• The new FFP rules

    What difference does it make?

    The new rules for Financial Fair Play (FFP) announced by the Football League Championship earlier this week provoked head scratching, chin rubbing, calculator tapping and cynical indifference in equal measure from Albion fans.

    The latest incarnation of FFP (which I suspect won't be the last), attempts to address some of the criticisms of the 'old' (i.e. current) rules, which were deemed by some to give clubs relegated from the Premier League too great an advantage over more established FL members.

    For the most recent season (2013/14), Championship clubs were allowed a maximum loss, after exclusions, of 3 million. On top of this, the club owner was allowed to put a further 5 million into the club, but only in the form of shares, not loans.

    Panic

    For a club such as the Albion, this was a pretty hard task, as the losses for 2012/13 were a record 14.7 million. However, anecdotal evidence and comment from Paul Barber, the club's 480,000 a year CEO, suggested that the club was confident of making this target, even before the sale of Liam Bridcutt and Ashley Barnes during the financial year ended 30 June 2014 for around 4 million (the departures of Leo Ulloa and Will Buckley took place after the financial year end).

    As previously mentioned, some costs, such as infrastructure and youth development, are excluded from FFP calculations, but my calculations produced an FFP loss of around 11 million, that the club had to reduce during Oscar Garcia's tenure at the club.

    Clubs in the Championship get money from four sources: fans, commercial partners, TV income and payments from the Premier League.

    Ask

    It is this final item that causes the greatest discrepancies between clubs. Bolton, relegated to the Championship in 2012, received 19 million from the Premier League in the form of parachute payments during 2012/13, compared to the Albion's 4.8 million. Those figures are before the Premier League boosted parachute payments, so that now over the four year period that parachute payments are on offer, former PL clubs receive a total of 60 million, including an eye watering 27 million in the first year following relegation.

    (As a side note, Bolton also generated more money from the hotel at the Reebok than they did from gate receipts, 6.5 million to 3.7 million. This may explain why Tony Bloom wants to develop the Amex complex with a hotel, open 365 days a year, compared to the stadium, effectively open about 25 days a year).

    Heaven Knows I'm Miserable Now

    The new rules attempt to bridge the gap between those clubs receiving parachute payments and those that do not.
    The rules do not affect the current season, so the Albion will 'only' be allowed to make an FFP loss of 2 million, although Uncle Tony can top this up with a further 4 million.



    The main changes kick in from 2015/16. Losses are capped at 2 million as before, BUT owners can now, if they wish, put in a further 11 million a year in the form of shares (as before, not loans), to effectively allow a loss of 13 million.
    Clubs which require such injections of capital by owners are subject to extra scrutiny by the Football League overseers (once again, it's BMWs and Caribbean holidays for the accountants who inevitably will be employed to perform this role).

    Stop me if you think you've heard this one before

    There is a further change too, to remove some of the 'lumpiness' arising in the accounts in a single year, the clubs will be assessed over a rolling three year period. So that the losses of 13 million in a year become 39 million over three years.

    The logic behind this is that it removed the distortions caused by selling a player for a large fee, which can have a significant impact on the accounts of a single season, and make the previous/consequent years' accounts look poor by comparison.

    It would therefore appear that (for example) a club could lose 35 million in a year, provided that it can convince the Football League that it won't lose more than 4 million in the two subsequent years.

    Strangeways here we come

    Looking at the rules, there will be winners and losers, as there are whenever rule changes arise. Paul Barber's comments that the Albion voted for the changes for 'the greater good', caused my eyebrows to raise higher than Lewis Dunk's clearance into the East Stand last Tuesday against Wigan.

    My perception is that the club voted 'Yes' because it was in the interests of Tony Bloom, and his desire for the Albion to play in the Premier League, rather than an egalitarian wish for more fairness or to protect clubs from the spectre of administration.

    That's not a bad thing for anyone who wants to see the Albion sitting at the top table, but to claim that the changes are for the greater good is about an accurate a statement as saying there were 23,000 at the Amex for the last home game.

    Read more about the Albion's finances


    Comments 6 Comments
    1. KZNSeagull's Avatar
      KZNSeagull -
      This 'greater good' comment is perplexing - the only reason I can think is that the FL are trying to future proof the rules as far as possible. The original rules were created at a time when the parachute payments were considerably less, so to tie themselves into the original rules for the foreseeable future would have created a much greater disparity. For the club to agree suggests that TB is prepared to pump yet more money into the club so any suggestion otherwise could be a 'miserable lie'.

      We all know that parachute payments do not necessarily help relegated teams at the moment, but that seems to be because they are losing a fortune in the PL anyway. If PL teams sort themselves out such that the relegated teams are reasonably financially sound, then these enormous parachute payments will give them a much healthier advantage in the Championship.

      There is no compulsion for a Championship club to lose 39m over 3 years, but we all know that trying to get any club on a sound financial footing makes it highly unlikely that they will stay competitive - it can be done but it will get increasingly difficult over time. All I can see that these rules are doing is 'encouraging' clubs to get into more financial strife than they are already in and there are only a certain amount of sugar daddies around. Something has to give at some point and I hope that Brighton is not a club that is affected - we have to trust in the benevolence of TB, keep chanting the mantra 'please, please, please let me get what I want' and hope that we do not end up with a 'girlfriend in a coma'.
    1. hans kraay fan club's Avatar
      hans kraay fan club -
      You have to feel for Tony Bloom. This charming man has sunk a fortune into the club to aim for top rank. He must despair at the ludicrous inreases in parachute payments - that joke isn't funny anymore. Against these, the club is getting nowhere fast.

      Well I wonder, is there a limit to Bloom's benevolence? Will he one day think 'I started something, that I just couldn't finish', or will his view of his beloved Albion always be one of 'I won't share you'?

      Either way he can safely think of Albion fans 'I don't owe you anything. You've got everything now'.
    1. KZNSeagull's Avatar
      KZNSeagull -
      Quote Originally Posted by hans kraay fan club View Post
      You have to feel for Tony Bloom. This charming man has sunk a fortune into the club to aim for top rank. He must despair at the ludicrous inreases in parachute payments - that joke isn't funny anymore. Against these, the club is getting nowhere fast.

      Well I wonder, is there a limit to Bloom's benevolence? Will he one day think 'I started something, that I just couldn't finish', or will his view of his beloved Albion always be one of 'I won't share you'?

      Either way he can safely think of Albion fans 'I don't owe you anything. You've got everything now'.
      Bravo! What (s)he said.

      Football finances are still ill. Money changes everything - is it really so strange?. Spend ours wisely and with a rush and a push the land is ours, where we can enjoy our time in the golden lights and oscillate wildly. On the way we can perhaps enjoy(?) a trip back to the old house in south London, not far from the cemetry gates - sadly it paints a vulgar picture but we can wish them an unhappy birthday nonetheless. We just need to stretch out and wait as we clearly just haven't earned it yet baby.
    1. Creaky's Avatar
      Creaky -
      The statement on the Football League website includes the following -

      "From the beginning of the 2016/17 season, Championship clubs will have their financial performance continuously monitored over a three season timeframe and will be permitted to lose up to 15m during that period without having to be prescriptive over how that loss will be funded."

      I can't see where the rule changes state that losses over 2 million pound have to be funded by equity purchase. The above statement seems to suggest that 15 million losses over 3 years, (i.e. 5 million per year), can be funded by any means.
    1. El Presidente's Avatar
      El Presidente -
      Quote Originally Posted by Creaky View Post
      The statement on the Football League website includes the following -

      "From the beginning of the 2016/17 season, Championship clubs will have their financial performance continuously monitored over a three season timeframe and will be permitted to lose up to 15m during that period without having to be prescriptive over how that loss will be funded."

      I can't see where the rule changes state that losses over 2 million pound have to be funded by equity purchase. The above statement seems to suggest that 15 million losses over 3 years, (i.e. 5 million per year), can be funded by any means.
      Good point, well made, will check it out.
    1. AZ Gull's Avatar
      AZ Gull -
      Quote Originally Posted by KZNSeagull View Post
      This 'greater good' comment is perplexing - the only reason I can think is that the FL are trying to future proof the rules as far as possible. The original rules were created at a time when the parachute payments were considerably less, so to tie themselves into the original rules for the foreseeable future would have created a much greater disparity. For the club to agree suggests that TB is prepared to pump yet more money into the club so any suggestion otherwise could be a 'miserable lie'.

      We all know that parachute payments do not necessarily help relegated teams at the moment, but that seems to be because they are losing a fortune in the PL anyway. If PL teams sort themselves out such that the relegated teams are reasonably financially sound, then these enormous parachute payments will give them a much healthier advantage in the Championship.

      There is no compulsion for a Championship club to lose 39m over 3 years, but we all know that trying to get any club on a sound financial footing makes it highly unlikely that they will stay competitive - it can be done but it will get increasingly difficult over time. All I can see that these rules are doing is 'encouraging' clubs to get into more financial strife than they are already in and there are only a certain amount of sugar daddies around. Something has to give at some point and I hope that Brighton is not a club that is affected - we have to trust in the benevolence of TB, keep chanting the mantra 'please, please, please let me get what I want' and hope that we do not end up with a 'girlfriend in a coma'.
      There is a bit more explanation from Paul Barber here - Albion reluctantly back Financial Fair Play changes for the 'greater good'. He sees a more consistent system between the PL and the FL as a good thing.

      And based upon this additional information that came from Paul Barber on Thursday (that I haven't seen reported elsewhere) - Paul Barber details new proposals with regard to parachute payments and solidarity payments - it looks as if there is an attempt to mollify the effect of the parachute payments.
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