Football Finance
- Thread starter King Binny
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Just following up on the future transfer windows question. The long-term UEFA target is a "squad cost ratio" of 70% (starting at 90% and reducing by 10% per annum through the transition period). NB - the Premier League target is 85%. So as with the current rules, they allow further leeway. The theory for this is presumably that the top clubs, those in UEFA competition, will stick to 70% and the clubs below them will be allowed further capacity to spend so they can compete, and will then self-regulate if and when they qualify for Europe.
The ratio is calculated for the calendar year in which the club is participating in Europe (so failure isn't a barrier to entry to that competition in the year) and imposes fines for non-compliance. In practice, a club that is massively over the limit may be better off rejecting entry to the competition rather than risking a fine that exceeds the income it will earn.
Because it's calendar year, and because it is a detailed calculation, it isn't possible to calculate the precise ratio from published accounts, but they can give an estimate.
The ratio is calculated by dividing relevant expenses by football income.
Relevant expenses is broadly player / manager wages and amortisation.
Income is turnover, plus interest, plus the profit on sale of players. In the case of profit on sale ONLY, this is a 3-year average.
There are, in theory, adjustments for a number of items that clubs might try to use to manipulate the ratio (e.g. spurious, non-football income, over-valued transactions with related parties).
Looking at our most recent accounts (31 May 2022) for a proxy on this:
Total wages £326m
Total amortisation £106m
Non-player wages estimate -£36m (based on £50k per non-playing member of staff).
Total £396m
Turnover £594m
Interest income £1m
Average profit on sale £31m
Total £626m
So our current ratio is 396/626 = 63%.
Which means we're well within the long-term target already.
TLDR (@tombrown ) - we've got capacity to spend over and above a normal, squad-sustaining level.
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Using the same basis of calculation:
City 71%
United 75%
Tottenham 75%
Chelsea 79%
Everton 96%
Newcastle 109%
EDIT - Arsenal 81% - poor Arsenal, just an after-thought in my analysis.
NB - selling Guimaraes isn't going to help Newcastle as much as has been touted in the press, largely because the press is focusing on the current (profit-based) rules, not the ratio.
And as a general point, because the inclusion of player sales income is on a 3-year average basis, selling a player in the current year to try to plug a hole won't help that much - you only get 1/3 of the profit to help you out. And if you reinvest the money in a replacement, you'll end up reversing much of the benefit anyway.
The ideal is a procession of youth players which you sell at a profit. Annual investment cost is limited, profit is all to the good.
City 71%
United 75%
Tottenham 75%
Chelsea 79%
Everton 96%
Newcastle 109%
EDIT - Arsenal 81% - poor Arsenal, just an after-thought in my analysis.
NB - selling Guimaraes isn't going to help Newcastle as much as has been touted in the press, largely because the press is focusing on the current (profit-based) rules, not the ratio.
And as a general point, because the inclusion of player sales income is on a 3-year average basis, selling a player in the current year to try to plug a hole won't help that much - you only get 1/3 of the profit to help you out. And if you reinvest the money in a replacement, you'll end up reversing much of the benefit anyway.
The ideal is a procession of youth players which you sell at a profit. Annual investment cost is limited, profit is all to the good.
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To this point I was hearing a TAW podcast earlier today and they were discussing selling of youth players to generate pure profit for clubs (Gallagher at Chelsea being the player being discussed). The suggestion was a that club trained player sales proceeds should not be counted towards profit and vice versa their wages should also be considered an exception when calculating PSR. Made a lot of sense to me.
I'm thinking more of middling youth players here, as opposed to ones who make it to the first team. I get that Chelsea fans wouldn't want to see Gallagher sold because he's "one of their own" and we'd feel the same about Trent or Curtis, for example. In that sense, a rule that excludes their costs / income sounds appealing. But if we applied that to a club like Ajax or the Red Bulls, whose historic business model has substantially involved developing and selling players coming through the ranks, then it would put them at a disadvantage.
I'm thinking more of the sort of youth players who don't quite make it but who still generate profits on sale. Think Ibe, Brad Smith, Conor Coady, Neco Williams. If your annual budget for the Academy is £5m, for example, and you can sell 3 or 4 players for a few £m each, or even more, then that'll give you a bit of wiggle room.
Chelsea at 79% gasts my flabber
Miguel Delaney
@MiguelDelaney
Richard Masters says at parliamentary hearing "a date has been set" for the City case, although points to confidentiality.
@MiguelDelaney
Richard Masters says at parliamentary hearing "a date has been set" for the City case, although points to confidentiality.
United are at a basic loss over the three periods to 2022 of £162m. They can probably get back to the £105m limit with add-backs for covid costs, infrastructure, youth investment etc. I could see how they could be OK.
Arsenal are at £129m so same story.
This stuff is almost a year old?
They probably were under scrutiny which is why they got rid of Neymar, Messi, Ramos and Verratti. The sale of those players + Gini, Draxler, Diallo, Parades and Icardi racked in 180m.
Yes as @Beamrider pointed out, its done as an average. Evermoron's infringements covers 3 years of losses
It turns out PSG were fined for their misdemeanours. The French FA seem to be toothless ones
Paris Saint-Germain given £56m fine by Uefa after breaking FFP rules
This article is more than 1 year old
- Manchester City and Chelsea avoid punishment
- New sustainability regulations replace financial fair play
Reuters
Fri 2 Sep 2022 20.37 BST
Paris St-Germain, Milan, Juventus and Internazionale are among eight clubs who have agreed settlements with Uefa after failing to comply with break-even requirements last season. The eight clubs have agreed to fines totalling €172m (£149m), of which €26m must be paid in full, with the balance conditional on compliance with targets laid out in their respective settlement agreements.
PSG, Monaco, Marseille, Milan, Juventus and Besiktas have reached settlements covering the next three years, while Inter and Roma agreed four-year settlements, Uefa said.
European roundup: Napoli held by Lecce, Neymar strikes again for PSG
Read more
Of the eight, PSG are liable for the biggest fine of €65m (£56m), of which €10m must be paid in full, followed by Roma, who are liable for a penalty of €35m, €5m of which must be paid in full.
Uefa announced new sustainability regulations this year to replace the previous financial fair play (FFP) system. The new stability requirements, known as the football earnings rule, came into effect from 1 June. Under the new rules, acceptable losses have doubled from €30m to €60m over three years.
The clubs that have agreed a three-year settlement have until the end of the 2025-26 season to comply with the new Uefa sustainability rules, failing which they can be held liable for the full amount of the fines set by Uefa.
Failure to comply could also result in the clubs being banned from Uefa competition in the 2024-25 and 2025-26 seasons, as well as being banned from registering new players in the 2026-27 season. Inter and Roma have one additional season to comply with the new rules.
Nineteen other clubs, including Manchester City, Chelsea, West Ham, Leicester and Barcelona avoided punishment because of the emergency relief measures Uefa instituted during the pandemic or because they had benefited from historically positive break-even results.
Uefa said it had asked these 19 clubs for more financial information and told them they would be monitored closely because neither Covid-related deductions nor historical finances would be considered from the next financial year.
I agree in relation to clubs like Ajax, Redbull or even Brighton as it allows them to run their respective clubs in a sustainable manner. Even LFC ended up selling players like Ibe, Smith etc., only when they knew they would not be a standard needed. The issue arises when Chelsea is going to sell their best player of this season to book the profit & than spend another 100 million on new players which will be amortized over the next 5 years.
As is often the case, the contrast to North American sports is interesting. In many sports, collective bargaining agreements contain clauses that encourage and promote the retention of players who come through the ranks.
This can be additional years of club control before unrestricted free agency, ability to resign your own players above a salary cap, or the ability to offer your own players longer deals or at more money than other clubs.
The intent is to avoid all the talent being funnelled to big, wealthy clubs.
In football, it seems the surest way to be viable is to develop players and sell them rather than to hold them and use them.
Obviously this is a consequence of a closed loop system in North American sports with greater or lesser equity versus a global football pyramid, where clubs largely have differing roles to play. Still interesting.
Speaking at a hearing of the Culture, Media and Sport Committee, Masters would only offer that the Everton investigation could hopefully be completed within weeks, after processes were complicated by a lack of satisfactory answers from the American investors. Neither would he share details on the City hearing, which has been reported as likely to take place before the end of the season. Meanwhile, Masters’ English Football League counterpart, Rick Parry, also had to acknowledge that the current crisis at Reading involving their owner, Dai Yongge, is a new problem for the League.
That to me says there's loads of issues going on at 777
That to me says there's loads of issues going on at 777
I think Everton are really in the shit.
There is only a very narrow path to avoiding administration/relegation for them. All of these things need to go their way:
1. They need to be taken over by 777 because Moshiri's got no money. Stick with him = administration, 9 point deduction, relegation, stadium mothballed. That'll likely happen after the winter transfer window when they won't even be able to raise cash by selling players, and come summer, Calvert-Lewin will be injured again and potential buyers will have worked out that Onana is a fanny. They might get a few quid for Prickford and Branthwaite, but if they sell those two mid-season they'll go down.
2. They need 777 to be good owners, otherwise they end up in the same situation as above with Moshiri, might just take a bit longer to happen.
3. They need good results in their PSR hearings, otherwise relegation, then administration.
4. They need Burnley, Luton and Sheffield United to continue to be utter shite, otherwise relegation is possible on their season-long form, ignoring the post-PSR-sanction bounce. Luton seem to be showing a bit of fight.
If they're still in the Premiership and still in business come summer, this will have been their Istanbul. SixCrazyMonths.
they're beyond fucked and it's not helping their cause that 777 just keep throwing cash at them to assist with the day to day financials and the new stadium. Think Branthwaite will deffo be gone.
also @Beamrider if you're the premier league how can you allow a transaction to go through when they're being sued left, right and centre? The league would be absolutely negligent to allow the ownership transaction to go through only for 777 to lose all these litigation claims and potentially end up bankrupting Everton so soon after only getting the keys. Not exactly a gold look for supposedly the best league in the world.
I think the League may view it as out of the fire and into the frying pan - that 777 are slightly less shit than Moshiri and that Everton may go bust if they don't allow if to go through.
The thing about the fit and proper test is that it's all done secretly so we don't know whether it's just a rubber stamp - you tell us what we want to hear and we'll wave it through - or a thorough test where they push back on anything that has a whiff of bullshit about it. I'm beginning to think it may be a bit more thorough these days, especially given the time they're taking over United and Jim Radcliffe where there really shouldn't be any serious concerns and it could have been rubber stamped by now.
Thank you, sir. I actually got about 2/3 through the main post before scrolling down, which isn't bad for me
@Beamrider I don't know what we did to land you in this humble forum but your insights, analysis & opinions are brilliant.
TL;DR for @tombrown "cheers Beamy"
TL;DR for @tombrown "cheers Beamy"
