Champions League - Is this the end of transfer madness?

Wed, 02 Feb 11:45:00 2011

Chelsea and Liverpool stunned the world of football and infuriated the recession-sore public by spending an astonishing amount of cash on the final day of the transfer window.

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But will their actions go down as the last mega-money transactions in football? UEFA's new Financial Fair Play regulations are to come into effect imminently, effectively meaning that billionaire chairmen will no longer be able to buy their way to success by incurring enormous losses.

The new system could turn the transfer market upside down just as it appears to have reached its apogee. But what are the new rules, and what effect will they really have? Our guide explains everything you need to know.

What are the new rules?

The UEFA Financial Fair Play regulations cover several areas, including investment in youth football and the timely forking out of payments - but at their heart is one thing: to protect clubs from financial implosion.

The main thrust of FFP is simple: forcing clubs to balance their books to stop them from getting themselves into financial trouble by trying to buy success: that means the end of club owners accepting huge losses in order to bring in top talent. These rules will start as of the 2011-12 season.

Why are the rules being introduced?

The consultants who looked into the issue for UEFA found that 50 per cent of clubs were consistently losing money, and 20 per cent bleeding huge sums on a regular basis. Disproportionate spending on transfers and players' wages is to blame, as UEFA said in their own statement: "The regulations are aimed at bringing about a situation which curbs the excessive spending and inflated transfer fees and player salaries that have endangered football in recent years. They call for greater discipline and more rational financial behaviour from clubs, and encourage clubs to operate more responsibly by not spending more than they earn, while settling their liabilities punctually."

Surely the chairmen should be allowed to spend their money any way they like?

You might say that. Fans of clubs like Portsmouth and Gretna - which lurched from European competition to the brink of extinction when the owner's money dried up - would probably not agree.

What if the clubs keep on spending money like crazy and just take the losses anyway?

They'll be banned from all European competition.

So is this the end of mega-money transfers?

It looks like it must be. European glory is the ultimate aim of vanity owners buying success for their teams, so there would be little point cutting their noses off to spite their faces. The transfer window that has just closed was the last that will not be taken into account under the rules.

That doesn't automatically mean that everyone will start with a clean slate in August, however: transfer spending is often spread over several years for accounting purposes, meaning several big clubs will have hefty hangovers.

Are the clubs happy about the rules?

All of UEFA's members have happily signed up, and all are paying lip service to the rules - though Arsene Wenger was gobsmacked at Chelsea's January splurge.

"Chelsea supported UEFA's financial fair-play proposals but in the morning they announced a £70 million loss and in the afternoon they buy £75m worth of players. Where's the logic in that?" said the Arsenal boss. "It's hard to guess. Officially they vote for financial fair play but they can explain why they have done this much better than I can. "

So who will be affected?

Any club whose wealthy owners are funding transfer market moves that would otherwise be unaffordable. It's been going on for years, from the days of Jack Walker at Blackburn in the 1990s through to Sheikh Mansour at Manchester City, while on the continent clubs such as Barcelona and Real Madrid have also swallowed up massive losses to bring in the best talent in the game.

City could be among the worst-affected sides. Their consistently big spending over the last three seasons is to be balanced out on their books until 2015 through an accounting process known as 'amortisation', with one recent estimate in The Independent claiming that they need to make around £50m profit each season just to break even. Making it into the Champions League this season is more critical than ever for them.

What if clubs accidentally lose money?

After an initial settling-in period, clubs will be allowed to lose €30m euros over each three-year period - around £8.5 million a year. Or enough to buy one of Andy Carroll's legs.

Surely there are loopholes?

Inevitably some will be found, and clubs' accountants will no doubt find ways to massage the figures. But UEFA have a 'related party' rule on sponsorship, for instance, which would stop investors or club owners channelling money into the club by paying massively inflated fees for advertising hoardings at the ground, for example.

There's another possibility as well: nothing should stop a club chairman with a 10-year plan from buying a string of superb young players to make up a successful domestic team before settling down to more modest spending levels and taking their place in Europe. But good luck finding a group of players talented enough to succeed, patient enough (and young enough) to stay for several years to see things through, and who don't mind missing out on European glory themselves for several years.

One expert believes the settling-in period will also lessen the effect of the rules massively.

"They have not gone as far as they should. There appears to be a get-out clause that will continue to render the market over-valued," says Spanish football finance guru Angel Barajas.

"In concrete terms, article 61.2 allows clubs to run a deficit of up to €45m until 2015 and up to €30m until 2018. This implies that some magnate or investor group could appear at any time and 'artificially' inject cash into clubs with the aim of strengthening it with the best players."

Okay - if it all works, surely it's a good thing for football?

The major criticism levelled at the plan is that it will become even harder for smaller clubs to break the monopoly of those who are already successful.

So who will benefit and who will lose out?

Clubs that are naturally profitable should thrive in the medium-to-long term. That mostly means well-supported teams with big stadiums playing in lucrative leagues and with regular European football. Most of the big Premier League sides fall into this category - as do Europe's bigger clubs.

Teams like Leeds or even Sheffield Wednesday should also thrive should they ever make it back into the Premier League, while the two Glasgow giants should see the transfer market come back to their level after recent years of being overshadowed

On the other hand, the chances of seeing a team like Mohammed Al-Fayed's Fulham making it to a European final seem increasingly remote. On the continent, you'd have to imagine a team like Hoffenheim slipping back down to whence they came.

Experts also expect a massive increase in the attention paid to scouting and youth programmes. You might not be able to spend £50m on Fernando Torres any more, but if you sign him when he's 17 and keep the faith with him then you'll be laughing.

Anything else to add?

Almost needless to say, UEFA haven't followed their own simplification and cost-cutting ethos when it comes to producing the rules themselves - they run to 85 pages!


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