Thursday 23 November 2017

Uefa set to rein in 'huge' club losses

Uefa president Michel Platini's initiative aims to tackle the growing trend of financial excesses in club football. Photo: Getty Images
Uefa president Michel Platini's initiative aims to tackle the growing trend of financial excesses in club football. Photo: Getty Images

Paul Kelso

Half of all European professional football clubs are running at a loss, with more than 20pc recording "huge" deficits in the last year despite the game generating record revenues.

The shocking figures, compiled by Uefa and due to be published next month, reveal the full scale of the financial excesses in club football across the continent.

Uefa, fearing a spiral of wage inflation across the continent, is pressing ahead with new rules requiring clubs to live within their means rather than relying on wealthy owners or bank debt to underwrite player wages and transfer fees.

The intention is to prevent a repeat of the difficulties being felt at Portsmouth and West Ham, as well as limit the ability of benefactors such as Sheikh Mansour bin Zayed al-Nahyan at Manchester City to fast-track success with short-term spending that the club's revenues could not otherwise sustain.

Uefa president Michel Platini's "financial fair play" initiative will require clubs competing in European competition to break even or turn a profit, relying only on what they earn from football revenues.

Clubs repeatedly making a loss over a three-year cycle could be barred from the Europa League and Champions League.

The new rules, which will be welcomed by those concerned at the financial extremes of the Premier League, will be published in the summer and introduced from the 2012-13 season.

They will not limit the amount of debt that clubs can carry, but interest payments will have to be covered by income. Clubs will be able to record losses as a result of long-term football investment such as stadium improvements and youth academies.

Short-term spending, such as the £170m lavished on transfers by City in the last year, will have to be funded from club earnings, and heavily-leveraged models such as that imposed on Manchester United by the Glazer family will be imperilled. United's holding company has regularly recorded losses as a result of interest on its £716m debt burden, though last season the £80m transfer of Ronaldo contributed to a £6.4m profit.

The implications for English football are serious. In the 2007-08 season 14 of the 20 Premier League clubs made a loss, including Manchester United, Chelsea and Liverpool. Major European clubs including Inter Milan, AC Milan and Real Madrid will also be affected.

Infantino said: "What we are doing, with the support of all the stakeholders in the game including the major professional clubs, is to try and improve the long-term stability of European club football by encouraging clubs to live within the revenues that they generate," he said.

"We are concerned, and many of the clubs and owners are concerned, about the sustainability of the game. We survey more than 650 clubs all over Europe, and found that 50pc of those clubs are making losses every year, and 20pc of them are making huge losses, spending 120pc of their revenue every year."

Infantino said the primary reason for the losses is wage and transfer inflation driven by clubs relying on owner finance or debt.

"Around one third of the clubs are spending 70pc or more of their revenues on wages. Revenues across European football grew by 10pct last year, but the salaries of players and coaches have gone up by around 18pc.

"It is clear that if we continue like this it will end up with a spiral of inflation, so we need to bring a more rational and reasonable approach to this crazy game."

Uefa's proposals have been backed by the influential European Club Association, but there remain misgivings in the English top flight.

Premier League chief executive Richard Scudamore said earlier this week that he opposed any limit on the ability of benefactors such as Sheikh Mansour to invest freely.

He argued that requiring clubs to break even would mean the big clubs would always dominate.

Infantino disagreed, but said Premier League clubs had nothing to fear. "Our intention is not to make all clubs equal with the same money to spend. What we see now is that the rich owners already go to the big clubs because they make more money.

"We want a healthier environment which will allow smaller clubs to invest in their infrastructure and be able to compete with the bigger clubs, knowing that they can only spend what they earn."

How the rules will work

What are the new regulations?

From the 2012-13 season, clubs will have to consistently break even – spending only what they earn – if they want to compete in European competition.

Does that mean they can’t have debts?

No, but the debt has to be affordable. If the interest on the debt means that the club or its holding company make a loss, they would fall foul of the rules. Clubs will still be able to borrow to fund new stadiums and youth academies.

What about wealthy owners?

It will be harder for them to subsidise transfer spending and player wages from their own pocket.

Which English clubs will be affected?

Chelsea and Manchester City, as they both need their owners to pay the players. Manchester United will be hit if their debts stay high. In fact, the whole Premier League could be hit: 14 of the 20 clubs made a loss in 2008.

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