Chelsea and Manchester City confident they will meet Uefa financial fair-play rules
Chelsea and Manchester City are confident that they will meet Michel Platini’s new financial fair-play rule despite a fresh warning from Uefa and general shock across Europe at Premier League spending during the January transfer window.
Adriano Galliani, vice-president of AC Milan, summed up the mood on the Continent yesterday when he described the behaviour of English clubs as “crazy”. Uefa also issued a statement to remind clubs that it would apply its new rules “with rigour”.
Chelsea's decision to spend £72m on the day that they announced annual losses of £70.9m hardly appears compatible with Uefa’s break-even principle but, according to club sources, they remain firmly on target to satisfy Platini’s requirements.
That is mostly because previous spending cuts will result in the club going close to the break-even target in the accounting year for 2010-11.
Chelsea and Manchester City are acutely aware of key caveats in Uefa’s 85-page financial fair-play handbook. Clubs will be permitted up to £38.5m in losses in the first monitoring period of 2011-12 and 2012-13.
However, even if they miss that target, they will also escape sanctions if they meet two requirements: the trend of losses is downward and, most significant of all, the overspend is caused by commitments on wages and transfer fees that were made before June 2010.
That means that, in the first accounting period, clubs can write off the cost of wages that arose from contracts agreed prior to last summer’s transfer window. This will act as a potentially crucial safety blanket for clubs such as Manchester City, whose most recent annual losses were £121.3m.
It also goes some way to explaining why, even amid the spectre of financial fair-play, English clubs have collectively spent more than in any previous January transfer window.
Chelsea believe that they are on course to meet Uefa’s rules even without writing off any of their spending commitments before June 2010.
That is because of new commercial deals, an increase in ticket prices, a reduction in the players’ bonus scheme and the departures last summer of Michael Ballack, Joe Cole, Juliano Belletti, Ricardo Carvalho and Deco. That saved about £20m in wages.
The club are also confident that a deal worth more than £10m a year will soon be announced for the naming rights to Stamford Bridge.
Monday’s purchases of Fernando Torres and David Luiz will be amortised over the length of the respective contracts, creating an additional outlay before wages of about £14m a year until 2016.
Yet, if Torres and Luiz play a significant role in keeping the club in their recent position among Europe’s elite, Chelsea would consider that a prudent use of their resources.
“The club is in a strong position to meet the challenges of Uefa financial fair-play initiatives which will be relevant to the financial statements to be released in early 2013,” said chief executive Ron Gourlay.
Others, however, remain rather less optimistic. Galliani, whose Milan team face Tottenham in the Champions League this month, said: “Everyone’s talking about balancing the books, but then they spend like crazy people. [Chelsea] strengthened in an amazing way. I just don’t know where financial sense will end up.”
In its statement, Uefa made a point of warning that the vast spending of this transfer window would be taken into account when it applies its new regulations.
“Transfers made now will impact on the break-even results of the financial years ending 2012 and 2013 — the first financial years to be assessed under the break-even rule,” Uefa said. “The clubs know the rules and also know that Uefa is fully committed to implementing them with rigour.”
Uefa excluded 27 clubs between 2005 and 2011 for not meeting its existing licensing rules.
The Premier League, however, is confident that none of its clubs will be excluded from European competition in 2014-15, the first season when disciplinary sanctions could be implemented.
Amid all the deadline-day drama in England, it was striking that the other major European leagues were generally cautious.
Indeed, England’s top six deals – Fernando Torres, Andy Carroll, Edin Dzeko, David Luiz, Luis Suárez and Darren Bent — were all higher than any other transfer across Europe. On its own, the Premier League spent more than the combined outlay in the top flights of Spain, Italy, Germany and France.
However, the extravagance in England was largely explained by the decision of Chelsea owner Roman Abramovich to reopen his chequebook. Without his input, the net spend in the Premier League would have been about £20m.
“When you scratch beneath the surface you find that around 80pc of the total spending of £225m is concentrated across only four clubs and spread across only six players,” said Dan Jones, a partner in the Sports Business Group at Deloitte. “This was a particularly polarised window.”