FFP Turned Round Premier League Clubs’ Losses and Helped Restore Liverpool

Sports

February 26th, 8:58am

London - David Conn

A view of Manchester City's Etihad Stadium. (Getty Images)

In the days after Manchester City were found to have seriously breached Uefa’s financial fair play rules by overstating their sponsorships from Abu Dhabi companies, some of the ensuing discussion rapidly diverted from that guilty finding to questioning the merits of FFP itself. Approved by Uefa in the 2009 season after years of wondering how to drag European football from overspending on players’ wages, FFP has since transformed top division clubs’ finances overall, and was introduced by the Premier League in 2013. City’s impatient ambitions after the great fortune of the 2008 takeover by Sheikh Mansour of the Abu Dhabi ruling family were based on him bankrolling mega-spending, rather than the FFP principle that clubs should not spend more than they make in revenues and not rely on owner funding. Mansour’s executives were adversarially hostile to FFP and threatened to sue Uefa in 2014 as its club financial control body (CFCB) assessed City’s deficit at around €180m, far greater than the €45m allowable then. The idea has grown that FFP was specifically introduced after the big clubs lobbied to prevent Manchester City competing with them, based on the new Abu Dhabi fortunes. Senior people who were involved in developing the regulations reject that; one recalled that discussions about incorporating financial discipline into Uefa’s licensing system continued for years and the detailed work began on creating FFP in 2008. City were in crisis then, at risk of becoming a classic illustration of the need for such rules. Their owner for a single season, the former prime minister of Thailand Thaksin Shinawatra, had backed heavy spending but was then accused of corruption in his homeland and had his assets frozen. City made a loss of £33m but Thaksin had no more money to fund it. That year, 13 clubs in the Premier League, the world’s richest, made losses, and six subsequently fell into some form of crisis after their owners decided they could no longer keep pouring the money in. Mansour’s purchase was a startling reversal of City’s luck over the previous 30 years – apart from inheriting the City of Manchester stadium after the 2002 Commonwealth Games. City could have fallen like Portsmouth, or Leeds, or Bolton, then in the Premier League, who finally went into administration last year after their owner, Eddie Davies, called a halt after writing off £180m, or Málaga, the Spanish club whose crisis was cited by Uefa when FFP was finally introduced. The then Uefa president, Michel Platini, had talked about debt being the issue, but as accountants worked on the principles, they formed the view that debt can be taken on for investment purposes, but losses, overspending, was the key problem driving clubs into trouble. Platini and his officials notably said at the time that they were not aiming to stifle investment in football but to encourage it for long-term development. Owners’ money could not count to reduce allowable losses if it was just paying excessive wages but they could make unlimited investment in stadium improvements, youth development and other infrastructure. Uefa can point to Liverpool’s recovery since then as an example of the system working as they hoped. In 2009-10, Liverpool were falling into financial crisis under the debt-loading ownership of Tom Hicks and George Gillett; they finished seventh in the Premier League, made a loss of £20m and owed the Royal Bank of Scotland £200m. When crisis bit and RBS in effect took control of the failing club, John W Henry ultimately bid and fought the court battle to buy the club partly because he believed FFP made it a viable prospect. A private equity investor and owner of the Boston Red Sox, Henry believed from his business experience that if unlimited spending on players backed by owner funding were allowed, nobody could compete with a Gulf state. However, the FFP framework restricting losses meant that his FSG ownership could plan for rebuilding Liverpool through its revenues. In almost 10 years since his FSG takeover, they have not put money in to bankroll player signings, but have advanced a £110m interest-free loan to build the new main stand, ending years of Anfield stadium stagnation. Revenues have grown steadily as the recruitment of players and, transformationally, Jürgen Klopp as manager have improved the team’s performances. Liverpool were always a big club and similar growth would not produce a Champions League victory and impending Premier League title for many others. The issue of “competitive balance” is real, as success is consolidated in a few rich clubs, but that was not the problem FFP was designed to solve. The richest clubs were carrying off the trophies before, as they do, but unlimited spending was no rational model for football competition, because a club needed a Gulf state backer, as City and the Qatar-owned Paris Saint-Germain had, or a Russian oligarch as Chelsea had, to fund the necessary wage bill. In 2017, after six years of FFP, clubs across Europe’s top divisions recorded an overall profit for the first time, €615m, finally reversing years of losses. Premier League clubs were also transformed into profit immediately FFP was introduced in 2013, although City and a small group of other clubs had voted against it. City got through their initial years of massive losses by agreeing a settlement with Uefa in 2014, involving relatively modest restraints. Making agreements with Uefa to enable large initial investment is now built into the FFP system. City are now looking to build a global football empire and not share more money to facilitate competitive balance: they led the campaign by the Premier League’s “big six” in 2018 to have more of the international TV rights than the other 14. Contrary to some of the fury expressed this month, City have not been found guilty of breaching FFP rules by exceeding permitted loss limits. The finding, which City are appealing against, is that they overstated their Abu Dhabi sponsorships in their accounts and in their submissions to Uefa, a different issue entirely. The Guardian Sport

from Asharq AL-awsat https://aawsat.com/english/home/article/2150411/ffp-turned-round-premier-league-clubs%E2%80%99-losses-and-helped-restore-liverpool