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British transfer records, unreasonably high wage bills and levels of frivolity that could only be perpetrated by Russian oligarchs – it doesn’t sound like a recipe for a football club looking to comply with UEFA’s Financial Fair Play regulations. But then again, you never know. When he arrived at Chelsea in 2003, Peter Kenyon claimed it was his aim to turn Chelsea in to a profitable club. A somewhat outlandish statement you might think, but, even after everything that has happened in the last two years, it is more than just a pipe dream. Chelsea can adhere to the FFP rules, but it will be a struggle.
Aims of FFP
As agreed upon in 2009, UEFA have a set of core objectives, which they hope FFP will help them achieve within European football. These aims are: to reduce the inflationary nature of wages and transfer fees, to introduce more discipline and responsibility in club finances, to ensure that clubs compete within their financial means, to encourage long-term investment in clubs’ individual youth programmes and infrastructure, and to ensure the economic future of European football as a whole.
Some of these measures have already been taken into account and acted upon at Chelsea, others have not.
The goal for UEFA is that by 2018/19 all clubs will be spending no more than their revenue each year. Before that point some leeway is allowed.
In theory, the first season in which a club could fail in their application to take part in a European competition due to FFP is 2013/14. However it is unlikely that such actions will be taken at this stage
The rules stipulate that a club wishing to enter into a European competition for 2013/14 must have lost no more than €45m for the previous two seasons.
For the 2014/15 season that figure of debt allowed remains at €45m but is calculated over three seasons instead of two. For the 2015/16 season the maximum shortfall is €30m over the three years. This format continues until 2018/19 when there are no more allowances made.
Whilst these figures for the near future may seem unattainable, allowances can be made if the excess shortfall (i.e. debt exceeding €45m within this period) is a result of player contracts signed before 1st June 2010. However, this will only be accepted as an excuse if the club can prove that there has been, and will continue to be, an upturn in the financial health of the club.
Chelsea’s efforts
Contrary to popular belief, Chelsea have been making considerable efforts for some time now in order to prepare for FFP. For example, they have a clear long term transfer policy, as demonstrated by the signings of Romelu Lukaku, Lucas Piazon, Kevin De Bruyne and Marko Marin. Despite being ‘in charge’ at the time, Andre Villas-Boas admitted to having no involvement in the signing of De Bruyne and made it perfectly clear that signing Lukaku had not bee his idea either.
Whilst signing players without asking your manager might not appear a constructive action, providing they were all thoroughly scouted, buying young and reasonably priced players is a sensible move for the future. Buying Fernando Torres for £50m during the January transfer window reeked of short termism inspired by desperation to hold on to the title. Chelsea have learned from their mistakes. There is a plan to avoid having to make such signings again. Whether Abramovich will stick to it is another matter.
The decision to initially only offer Roberto di Matteo a one year contract (and then a two year contract) was another big step for Abramovich. However mean it may have seemed and whatever Abramovich’s motives for doing so were, it is a serious issue. If Roman wishes to continue dispensing with his managers quite so regularly then he needs to refrain from handing them long, costly contracts. Redundancy packages to former managers are a major issue at Chelsea, one that appears to have been recognised.
New stadium
Having the Chelsea Pitch Owners turn down Abramovich’s approach to redevelop the stadium was a blow for the club with regards to FFP. Yes they would have had to take on a certain amount of debt to build the stadium, but it needn’t have been that costly. Providing they did it this year it might have been possible to raise the money through a combined effort from the council, sponsorship deals for naming rights and a nominal donation from Abramovich. Arsenal may have built their stadium the hard way but Tottenham and Chelsea can look to buy a new stadium whilst incurring minimal costs themselves.
Moreover, the money Chelsea could have received from a larger stadium would have gone far, far further than the modest returns currently provided by Stamford Bridge. It’s worth pointing out that since the Champions League’s creation in 1993 Chelsea have the smallest stadium out of all the clubs who have ever won it. This shows just how much Abramovich has had to stump up in order to get Chelsea where they are today, and how far they have to go before they can realistically support themselves at this level. Obviously there are other sources of income but it is an issue that the club need to address.
Turn debt in to equity
Easily the most effective way for Chelsea to solve their debt problem is to turn the club’s debt, which is owed to Abramovich, in to equity for the owner. Not only is this a good way to decrease the current debt but there are also rules within FFP that state that an owner may lend up to €45m to their club over the course of the three season period as long as they then turn that debt in to equity. If an owner wishes to simply lend money to the club without turning it in to equity then the limit is €5m.
The problem with this is that it is not good value for money for Abramovich. If he never has any intention of selling the club or of recouping his losses then it’s an excellent plan, but if that is not the case then it is an unattractive move for him, especially considering he already did this 2009.
Other options
There are a host of other options available to Chelsea. First, they can go down the route of Arsenal with The Emirates and Man City with Etihad and rename their stadium. Arsenal received £100m in 2006 for the naming rights to their new ground whilst City’s recent shirt and stadium deal gained them £300m. The problem with these long-term deals is that towards the latter stages of the agreement sponsorship deals have normally progressed so fast that the money is no longer competitive.
This is a problem Arsenal has been suffering from for the last few years and will continue to until 2014 when some of their deals expire.
Chelsea can also raise ticket prices. Fans at some point have to realise that if they want success as a result of massive financial investments they may, at some point, have to contribute to such actions. Man City fans will almost certainly discover this over the next few seasons. The problem for Chelsea is that their tickets are already relatively expensive. Nonetheless, as the current Champions of Europe playing regularly in a relatively small stadium there will never be a lack of competition for tickets. Such is the price elasticity of tickets to see big clubs.
The future
The next few years look undeniably difficult to navigate for Chelsea. The latest financial figures released by the club indicated that their debt was around £91m, their turnover was just over £222m and their wage bill was over £189m. A net loss of £60m on player trading for the year is a shockingly bad return but things are changing.
The club set up a Club Financial Control Panel to ensure that the requirements of FFP are met and if the club’s hierarchy can dissuade Abramovich from rushing out and buying a marquee player every single transfer window then there may be hope for the champions of Europe. UEFA being UEFA it seems certain that FFP will not be a watertight set of rules, but regardless of loop holes Chelsea, given discipline from the owner, can achieve this seemingly impossible goal.
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