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Quick_newsExample of how club wages might be written off to avoid failing Uefa FFP rules

Example of how club wages might be written off to avoid failing Uefa FFP rules

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. . . which accompanies this piece.

NB: this article has been amended on 5 Feb to reflect an earlier error in calculations.

Season 2011-12: Club X loses £101m.

Season 2012-13: Club X loses £39m.

Club X is monitored for first Uefa FFP monitoring period, 2011-12 and 2012-13. All other things are equal and there is no claim that losses were down to youth and umpteen other get-outs. The losses are £101m and £39m.

‘My goodness,’ say Uefa. ‘You lost £140m in our first monitoring period, and the acceptable deviation is only €45m, or about £39m. How do you explain the other £101m?’

‘Well,’ says Club X. ‘You see that big annual wage bill over there, for 2011-12, of £160m. About £101m of that went on players like our rugged captain John Thomas and our dashing midfielder Frank Flash, who both signed their contracts before 1 June 2010.’

‘Aha,’ says Mr Uefa. ‘But are you moving in the right direction?’

‘Of course we are guv,’ say Club X. ‘Haven’t you noticed the way our losses are surging down from £101m to £39m?’

‘In which case,’ says Uefa. ‘You fulfill the criteria in the rule book here. Move along.’

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So to the next monitoring period (which is over three years).

Season 2011-12: Club X lost £101m.

Season 2012-13: Club X lost £39m.

Season 2013-14: Club X loses £41m.

Club X is monitored for second Uefa FFP monitoring period, 2011-12, 2012-13 and 2013-14. The cumulative losses are £101m + £39m + £41m = £181m.

Club X sends a representative to Nyon with a thick file about the great strides in its youth development programme, its community work, its green agenda and brilliant facilities for mums, toddlers and families. Amazingly, the extra set of kit at the academy, the ‘sandwiches for schools’ initiative, the new greenhouse and the new creche have cost £41m. But quality does come dear.

‘My goodness,’ say Uefa. ‘You lost £181m in our second monitoring period, and allowing for the good work deductions, the acceptable deviation is still only €45m, or about £39m. How do you explain the other £101m?’

‘Well,’ says Club X. ‘You see that big annual wage bill over there, of £160m for 2011-12. About £101m of that went on players like our rugged captain John Thomas and our dashing midfielder Frank Flash, who both signed their contracts before 1 June 2010.’

‘Aha,’ says Mr Uefa. ‘But are you moving in the right direction?’

‘Of course we are guv,’ say Club X. ‘If our losses keep surging down like they have from £101m to £39m to £41m that don’t count because that was ‘good’ spend, we’ll be making money soon!’

‘In which case,’ says Uefa. ‘You fulfill the criteria in the rule book here. Move along.’

.

So to the next monitoring period (three years).

Season 2012-13: Club X lost £39m.

Season 2013-14: Club X loses £41m.

Season 2014-15: Club X loses £25m.

Club X is monitored for third Uefa FFP monitoring period, 2012-13, 2013-14 and 2014-15. The cumulative losses are £39m + £41m + £20 = £100m.

Club X can still write off ‘good works’ cash of £41m and will no doubt try to write off more.

But Club X can no longer write off anything on wages, because wages write-offs can only happen in the first two monitoring periods as in the rule book here.

And not only that, the acceptable deviation for the third monitoring period has fallen from €45m over three years to €30m over three years, or about £26m.

And the club has actually lost £59m, or £33m more than allowed.

And the club is in a lot of trouble.

Which shows that the wages write-off will only delay the headache for over-spenders, not negate the need to take action altogether.

Unless Uefa changes the rules before then.

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Last scanned on:
2013-05-28 11:34:43