“[An injection of money] might go through once or twice but if they are disproportionate to the value of other deals, the panel [of monitors] will have a conversation and can restate the value of the deal to the market value. The point is whether naming rights are concluded to a figure that is above the fair market value.

“Clubs have to disclose this and these must be benchmarked. Clubs will be called to account and to explain if [these deals] are concluded with related parties or third parties. A monitor will be done on all those deals.“

The latest update on FFP suggests that monitors from UEFA’s panel will have to gauge the value of sponsorships and naming rights across all 53 countries that are members of Europe’s governing body in very different economic and geographic locations.

Mr Traverso did not explain how UEFA would be able to gauge the value of sponsorships or stadia naming rights deals in such a diverse membership ranging from Albania and France to Belarus and Denmark.

“Costs must be lower than income to a deviation of 5 million Euros,“ added Mr Traverso. “Money from related parties, from beneficiaries, will be regulated but [clubs] will only be allowed to inject money for the long-term good of the club. We want to regulate the amount of money owners put into clubs in terms of transfers and wages. There is an acceptable deviation. What is difficult is how the individual clubs react individually.”

Shift from money transfers to youth development

Speaking at a later session, Marcus Keane, director of business development at Dutch club Ajax, suggested that the shift away from big money transfers to youth development would benefit clubs such as his own that are no longer able to compete with European giants such as Real Madrid in transfer fees.

“We clearly cannot box ourselves up against the major brands and we have to find a position“, said Mr Keane. “FFP is pushing more towards youth development and that’s the position we take.”

Earlier, Clarke Carlisle, chairman of the UK’s Professional Footballers Association (PFA), voiced the PFA’s support for the FFP initiative but he also cautioned that the ‘soft cap’ on squad sizes that the new rules will bring in could cause a glut of unemployed players in the short term.

“The first thing clubs look to address when cutting costs is the wage bill“, said Mr Carlisle. “Those players that are trimmed from clubs vying for European competition will filter down the system. This will reduce the chances of players down the leagues when contracts are renewed.“

“The upturn in unattached players will even out in the long-term. This will also place a considerable whole in the war chest of the bigger clubs and in that interim period that may give smaller clubs a chance of success".