Skip to main content

Feeling the pinch: Clubs braced for cuts as FFP arrives with teeth

ItâÂÂs the Football LeagueâÂÂs lean, mean, debt-reducing, killing machine â and coming to a club near you. FourFourTwo's Joe Brewin runs the rule over the financial regulations that will impact the 72 next season.

OK, so it wonâÂÂt hurt quite like George Foreman in his prime but after over two years of discussions, Financial Fair Play finally arrives packing a punch.

Though sanctions donâÂÂt arrive until the 2014/15 campaign, clubs in the second tier and below have been warned. Failure to adhere to the LeagueâÂÂs strict framework can result in consequences ranging from transfer embargoes to heavy financial penalties.

It is not a test to trick clubs, nor is it designed to catch them out. Simply, the Football League doesnâÂÂt want another Portsmouth on its hands.

And can you blame them? The latest accounts (2011/12) were released sporadically by clubs from the end of last year, and showed only five second-tier outfits posting a net profit. 

All but three of the ChampionshipâÂÂs 24 teams voted in favour of the model in April 2012. With aggregate losses of ã158m â an average of almost ã6.6m per club â it was an issue too big to ignore.  

While the Premier League is also braced for spending cuts after clubs ratified the implementation of FFP in April, the regulations are likely to hit Football League clubs hardest. After all, the top flightâÂÂs bumper new television deal softens the blow for the English league's top 20 clubs.

Feeling blue: Portsmouth fans have been put through the mill

âÂÂBut how the flippin' âÂÂeck does it actually work?â we hear you cry. Well folks, hereâÂÂs FFTâÂÂs bullet-point guide to the boring stuff.

⢠Next season, Championship clubs are allowed losses of up to ã8m. Of that, ã3m allowed is operating losses and ã5m in equity (effectively shares bought through the owners â âÂÂgiftsâÂÂ, not loans).
⢠Those figures decrease to ã6m in 2014/15 and ã5m in 2015/16.
⢠Clubs must submit their annual accounts from the previous season/financial year by December 1 each year.
⢠The first reporting period was actually the 2011/12 season â the Football LeagueâÂÂs trial run, if you will.

Hey presto! From that, the LeagueâÂÂs boffins calculate a âÂÂFair Play Resultâ that will ultimately decide each clubâÂÂs fate. Those clubs who donâÂÂt meet the criteria from accounts posted by 1 December 2014, will be subject to a transfer embargo until they can prove their ship has been steadied.  

Sides in League One and Two have chosen to implement the Salary Cost Management Protocol (SCMP) instead. Despite the technical-sounding name, the concept is simple. Broadly, the SCMP limits a clubâÂÂs spending on player wages to a percentage of its turnover. League One sides will be restricted to a 60 per cent threshold from next season, while League Two teams (who have used the system since 2004/05) have reduced their limit to 55 per cent. Transfer embargoes, unlike in the Championship, are applicable as of now. 

There are exemptions to a clubâÂÂs FFP result, however, which include investment in youth development, community schemes, promotion-related bonuses and the profit element of âÂÂthe purchase, sale and depreciation of fixed assets excluding players (e.g. a club's stadium)âÂÂ.

But if youâÂÂre a cavalier club hoping to blitz your way to the big time, think again. Spending beyond your means to reach the so-called Promised Land wonâÂÂt wash â and clubs who try and do it that way will be forced to pay a âÂÂFair Play TaxâÂÂ.

The tax is applied on a sliding scale. Excesses of between ã1 and ã100,000 are met with a charge of one per cent of the excess; any excess over ã10m draws a 100 per cent charge. The exact figures can be found here.

To put that into context, a club gaining promotion next season with ã10m losses would pay a tax of ã1.2m (60 per cent of a ã2m excess). Any proceeds are split between clubs who have complied with FFP regulations that season.

So rather than a gold star or pat on the head, well-behaved sides are actually rewarded properly. Neat, eh?

Naturally, the sceptics among us are already wondering how clubs will bend the rules. Inflated sponsorships appear an easy way out but to combat this the Football League have a plan up their sleeve.

âÂÂIf a club was to receive inflated commercial revenues from an owner or any other related party, as part of the audit review of the Fair Play calculation these would be adjusted for the market,â a League spokesman told FFT.

Cheerio? High earners like Loic Remy will have to be moved on

If youâÂÂre still with us at this point, congratulations. But whether interesting or otherwise, FFP is a significant step forward for football and will almost certainly have huge implications on next seasonâÂÂs title tilt.

Financial number-crunchers Deloitte unearthed alarming figures in their recent football finance review, revealing the average wages-revenue ratio for Championship clubs to be a staggering 89 per cent (having hovered around that level for five seasons). Nine clubs exceeded a 100 per cent ratio - meaning they spent more money on wages than they brought in.

Some clubs have more work to do than others. Though QPR are not subject to FFP rules as a newly relegated club (they would pay âÂÂtaxâ should they bounce straight back up while failing to comply, however), the west Londonersâ 2012/13 accounts are expected to paint a frightening picture. 

They arenâÂÂt alone either, with Blackburn anticipating losses of at least ã40m over the same period after dropping out of the top flight. Leicester (-ã29.7m), Bolton (-ã22.1m), Ipswich (-ã15.96m) and Nottingham Forest (-ã12.2m) also have work to do after posting heavy losses in their last sets of accounts.

The latter clubs are expected to shape up better next time around but, almost certainly, there will be those who donâÂÂt meet demands even with a predictably frugal summer.

With everyone now hampered by the restrictions, offloading overpaid excess becomes all the more difficult. Teams are faced with a choice: bite the bullet and get rid on the cheap or hang on in the hope that such a player still has a part to play.

We wonâÂÂt know how the land really lies until last seasonâÂÂs accounts are published towards the end of this year, but one thing is for sure, FFP is very real and its sanctions significant.

The gulf in class between English footballâÂÂs top two tiers hardly needs bridging further but, inevitably, the Championship canâÂÂt sustain this careless spending forever.

These regulations should point towards a new emphasis on youth development within the Football League - but EPPP has put paid to that. ThatâÂÂs another argument entirely, however, and one made no better than this.

Sadly clubs had better get used to it though - itâÂÂs all uphill from here.