UEFA will ratify its new financial regulations tomorrow, trumpeting them as a step forward in fair play. But the rules, which essentially outlaw the sugar daddy subsidisation of football clubs, will do little to prevent the kind of leveraged takeover that has placed Manchester United in more than £700 million debt.
UEFA will phase in the new rules after President Michel Platini finally found agreement on the long-standing proposals for financial fair play in European football. From 2012-13 onwards clubs must not spend more than they earn if they wish to play in European competitions, although the governing body will introduce the regulations over an extended six-year period.
UEFA denies that it is trying to create greater diversity in competition winners, rather to ensure better financial management in football, with no Chelsea or Manchester City-style subsidisation.
“We’re not trying to level the playing field,” a UEFA spokesperson told Reuters today.
“We want to make sure that the middle-ranked clubs don’t go spending millions which they don’t have as they try to compete with the big clubs.
“The underlying principle is that clubs cannot repeatedly spend more than their generated revenues.”
Between 2012-13 and 2015-16 total losses at any individual club must not exceed €45 million – effectively €15 million per season – unless club owners put money into the organisation as hard equity. In the following three years the total losses cannot be more that €30 million and by 2020 UEFA hopes all clubs will run on an even keel.
The rules do not cover infrastructure investment such as that in youth facilities, training grounds or new stadia, which leaves Arsenal in the clear over the Emirates Stadium but Liverpool in the red due to interest payments. Chelsea and City fall foul based on the continuing losses at each club, although Sheihk Mansour and Roman Abramovich have sought to convert debt into equity this season.
UEFA will preclude clubs that do not meet the rules from European competitions.
Today a United spokesperson insisted that the club meets the new regulations, with pre-tax profits around £91 million during the last full accounting period and revenues rising sharply. But this is tempered bythe knowledge that the club’s parent company, Red Football Limited, would have made a huge loss had it not been for the sale of Cristiano Ronaldo last summer.
While the club itself is increasingly profitable, the mountain of debt interest has a draining effect on the books and the parent company will continue to lose money for the foreseeable future.
Moreover, the UEFA regulations seemingly do not cover Red Football Joint Venture Limited which holds the Payment in Kind loans that the club is now committed to paying down after the January bond issue. The Glazers can effectively milk the club with impunity despite the new rules.
“We support the financial fair play measures. We are confident that we pass them and that we will continue to do so,” a United spokesperson added today as part of the ongoing public relations drive by the club ahead of the 13 June season ticket renewal deadline.
Indeed the regulations are not designed to cut indebtedness per se but the subsidisation from rich owners that has resulted in massive losses at Chelsea and Manchester City. Around two-thirds of Premier League clubs and 50 per cent across Europe will fail to meet the regulations according to football analysts.
“The many clubs across Europe that continue to operate on a sustainable basis are finding it increasingly hard to co-exist and compete with clubs that incur costs and transfer fees beyond their means and report losses year-after-year,” Michel Platini claimed recently.
“For the health of European club football, those many clubs that operate with financial discipline and sustainable business plans must be encouraged
“This is why the entire football family requested and expressed full and unanimous support for the principles of financial fair play.”
Indeed, the football community now recognises that outside intervention will ensure clubs, such as Portsmouth, do not spend themselves into oblivion, while City, Chelsea, Real Madrid and Barcelona can no longer lean on wealthy benefactors or the banks without consequence.
It is perhaps ironic then that United’s position in European football would be strengthened by the new rules were it not for the Glazer family’s ownership of the club. Compared to leading domestic and European rivals, United is highly profitable but for debt interest payments. The same is true of the Premier League as a whole, which generates more revenue than major European rivals.
Platini’s is not an anti-English agenda.
But this is the UEFA regulations do fall well short of the over arching framework for football finances that many in the community have called for. United’s debt will likely reduce the club’s competitiveness over time, with transfer and wage spending only permissible once the club has made interest and debt payments.
In the longer term should the Glazers ever wish to pay off the bond, United must raise revenues, sell players or reduce spending in the transfer market to stay within the regulations.
Indeed, the new rules should only increase the anger of fans, with the £437 million wasted by the Glazer family so far dwarfed in the next seven years by interest, dividends and management fees.
Platini will obtain greater fair play in European competition but United will benefit little from it.