£250m millstone to cost City their European future
Manchester City face a much tougher fight than they expected if they are to avoid a ban from European football from 2013 onwards because of a £250m burden that must remain on their books for the next five years.
Uefa has said that this nine-figure sum, accrued from recent transfers, cannot be written off as a loss on next year's accounts alone, but must be spread over the length of the relevant players' contracts. As a result, the club must rethink its strategy as it hopes to meet the terms of Uefa's Financial Fair Play (FFP) regulations, which demand that, from 2013, clubs must lose no more than £13m per year or risk being shut out of all European competitions.
Uefa's calculations are made as an average over a rolling three-year period, and though this would allow some flexibility, City's recent spree means they will be starting each year until 2015 some £50m in the red, before they spend another penny. The club acknowledges privately that "a huge challenge" lies ahead to meet Uefa's break-even targets.
The news comes as City's Manchester rivals, United, publish accounts today that are expected to comply comfortably with FFP, not least because they make enormous operating profits.
A British record figure of more than £100m for 2009-10 is expected when United post their latest results today.
The FFP rules dictate that clubs must effectively break even from 2011-12 onwards, when monitoring begins.
Two seasons of finances will be considered for entry into the Champions League or Europa League in the 2013-14 season.
Initial losses averaging £19.6m per year will be allowed, but from 2012-13, losses will be capped at £13m per year (averaged over three-years), and from 2013-14, be capped at £8.7m per year.
The size of City's task is illustrated by the fact they made a loss of £121.3m in 2009-10, and expect losses of £130m-plus in 2010-11. The trend is hugely problematic and the transfer "backlog" is a damaging part.
Because City won't be allowed to clear that in one go, the £250m must be spread out over five years.
In simple terms, City will start every season between now and 2014-15 with a red hole averaging £50m per season -- for players they already own -- before a ball is kicked. If they sign anyone else from now on, the deficit will only get bigger.
*City argue, with some justification, that owner Sheikh Mansour's huge investment is rebuilding not just a club but a community, with spending on everything from facilities to a youth academy. (© Independent News Service)