Financial Fair Play

[jamboinglasgow]

I was having an interesting read today at what a German journalist, Raphael Honigstein (writes for the Guardian), had to say about the new rules from UEFA on financial regulations, known as Financial Fair Play. He was writing a lot on his twitter in reponse to an article by a Daily Mail sports writer who had said the problem with FFA is that it will only widen the gap between the elite clubs and the rest as the biggest clubs will get ahead of everyone backed by champions league money meaning that its harder for smaller clubs to get near these giants.

 

Now I must admit that has been my concern with FFP, a real problem in the SPL is simply that Rangers and Celtic each bring in over double the amount of people from their nearest rivals. However it was interesting to read how Honigstein counters this. He argues that it is actually a stealth cap on wages and transfers and actually reduces the gap between rich and poor as it makes players more affordable. He says when there is an excess of money chasing after limited assets (players) it creates a bubble, so what we see is transfers like Torres or Carroll, as excess money is pushed around for players without too much need to be realistic and can offer crazy wages which pushes the average wage up, so it then affects teams like us as agents in lower levels push wage demands up and clubs pay those inflated wages. When you take away that excess money then the bubble bursts. He says that had last year been a year when FFP was in force then Torres and Carroll's transfer fees would be depressed. It would also mean that if a big club bought a player who played badly for them it would be harder for them to just go out and replace them with another expensive signing (and could make stock piling players harder.)

 

He gives the example of the Bundisliga, saying that Bayern Munich have been the richest club in the league (and the licence system has been in the league for nearly 50 years.) They became the richest by growing organically. However if they were allowed to spend double or even triple the money they generate there would be little point in the league carrying on. But the licence system forces them to be careful on how spend their money so their are limited in the number of players they can buy. Thus it allows the smaller clubs to be able to afford decent players and less of a difference on the pitch. It also means that smaller and smarter clubs can compete as Bayern cant just go out and throw huge amounts of money every 6 months. And under this system the Bundisliga is one of the most fluid leagues in Europe, with big clubs constantly changing position.

 

His final point is that FFP doesn't stop massive investment at clubs, what it does instead is try and change where that investment is directed, instead of in buying unsustainable players it is encouraging investment into infrastructure, i.e. Stadium and youth set-ups. Thus ways that will both benefit the club long term (increasing revenue raising and cutting costs with cheaper players through the academy) as well as benefit the league.

 

I think if the SPL or even the SFA was wise it would look at implementing a licence system in Scotland, a way that it could not only try and put clubs on a financially sound footing (though it may take a few years) but also bring in regulations and requirements which could benefit Scottish football as well. Certainly interesting points about something that is going to be so important for all European clubs.

[Deevers]

Sound stuff - the problem here is that since the SFA are for all intents and purposes "Rangers and Celtic" they would never vote for it. They see that the only purpose in their "being here" is to ensure that the status quo remains in place here. Sad but true!

[I.T.K]

Sound stuff - the problem here is that since the SFA are for all intents and purposes "Rangers and Celtic" they would never vote for it. They see that the only purpose in their "being here" is to ensure that the status quo remains in place here. Sad but true!

 

If anyone was to question the above all I would ask is..... what have the SPL done in the last 5 to 10 years to close the gap and improve the league?

 

Pretty much agree with what the OP posted as well. Thanks for posting.

[Rand Paul's Ray Bans]

Great post, OP.

I for one am looking forward to the introduction of FFP.

 

Also the German system is always one that I have admired, and led to my belief (I'm sure others would agree) that the Bundesliga is the most competitive football league in Europe, if not the world.

 

The only problem I can predict is that with investment diverted towards youth development, is that the quality of youth facilities offered by clubs will polarise between richer clubs and poorer clubs. For example, we've all seen Man City's plans for their next youth academy, which are astonishing. A young player would jump at the opportunity to go there, rather than say Crewe Alexandra's? The quality of facilities will be dictated by a club's wealth, and in turn be a pull factor in the decisions of young talented players.

Additionally I can see a problem, which a more recent phenomenon, of wealthier clubs acquiring/'poaching' young players. We might see an acceleration in the acquisitions of smaller clubs most talented players by bigger clubs, which would create a gulf in class on the pitch. And I'm sure we're all aware of the predatory-like attitudes of agents, unduly influencing young players with incentives to go to the bigger clubs.

 

Those are two problems that I can forsee, but I am happy to be proved wrong!

[givememychoice]

I remain unconvinced.

Rangers and celtic have turnovers of around ?60m each.

Hearts is about ?10m.

So, we will be limited to spending ?10m and the OF ?60m.

How will that remedy things?

It makes no odds with regards that. So, what about big investors?

Well, All a team like Man City need to do is sell a single season ticket for ?200m to a certain Sheik Monsoor and then it is genuine revenue....or release more shares.

There are ways around these things.

 

My favoured solution would be to limit debts to 20% of previous years turnover. That would ensure a more sustainable level of debt....though it does raise the risk of a precipice.

I also suspect that there would be ways round that.

[jamboinglasgow]

If anyone was to question the above all I would ask is..... what have the SPL done in the last 5 to 10 years to close the gap and improve the league?

 

Pretty much agree with what the OP posted as well. Thanks for posting.

 

No problem, it sounds daft but FFP is basically saving clubs from themselves. The SPL needs radical actions and making sure clubs kept within sustainable levels of spending may mean that quality initaly will go backwards but allows a stable platform from which they can grow. As long as you can encourage the fans to support and that by spending their money the club will grow with their support. At the moment it can be a black hole.

 

I think Hearts will be a real example to the SPL over the next year, we seem to be drastically cutting back (like a crash diet) where we should at the end of it have a wage level much more sustainable and if done correctly have a team that though full of inexperenced youngsters still has the ability to compete in the top 6 at least in the short run and develop into a real team in the long term (with an academy system that replenishes the team when players leave (hopefully for good money in transfers.) If that works then I think you may see other clubs moving towards that style, if it doesn't then I think it will be teams full of cheap journeyman with some youngsters.

[Charlie-Brown]

So after over 15 years of massive overspending HMFC to become a paragon of financial virtue...

 

Scottish Football drastically needs stringent financial rules to protect clubs from themselves and their inclination to overspend if creditors will provide the money (or debt)

 

We need to place maximum percentage limits on wages / turnover / debts / allowable losses etc. as well as much greater scrutiny of clubs budget projections, budgeting assumptions and asset sheet valuations as well as comparing these projections with final results and numbers achieved.

 

Without stringent financial rules and strong oversight and sanctioning clubs who break rules then Scottish fitba is doomed to repeat the financial madness & mismanagement of the last 2 decades when every club has trashed it's balance sheet whilst creditors and share-holders have taken a pasting.

[Jambos1983]

FFP will never be enforced the whole things a sham. If anyone thinks uefa would ban real Madrid for example for failing to comply they're crackers. It's a good idea in theory but will be challenged in the courts and there are always ways to get creative with accounting.