We are all aware from media coverage over recent years of the financial state of football generally, the wealth of Europe’s top teams such as Real Madrid, Barcelona, Bayern Munich, Manchester United, Chelsea and Manchester City, the wages of leading players and the efforts made to control overspending in football.
Ten years ago UEFA introduced a system whereby any European club wishing to compete in competitions such as the Champions League and the Europa League needed to be licensed by UEFA.
The criteria applied to obtain a UEFA licence covers many areas including, youth development, standard of stadia, personnel and administration and most importantly finance.
Following reported net losses by clubs of €1.7b in 2011 the concept of ‘Financial Fair Play’ (FFP) became a reality and is now part of the regulatory structure of European football and forms a growing part of domestic football regulations.
In essence FFP is centred on the obligation of clubs, over a period of time, to balance their books and break even.
The rules prevent clubs spending more than they earn, require owners to inject capital as opposed to running up debt and ensure commitments are met in relation to the transfers of players, payment of taxes and salaries of employees.
How successful have those efforts been in terms of European club football finance?
Information published in a recent UEFA report shows;
- Overdue payables reduced by 91% between 2011 and 2015
- After 10 years of wages outstripping revenue growth, revenues have grown faster than wages for two consecutive years
- For all 54 member associations of UEFA total revenue in 2014 peaked at €15.6b
- Combined net losses of clubs over the period of FFP have decreased by 70%
The impact of FFP in terms of European club finances has produced impressive results overall.
The FFP auditing system has encouraged clubs to be more disciplined in terms of financial reporting, has led to greater transparency and improved the financial health of clubs and leagues.
Application of FFP is not mandatory in domestic football but one of the key effects of the UEFA initiative has been to focus attention on the financial health of our own clubs which in turn has led to the implementation by the Premier League and the Football League of its own financial fair play rules, more of which will appear in a later blog.
European football, at least, is now on the way to putting its financial house in order.
For further information please contact Tim Bailey on 01782 205000 or firstname.lastname@example.org