The Glazer Out Blog

The UFEA Financial Fair Play Regulations

Soon New UFEA Regulations are coming into effect. Next year they will say what a club can spend and where its earnings come from. These are known as the Financial Fair Play Regulations aiming at reducing spending within football. The full regulations were due to be in place earlier than is now planned but they are still coming fast. The 2011-2012 season will see these introduced all over Europe and it will limit what a club spending if it wants a european place. The first 3 season of the new rules will be testing ground before in 2014 they come into force fully. It is more than likely for the first time in history, a club over spending could be banned from UFEA competitions.

The first test during the 2011-2012 season for a number of clubs across Europe is too vastly reduce their wage bills. They have a time frame in which to do this or face bans UFEA bans. The first time a club could be banned would be during the 2013-2014 season after accounts from 2012 and 2013 have been analysed.  In the past two years if these regulations were in place. Inter Milan, Manchester United, Manchester City, Chelsea and many more could be in big trouble.

Inter have the problem of the San Siro and their massive wage bills. Even through the San Siro is as big as they come, holding 80,000 people , it is owned by the local Government and therefore the revenues are spilt hence why compared with Manchester United or Arsenal they make less than half the revenue on match day. While United and Arsenal can pull in around £3m, Inter can end up with just over 1 million euros. The other problem is for the last 3 years they’ve made a loss of over 100 Million Euros. You maybe surprise to hear this after they’ve just won the champions league but its true. The 2009 loss, was a 131.5m euros. If you didn’t know they are a club bank rolled by an oil rich billionaire much like City. When it comes to looking at City they are the Inter Milan Of the UK. Ok City haven’t won anything for 34 years & they are clearly not as successful, but they aren’t as successful as the other local team AC Milan & they are run by an Oil rich billionaire. Without them, am not sure many of their top players would still be there. Eto’o, Sneijder, etc would all be up for grabs.

These new rules could be why some teams are breaking transfer records such as Real/City and why others aren’t spending alot. City have a very short time frame to reach the Champions League, otherwise the revenue on offer from other areas won’t be enough to cover the wages, let alone anything else. For City, Chelsea and Inter Milan funding new Stadia now would be a very good idea. The same could be said for Liverpool and Spurs. Although there is a mix of teams in this pot, these 5 teams looking to either build new stadia or meet the financial limits have limited options. For example if Spurs or Liverpool decided to build new stadia, the cost of building them and paying any debt back to banks, could cause them to make huge losses. The question is would UFEA allow these one of losses or would they be banned?

For City, Chelsea and Inter Milan, it is a must. For many big games all 3 could make more revenue than their current stadiums allow. Chelsea often sell out Stamford Bridge for League games but Roman hasn’t expanded or developed a new stadium. For them I think that’s a huge mistake although their losses have been dropping. This is due to the fact Roman hasn’t been spending big on new players. Chelsea made a £66m loss in 2009 so they have the possibility over the next few years of cutting wages while increase other revenues. Spending big to improve the team? I think Chelsea maybe at their current peak. Inter Milan are in the same boat as City, either keep the old Stadia or been banned. They have to increase other revenue streams or reduce the wage bill by a huge percentage. I don’t see anyway around it.

Manchester City might be spending big now but have said they won’t be spending like they have done to improve the team as they want to meet the regulations but I don’t see that as their problem. They spend £130m+ a year on wages alone. This is just £10m under want Chelsea pay and it will likely keep rising once the 50% tax rate comes in. City have to increase Revenue streams by around £100m or more, if they just want to break even. £200-225m would be a good target. This is more than Arsenal and Chelsea bring each season. Two London clubs where ticket prices are high and stadiums are full every week. City have to do this without getting banned, successfully reaching the Champions League, possibly increasing the size of the stadium and likely ending 34 years of no silver wear. My view is they have to reach the champions league and get their losses down to £30-40m a season by next. Chelsea didn’t spend as much, won silver wear and still can’t get the losses down. The question isn’t if City can do it, its what season they get banned in.

When it comes to Manchester United, they don’t face wage bill problems, winning silver wear, reaching the champions or looking for new streams of revenue. We have the stadium, the wage bill is under control and we’ve won enough over the past 20 years to be one of the biggest clubs in the world. The problem we have is our current owners and there is only one thing which would ever see Manchester United banned by UFEA. Its paying and controlling the debt on the club. In 2009 United would have a made around a £60m loss unless Ronaldo was sold. This was due to interest payments. This season Manchester United did make a loss. It was £84m. This was due to refinancing the debt and paying interest. United paid Ronaldo type money to sort someone elses debt out. Now its known the Glazers want to use the clubs funds to pay the PIK debt which is in their own names. As fans of the club that cannot be allowed to happen. If the club losses another £70m to debt repayments, its Ronaldo type money again being wasted. Two Seasons £150m gone. That wouldn’t even include the bond interest for 2010-2011. I have this question to ask. If Malcolm Glazers took £70m out of the club next season to pay off his debt, would that mean United making another huge loss meaning possible banning from UFEA competitions? If its taken out this season, there is nothing to worry about but a fan backlash. Next season a fan backlash and possible future ban. Is the clock already ticking for the Glazers?