New Rules and Potential Changes for Financial Fair Play in Football
Football fans are likely familiar with the term Financial Fair Play (FFP), a set of regulations aimed at preventing clubs from spending more than they generate. This has been a hot topic in recent years, with clubs like Everton facing punishment for breaching the rules and others, such as Manchester City and Nottingham Forest, currently under investigation.
However, it can be challenging to understand the specifics of these regulations and how they may change in the future. So, let’s break down the current legislation and what potential changes could be on the horizon.
FFP vs. PSR
The first thing to note is that both the Premier League and UEFA (football’s European governing body) have stopped using the term FFP. The Premier League now refers to these regulations as “Profit and Sustainability Rules” (PSR), while UEFA has rebranded them as “Financial Sustainability.”
Although the specifics may differ, the ultimate goal of these rules is to ensure that clubs are financially stable and not overspending. It’s worth noting that the regulations may soon align as both organizations strive for similar goals.
Premier League Rules
Currently, each country and league has its own set of rules, but for simplicity, we will focus on the Premier League regulations. In basic terms, clubs must not record a loss greater than £105m over the combined accounts of the previous three seasons. However, there are additional factors to consider, making it more complicated to determine compliance.
For example, a portion of this £105m must be covered by “secure funding” from a club’s owners. This refers to buying more shares in the club rather than simply lending money. This means that a club can only lose £15m of its own money every three years. Any loss exceeding this amount must be guaranteed by the club’s owners. Additionally, certain expenses, such as investments in youth development or community projects, can be deducted from the total loss.
Similar rules apply in lower leagues, such as the English Football League (EFL), with the figures decreasing as you go down the tiers.
A Quick Example
To clarify, let’s use an example. Club X and Club Y both overspend by £18m over three seasons, putting them £3m over the PSR limit. However, Club X has secure funding to cover this amount, while Club Y does not. In this case, Club X is in compliance as the club itself has only lost £15m (the owner’s shares cover the rest). On the other hand, Club Y is in breach of the rules and must produce a financial plan for the next two seasons and offset the losses with additional secure funding.
Harsher Punishments
The consequences become more severe when a club exceeds the £105m limit. In these cases, the club may be referred to an independent commission and face heavy fines or even points deductions, as seen with Everton earlier this season. The Premier League announced that the club would receive a 10-point deduction, putting them in a relegation battle.
Everton’s Case
Last year, Everton was charged with breaching PSR after recording losses of £370m over the 2018-2021 period. However, due to the COVID-19 pandemic and allowable expenses, such as stadium improvements and investments in women’s teams, the club’s total losses were reduced to £19.5m over the limit. The club has appealed this decision, citing mitigating circumstances, and the case is ongoing.
Nottingham Forest’s Case
This year, the Premier League has referred two clubs to an independent commission for breaching the rules. Everton will once again face the panel, while Nottingham Forest must adhere to slightly different regulations due to their time in the Championship. The club’s permitted losses were lower in this division, and they are only allowed £13m of secure funding for the 2020-21 and 2021-22 seasons, in addition to £35m for the 2019-2020 Premier League season.
Closing Loopholes
In an effort to prevent clubs from exploiting loopholes in the system, the Premier League recently banned long-term amortization. This refers to spreading the cost of a transfer over multiple seasons. For example, Chelsea previously signed players to large contracts over several years to avoid PSR penalties. However, the maximum number of seasons that a transfer can now be spread over is five.
Manchester City
Finally, let’s address the elephant in the room: Manchester City. Sky News sports correspondent Rob Harris explains that sweeping changes are expected to take place, but it is unlikely they will be implemented in the near future. Any updates to the current legislation must be agreed upon by the clubs and approved by the Premier League, while also complying with UEFA and FIFA regulations.
UEFA’s Plans
UEFA has also made changes to their regulations, introducing squad cost rules that will require clubs to only spend 70% of their
