FFP 2.0 – A step forward for fairer football

Financial Fair Play didn’t make football fairer, it just made it more profitable. But its replacement might…

With City active in the transfer market, there’s much talk that their purchases are intended as one last splurge before Uefa introduces a revised set of Financial Fair Play rules.

The so-called FFP 2.0 regulations include a headline-grabbing switch from limiting overall club losses to limiting losses on transfer dealings to no more than £90m each year.

This measure could have huge implications for competitive balance in European football, especially if some of the less well-publicised proposals are also adopted.

Immediate effects

Once we’ve seen clubs bring forward expenditure to try and get a headstart on the new rules, teams will have to reappraise their transfer strategies.

Previously England’s Big Six were able to look at wages and transfer expenditure as a whole and try to balance them against club income over a three-year period. Now, however, there will be a much greater focus on individual transfer deals.

We should expect to see clubs trying to get younger (to ensure players have resale value), looking to offload squad players (to limit losses) and adopting Wenger’s and Ferguson’s philosophy of selling-on players who may still have some mileage in them rather than letting them hit their 30s.

We may also see clubs seek to structure transfer fees with more of the total dependent on appearances as a way of spreading the value of the deal over a number of years. (It will be interesting to see the details on how such transfers will be dealt with. Under the old regime, transfer fees could be spread over the lifetime of the contract for FFP purposes. In future, they should all hit in the year in which the deal was made.)

While FFP brought some financial stabilty to the Premier League, ever-rising TV money and other commerical income meant it was possible for big clubs to outspend the rest and still break even. FFP didn’t make football fairer, it just saved clubs from the worst impulses of reckless owners.

It’s a much tougher challenge, however, for even the richest clubs to limit transfer losses and sustain their dominance. The crucial question, though, is whether £90m is a low enough figure to have a meaningful impact.

As I write, at lunchtime on transfer deadline day, Man City, United and Chelsea would all have comfortably exceeded the £90m net loss limit in the 2017/18 season, while Liverpool, Tottenham and Arsenal would be comfortably inside it.

Based on that, the limit might have teeth, at least at the top of the table. It could even lead to an interesting third element to the transfer market – the summer window, the January window and the May fire sale.

Unintended consequences – and happy star players

If the proposals are introduced as they stand, I would broadly expect FFP 2.0 to improve competitive balance, primarily by closing the gap between the biggest spenders at the top of the league and the teams just out of title contention. However, these regulations, in what is a highly speculative market, are likely to have unintended consequences as clubs, now sloshing with cash, look for work arounds.

Some of the excess cash will end up in the Glazers’ pockets, some may even limit ticket price increases. But there’s no doubt where a lot of it will go: on player wages, which will no longer be subject to club limits from Uefa’s perspective.

Now, Premier League clubs still face ‘short term cost control’ (STCC) restrictions which limit them to no more than a £7m increase in their total wage bill each season. However, if proposed squad limits come in from Uefa – reported as no more than ’25 professionals’ – clubs may have more wiggle room with salaries or they may demand the PL loosen restrictions.

For top players at big clubs, however, they will find themselves with enhanced bargaining power as almost any wage increase will be better financially for the club than the cost of replacing them if they leave on a free.

Additionally, we’re likely to see agents advising players not to sign long-term deals. Historically, particularly for players at mid-to-upper tier clubs, a long contract was a one-way bet – a guaranteed income stream with the knowledge that an ever-rising transfer market would make most release fees affordable in just a few years.

Now, if FFP 2.0 deflates the transfer market, a release clauses becomes a set of handcuffs. A far better route to riches will be to sign a short-term deal and hope to cash-in as a free agent.

Associated regulations

A club like City, with the financial muscle and the desire to dominate football, won’t simply accept their financial advantage being chipped away. Instead, they’ll devote even more effort to what they’ve been highly successful at – finding ways to maintain their on-pitch dominance through off-field investments.

The most obvious route is through the use of sister clubs and youth teams to acquire ever more players at a young age, avoiding paying transfer fees and hoping to sell on the ones who don’t make the grade to off-set purchases.

And it’s this that makes another of the FFP 2.0 proposals so important – limiting the number of players clubs can have to 25. Presently, Premier League clubs have a squad of 25 players, but they can have additional players out on loan, something Chelsea have become notorious for.

This situation was an unintended consequence of FFP mark 1. I have previous written about how the youth game was unwittingly financialised by the rules that allowed clubs to offset all youth expenditure (infrastructure, coaching and the wages of players under the age of 18) against their FFP calculations. This meant, in effect, that the youth teams could become profit-generating player farms, with huge sums being spent on academies which would acquire enormous numbers of young players, sending them on loan at 18 when their wages would hit the club’s FFP calculation. Clubs like Chelsea were incentivised by FFP to keep young players in cold storage, with the loan club paying the wages and Chelsea pocketing any transfer fees.

This helps explain why clubs have been signing more player than they could ever hope to play, even re-signing players in their mid-20s who’d never played a first team game, hoping to be able to sell them on to their loan clubs for profit.

If FFP 2.0 actually caps the number of professional players (however that’s defined) at 25, this would dent Chelsea’s player farm significantly. They’d have to start releasing players as they approach whatever Uefa’s definition of professional. If the definition is age-based and low enough, say, 18, players will flood onto the market, released or sold at a nominal fee, instead of being loaned, which may benefit youth development enormously.

However, since transfer spending becomes more constrained and wages less so, we can expect to see clubs make strong efforts to get younger – bringing in high-grade foreign talent. The door to academy players will be even more firmly closed than it is currently.

This doesn’t mean, however, that the difficulty in young players getting into first teams will stop teams from expanding their young player acquisition. Because it doesn’t matter if they never play, it doesn’t even matter if they can’t be loaned or are on big wages, just so long as they didn’t cost the club a transfer fee. Team which already have huge academies will grow them even further unless these number are capped. (I’m not aware that Uefa is proposing to do this.)

Given this, more small teams may give up on their academies, instead fighting for Premier League academy cast-off.

But where will all these young players play? Is there a mechanism which would allow teams to keep more than 25 players and increase the chance of them getting a game? Ah, yes, of course. That noise you can hear outside is the undead corpse of football’s ultimate zombie idea, B Teams, rising from its grave and rattling windows.

In a game where clubs are ever more demanding of success and ever wealthier, but much less willing to buy players, it is inevitable that league B Teams will be revived (yet again). And, if they are trialled in Scotland and the FFP 2.0 player limit leaves Premier League clubs feeling they are disadvantaged compared to Spanish and German sides, the calls may be more forceful than before.

Family values

Other proposals, which would be good for football governance but may have limited impact on competitive balance, include a mooted limit on club debts, which might be seen to target Manchester United, and an investigation into ‘related party transactions’ – the way in which City and PSG have been alleged to benefit unfairly from sponsor deals with companies related to their owners. These should certainly be tackled for the good of the game, but they’re unlikely to impact competitiveness now that net transfer spend instead of breaking even is the key metric.

An important related issue that is not, as far as I know, being explored, is the potential for club networks to be used to circumvent the transfer restrictions by, for example, buying talent, blooding it and then passing it on to the network’s premier club at an advantageous price. You could image, for example, five or six clubs all spending up to their limit to act as a proving ground, with only the best moving to the Premier League – massively derisking transfer expenditure.

One final, related idea is that, with each transfer becoming very much more important, is we’ll see an even greater focus on scouting and the use of advanced metrics to find under-valued players. In the past, paying £5m or £10m over the odds to secure the best talent really didn’t matter that much to big clubs. Likewise, a few younger, cheaper players could be bought without worrying that many may never make it. Now, every penny will need to be spent much more carefully. We may even see clubs finally taking a stand on obscene agent fees.

In general, then, the FFP 2.0 proposals seem a promising way of controlling the teams who, by having been able to buy success, have drastically undermined the competitive balance in leagues. Given Uefa hasn’t the appetite to force a fairer income distribution on top clubs or introduce a salary cap, this could be a modest first step towards closing the performance gap. And, if successful, the allowable net loss could be reduced in future years.

Crucial to its success, however, will be Uefa forcing through a coherent package of supporting measures – like capping player numbers and preventing further concentration of young talent at top clubs.

The other risk, of course, is that, if it works too well – if FFP 2.0 starts putting new names on trophies – is that it will make the biggest names in European football think about reviving their plans for a closed-shop Euro Super League.

These proposals, as they stand, then, represent a modest victory over the big clubs that have been strangling the life out of football. But if they are adopted – and expect lots of lobbying against between now and May – it’ll only loosen the big clubs’ grip slightly.

The real question is how will football’s behemoths respond? What little loopholes will they find to make sure they can keep their hands firmly around the neck of football?

Modern football has been an arms race, albeit an unequal one, between big clubs and regulators. Finally, perhaps, the regulators are up for the fight.

 

 

Martin Calladine

If you enjoyed this, please buy my book “The Ugly Game: How Football Lost Its Magic And What It Could Learn From The NFL”. That way I’ll have the money to write more things you might like. Oh, and please spread the word, too. Thanks a lot.

 

 

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