Football’s wealthiest clubs bypass salary caps with new cost controls

The biggest reforms to European football’s financial controls in a generation will stop short of creating American-style salary caps to limit team spending, and instead enact rules that are unlikely to prevent the most the continent’s wealthy to buy the best talent and win the most coveted trophies.

UEFA, European football’s governing body, has spent more than a year discussing with a cross-section of elite clubs a new model to replace its so-called Financial Fair Play rules, the mechanism cost-control system that for a decade has sought to limit team spending as part of an effort to promote competition.

UEFA have finally found a replacement. According to people briefed on the regulations, teams’ football-related expenses will not be able to exceed 70% of their income, a regulation that appears to be watered down from the strict salary cap long championed by UEFA President Aleksander Ceferin.

Ceferin had discussed for at least five years the imposition of salary caps as a means of closing the growing wealth gap in European football. But faced with the complexity of European labor law and fierce opposition, UEFA abandoned the concept of a hard cap and, according to three people familiar with the proposals, opted for a proposal which, after a period of implementation of three years, oblige the teams to maintain their expenses within a strict ratio.

The rules will be added to UEFA’s regulations after a vote by its board on April 7. They will also be renamed, with UEFA seeking to move away from FFP, or financial fair play, a term coined under Ceferin’s predecessor, and instead embrace a more prosaic title: financial sustainability regulations.

In more than a decade of use, the current financial fair play system has proven more adept at producing criticism than fairness. Smaller teams complained of being punished for rule violations, while larger, wealthier teams were often able to avoid the harsher punishments. The biggest and wealthiest clubs, meanwhile, have opposed financial controls as an unfair curb on their ambitions.

Discussions about changing regulations have accelerated during the coronavirus pandemic, when closed stadiums and broadcaster discounts have caused financial discomfort for teams big and small. UEFA reported in February that around 7 billion euros (around $7.7 billion) had been collectively wiped from club balance sheets during the pandemic.

Despite their noble nod to sustainability, the rule changes could actually bolster the growing hegemony of wealthy English teams, who enjoy not only the highest domestic television revenues in world football, but also access to the wealth of some of the sport’s wealthiest owners. In last season’s Champions League, two English sides met in the final for the second time in three years.

The decision to bring football-related costs like salaries and transfer fees into a tight ratio will be a challenge for many top teams outside England, the vast majority of whom have struggled to maintain fiscal discipline so that they were trying to keep up with rivals who play in the Premier League.

In Italy, for example, salary costs alone often exceed the ratios proposed by UEFA. In Spain, which has some of the strictest financial rules in football, central Barcelona were unable to retain star player Lionel Messi last year because it would have breached a cap imposed on the player. team by league.

Discussions over the ratio UEFA should impose on clubs have been complicated by conflicts of interest. Some teams, especially those backed by wealthy owners used to throwing their own money into buying their teams’ success, had wanted the limit to be as high as 85%. Others, including several German clubs, whose balance sheets are generally controlled by a system in which members retain a majority stake in ownership, have argued for an even lower limit.

To allow teams to adapt to the new regulations, the new rules will be imposed over time: clubs will be able to spend up to 90% of their income before this figure is reduced to its permanent level of 70% d three seasons here. Under the proposed rules, teams may, under certain circumstances, be given the option to spend up to around $10 million above the ratio, provided they have healthy balance sheets and have not previously breached regulations. .

UEFA’s critics have long complained that despite having cost-control rules in place, they have often failed to punish the biggest teams. In recent years, Manchester City and Paris St.-Germain – teams funded by wealthy Gulf states – have been able to avoid stiff penalties for technical reasons.

There has also been little clarity around the current sanctioning mechanism and concerns over UEFA’s willingness to take on the most difficult cases. Several longtime members of the committees responsible for overseeing the financial rules have been replaced or left in recent years. Sunil Gulati, the former president of American football, was appointed chairman of UEFA’s new financial control panel last year.

Under the new system, UEFA will have the right to impose sporting and financial sanctions on rule breakers, including fines, threats of expulsion and, for the first time, an option to demote teams between the three competitions it currently organizes. A Champions League team, for example, could be relegated to the second-tier Europa League for a breach of financial rules.

Another measure may also include point deductions under the revised Champions League and Europa League format: from 2024, all participants will be placed in a single league table in the first phase of the competition. And the regulations will also require closer scrutiny of sponsorship deals amid claims that some teams have benefited from inflated deals with companies linked to their ownership groups.

UEFA are talking about the proposals with several clubs who are already on performance plans due to their poor financial results. These teams, up to 40, have reached so-called settlement agreements with the governing body in order to continue participating in their tournaments.

Leave a Reply

Your email address will not be published.