💷 Why Financial Fair Play (FFP) is so pivotal to our favourite Premier League Clubs

Anthony Joshua went crazy this weekend.

What a performance.

I have a goal to do a full deep-dive into the marauding business of Anthony Joshua as I did for Lewis Hamilton.

Before then however we dive into a very important topic which governs our Premier League clubs at the moment.

Many people are aware of Financial Fair Play. They know it’s importance, but don’t actually know what it is!

So without further ado. A breakdown into the FFP and how it’s impacting our clubs today

One thing I have noticed about the Premier League is that despite being such a lucrative and global business it has never sat at the edge of sporting innovation. Infact typically, the Premier League follows the lead from other sports leagues around the world.

A few examples of things that Premier League does now, but were late to are:

• Embracing social content: Highlights on YouTube and Twitter in particular. The NBA did this for years before the PL cottoned on. F1 under Liberty Media went crazy here.

• In-game technology: Tennis and Rugby set trends here particularly in the UK

• Alternative streaming platforms with broadcasting rights: Amazon had NFL games long before the Premier League allowed them to enter negotiations. Similarly Formula 1 built F1TV for die-hard fans

This trend has followed with sustainability rules for clubs too.

Before FFP it was really easy for a very wealthy owner to buy a football club, pump millions of Pounds into it and run it into a loss-making bottomless pit of cash built on very fragile foundations.

It wasn’t healthy and it wasn’t fair.

In 2011, UEFA introduced Financial Fair Play Rules in an attempt to curb the runaway losses incurred by some European clubs.

Interestingly, today alot of fans think these rules are pointless and don’t add anything to the game but they were voted in by clubs in an attempt to control spending and protect jobs within our favourite clubs.

The rules were simple:

• Clubs that qualify for UEFA competitions could only spend €5million more than they hard earned across the last three financial years.

• That limit, however, could go up to €30m if it is covered by a direct payment from the club owner or a related party.

In 2013, the Premier League took this framework for the UK and ruled that:

• Premier League Clubs can lose £15m over the last three financial years (£5m per season)

• That number can raise to £105million over a three-year cycle if the additional £90m is guaranteed by the club owners

  • Those guaranteed have to be in the form of share purchases too, not just loans given to clubs by owners

The rules seem simple and have been in place for a decade now.

However clubs are still getting caught out!

Lets take Everton.

They received a 10-point deduction from the Premier League for breaching PSR rules recently. Which is wild considering clubs have been aware of the rules for 11 seasons.

They reported a £370m loss over their last three financial seasons(!). An astonishing amount.

However, it’s worth noting that the Premier League allows clubs to have notable exceptions from their Profit and Loss accounts. These exceptions are copied and pasted from the PSR handbook:

1. Depreciation and/or impairment of tangible fixed assets, amortisation or impairment of goodwill and other intangible assets (but excluding amortisation of the costs of Players’ registrations);

2. Women’s Football Expenditure;

3. Youth Development Expenditure;

4. Community Development Expenditure; and

5. in respect of Seasons 2019/20 and 2020/21 only, COVID-19 Costs

When asked to show their books Everton noted big spends on their Women’s team and a new stadium which is being built currently near Goodison Park as reasons why their overspend was so high.

After an exhaustive investigation it was adjudged they had still overspent by £124.5m - £19.5m over the £105m limit.

Outrageous.

As such, they were deducted 10 points in the Premier League some months ago.

Nottingham Forest are the same. They are under investigation at the moment for a smaller, but similar infraction. I did a shortform video(54secs) on their woes and how one player can save them:

There are some common issues with PSR rules at the moment however.

The £105m figure has been the same since the introduction eleven seasons ago. Considering the way inflation has taken over society and the sporting landscape many think the PSR figure should be raised.

Also, the time taken to come to decisions are often brought under question. Everton were deducted ten points in the middle of the season, that was then reduced to six points. For something so black and white many feel that it shouldn’t take so long to determine and should the punishments should be clearer.

Despite the detractors though, PSR has been a net benefit to the game. Clubs are now very wary of the dangers and as such are far more sustainable than ever before.

Similarly, the sustainability has allowed the valuations of clubs to rise exponentially. Brentford for example are exploring a sale at the moment at a valuation of £400m! An insane amount for one of the smaller PL clubs.

PSR helps bring spend control to clubs which allows for greater revenue forecasting which is ideal for potential investors. It’s no surprise how so many of our clubs have been taken over in recent times!

If you’ve made it this far, thank you for reading so much on such an un-sexy topic.

See you next week as always.

Salute.