Please explain FFP in very simple terms

[Creaky]

I'm trying to understand the points you are making here - and failing. I think you have an incorrect view of FFP, for these reasons:-

There is nothing under the FFP regulations that "prevents money being genuinely pumped into clubs via equity purchase". As long as money injected by an owner is used for purposes such as building or improving a stadium, or a new training ground, or an academy [sound familiar?], ie capital projects, then that expenditure is fine under FFP (which explicitly excludes investment in Youth Development and the purchase, sale and depreciation of fixed assets excluding players). Your comment about what position Albion would be in, if FFP had been in force 5 years ago, is meaningless, as it wouldn't have affected a single thing that the club has done in those 5 years.

However, trying to link Forest's sponsorship deal to this type of "good" capital expenditure is bizarre. It would seem that the sponsorship deal is clearly an attempt to artificially inflate Forest's revenue, with the sole purpose of allowing their expenses (ie player wages) to be commensurately higher than they would otherwise have been (if they had followed the rules). It is exactly this type of short-term, unsustainable, dash-for-the-Premier-League-riches spending that has caused issues for many clubs in recent seasons.

I applaud the Football League's efforts to attempt to rein in this profligacy and hopefully move towards greater self-sustaining finances amongst Championship clubs. We will all have to wait and see whether these regulations really do have teeth, and which clubs are taking the issue seriously.

FFP not only allows 'non-returnable' investment, (such as equity purchase), to be used for capital investment but also allows owners to personally loan or to take out commercial loans for this purpose - it is this latter type of debt that Drew pointed out can be the real cause of financial difficulties. This 'exemption' only serves to highlight that FFP isn't actually addressing the real cause of clubs getting into difficulties, (ie debt), but rather just one area of expenditure.

If FF regulations were in force and strictly enforced whilst we were in our last few years at Withdean and for our first few seasons at the Amex we would either have faced sanctions or would have had to reduce our 'spending' drastically - it's all very well to say capital expenditure can be ignored as far as FFP is concerned but that doesn't apply to the additional costs involved in running those facilities nor, more importantly, does it make the debts incurred in building them any less real.

Equity purchase or schemes such as the sponsorship deals mentioned do not threaten clubs in any way - they simply inject funds into the club that can be used for either capital or current expenditure - they do not increase debt, the real cause of clubs failing.

In summary FFP seems to be targeting a single factor, albeit a major one, players wages - a 'good thing' most people appear to be saying but this ignores the points very well made by Perseus at #36

Means we cannot sign first team Premiership players because their wages are too high. Might be able to get youngsters and old timers but not peak age players. So any new players will have to come from the lower divisions, Premier youngsters that cannot make the grade or foreigners

This effect will not only be seen in the Championship but also in all the lower leagues. The financial restrictions are not level between the Premier League and the Championship and are also not the same between the Championship and the lower leagues. This means that those clubs who do get promoted are unlikely to have a team that can successfully compete in the higher league without a huge investment in new players which in turn can only lead to bigger debts - debts that proponents of FFP claim will be restricted by the regulations but is actually doing the exact opposite.

The principle of regulations to ensure the sustainability of individual clubs should be directed in my opinion at debts not at financial losses - losses financed by owners via means other than loans do not threaten a club's future.

 

[CliveWalkerWingWizard]

Why is trying to stick to the rules gambling?

Maybe i should have used the term 'playing safe' - I just like to put TB and gambling together

 

[Seagull on the wing]

It will interesting to see what happens with Bolton if their reported debts of £163m are true....

 

[Green Cross Code Man]

It will interesting to see what happens with Bolton if their reported debts of £163m are true....

But aren't most of those debts very similar to the debts we have in that they are owed to their owner?

 

[Rugrat]

Equity purchase or schemes such as the sponsorship deals mentioned do not threaten clubs in any way - they simply inject funds into the club that can be used for either capital or current expenditure - they do not increase debt, the real cause of clubs failing.

In summary FFP seems to be targeting a single factor, albeit a major one, players wages - a 'good thing' most people appear to be saying but this ignores the points very well made by Perseus at #36



This effect will not only be seen in the Championship but also in all the lower leagues. The financial restrictions are not level between the Premier League and the Championship and are also not the same between the Championship and the lower leagues. This means that those clubs who do get promoted are unlikely to have a team that can successfully compete in the higher league without a huge investment in new players which in turn can only lead to bigger debts - debts that proponents of FFP claim will be restricted by the regulations but is actually doing the exact opposite.

The principle of regulations to ensure the sustainability of individual clubs should be directed in my opinion at debts not at financial losses - losses financed by owners via means other than loans do not threaten a club's future.

Totally agree. FFP is just making the gap between the Prem and FL clubs even bigger.

Football at the lower levels (outside Prem) needs more money put into it to prosper and survive, not less. If that means benefactors pump money into clubs (for whatever reason) that doesn't weaken the clubs longer term financial position then that should be encouraged no matter how "unfair" it might appear to some.

FFP is a poorly thought out concept which tries to deal with one issue yet it is creating several more, and potentially making the whole system uncompetitive

 

[TheJasperCo]

Forty ****ing Pounds?!! All we have to spend is FORTY ****ING POUNDS?!!!

 

[Diego Napier]

To a large extent, all this supposition, prejudgement, hand-wringing and mild hysteria over the possible outcome of the League's initial attempt to bring some financial accountability into football is beside the point.

We have a rich benefactor who wants to spend his money in a specific way; investing in the club's infrastructure & long term future. He's not going to emulate the foreign investors who splurge their dosh on transfers and wages in an attempt to get to the Premier League asap. It may simply be convenient for the club that FFP has been introduced and we are gearing up to comply with it as I believe that, after his initial financial singeing with our move to Falmer, TB will not get his fingers burnt again by failing to balance the current account.

Anyone who rails against other clubs' spending and wants us do the same to chase transfer targets ought to be praying for a foreign buy-out.

 

[Worried Man Blues]

Will sanctions come from the FA or the FL?

 

[Creaky]

To a large extent, all this supposition, prejudgement, hand-wringing and mild hysteria over the possible outcome of the League's initial attempt to bring some financial accountability into football is beside the point.

We have a rich benefactor who wants to spend his money in a specific way; investing in the club's infrastructure & long term future. He's not going to emulate the foreign investors who splurge their dosh on transfers and wages in an attempt to get to the Premier League asap. It may simply be convenient for the club that FFP has been introduced and we are gearing up to comply with it as I believe that, after his initial financial singeing with our move to Falmer, TB will not get his fingers burnt again by failing to balance the current account.

Anyone who rails against other clubs' spending and wants us do the same to chase transfer targets ought to be praying for a foreign buy-out.

I'm certainly not advocating that TB splashes out at all but likewise I'm not railing against those owners who have decided to do so - especially when such spending is being financed in such a way that it is not placing a future financial burden on the club.

 

[AZ Gull]

FFP not only allows 'non-returnable' investment, (such as equity purchase), to be used for capital investment but also allows owners to personally loan or to take out commercial loans for this purpose - it is this latter type of debt that Drew pointed out can be the real cause of financial difficulties. This 'exemption' only serves to highlight that FFP isn't actually addressing the real cause of clubs getting into difficulties, (ie debt), but rather just one area of expenditure.

The reasoning behind FFP is to ensure financially self-sustaining clubs. The only practical way to achieve this is to set regulations that tie a club's expenditure to its revenue. This is what FFP does. How a club chooses to fund itself (ie the relationship between equity and debt) is a matter for each club to decide; it is not something that the authorities can, or should, be regulating.

If FF regulations were in force and strictly enforced whilst we were in our last few years at Withdean and for our first few seasons at the Amex we would either have faced sanctions or would have had to reduce our 'spending' drastically - it's all very well to say capital expenditure can be ignored as far as FFP is concerned but that doesn't apply to the additional costs involved in running those facilities nor, more importantly, does it make the debts incurred in building them any less real.

This is simply not true. Go back and look at our accounts for those years.

Equity purchase or schemes such as the sponsorship deals mentioned do not threaten clubs in any way - they simply inject funds into the club that can be used for either capital or current expenditure - they do not increase debt, the real cause of clubs failing.

Of course Forest's dodgy sponsorship deal threatens the club - it has allowed the owner to saddle the club with massive commitments in terms of transfer fees and players wages. If the owner were to suddenly decide to remove this largesse (or run into financial difficulties) the club is left with excessive spending that cannot be met by revenue (because the sponsorship deal could not be replicated at anything like a similar sum, as it was so far above a real, market rate). It is EXACTLY this type of funding that FFP is seeking to curtail.

In summary FFP seems to be targeting a single factor, albeit a major one, players wages - a 'good thing' most people appear to be saying but this ignores the points very well made by Perseus at #36

As already explained, FFP is targeting the sustainability of a club's finances. If a club has high (legitimate) revenue, it will be able to afford commensurately high expenditure. If it has lower revenue, it will have to cut it's cloth accordingly. That is as it should be.

This effect will not only be seen in the Championship but also in all the lower leagues. The financial restrictions are not level between the Premier League and the Championship and are also not the same between the Championship and the lower leagues. This means that those clubs who do get promoted are unlikely to have a team that can successfully compete in the higher league without a huge investment in new players which in turn can only lead to bigger debts - debts that proponents of FFP claim will be restricted by the regulations but is actually doing the exact opposite.

The principle of regulations to ensure the sustainability of individual clubs should be directed in my opinion at debts not at financial losses - losses financed by owners via means other than loans do not threaten a club's future.

As a club moves up the league, it's revenues increase accordingly. The Albion seems to have been successful at gradually building a squad that is competitive in the higher league. What FFP will mean is that clubs will have to ensure their expenditure in the higher league doesn't outstrip their larger revenues - how is that a bad thing?

 

[Rugrat]

The reasoning behind FFP is to ensure financially self-sustaining clubs. The only practical way to achieve this is to set regulations that tie a club's expenditure to its revenue. This is what FFP does. How a club chooses to fund itself (ie the relationship between equity and debt) is a matter for each club to decide; it is not something that the authorities can, or should, be regulating.

I see where you are coming from but I think of FFP as gagging investment in the game (to a degree). So what if a rich benefactor wants to put money into a club to use it for buying players and paying wages? Not particularly you, but a lot of people here using the term "sustainable" and I wonder in what context? An "investor" may chose to fund a promotion push for 1 2 or 3 years and then give up .... so is that what we mean by not sustainable? So what? As long as that investment hasn't damaged the financial well being of the club (like Portsmouth) then what's the issue, other than it doesn't feel fair to us (those) that don't have the good fortune of these benefactors. Free market economy and all that ............

Personally I think the FA should spend more time making sure that the investments made are not putting clubs in perilous financial positions (e.g. signing players on long term contracts with no means to pay the entire obligation, taking on debt, providing financial guarantees - put the money up front instead) than to use such a blunt instrument to try and achieve the same end

 

[AZ Gull]

I see where you are coming from but I think of FFP as gagging investment in the game (to a degree). So what if a rich benefactor wants to put money into a club to use it for buying players and paying wages? Not particularly you, but a lot of people here using the term "sustainable" and I wonder in what context? An "investor" may chose to fund a promotion push for 1 2 or 3 years and then give up .... so is that what we mean by not sustainable? So what? As long as that investment hasn't damaged the financial well being of the club (like Portsmouth) then what's the issue, other than it doesn't feel fair to us (those) that don't have the good fortune of these benefactors. Free market economy and all that ............

Personally I think the FA should spend more time making sure that the investments made are not putting clubs in perilous financial positions (e.g. signing players on long term contracts with no means to pay the entire obligation, taking on debt, providing financial guarantees - put the money up front instead) than to use such a blunt instrument to try and achieve the same end

I think it would help clarify things by underlining the key difference between the club, as an entity, and the rich benefactor. There is absolutely nothing wrong with a benefactor investing in a club, ie pumping money in to build long-term, fixed assets that will help sustain a club long after that benefactor has ridden off into the sunset. This is what Tony Bloom has done; the fantastic stadium and the academy are incredible assets that belong to the club (not Tony Bloom), and will help secure the long-term, sustainable, financial well-being of the club. FFP explicitly allows this type of investment.

However, a benefactor who "funds a promotion push for 1 2 or 3 years" is most definitely not investing in the club. That type of funding, merely increasing a club's operational expenditure, is the very opposite of being sustainable. It does nothing to improve a club's fixed asset base. By definition, it DOES damage the financial well-being of the club (and, to a degree, of the football industry in general, because it artificially distorts the market rate for players wages).

 

[Rugrat]

I think it would help clarify things by underlining the key difference between the club, as an entity, and the rich benefactor. There is absolutely nothing wrong with a benefactor investing in a club, ie pumping money in to build long-term, fixed assets that will help sustain a club long after that benefactor has ridden off into the sunset. This is what Tony Bloom has done; the fantastic stadium and the academy are incredible assets that belong to the club (not Tony Bloom), and will help secure the long-term, sustainable, financial well-being of the club. FFP explicitly allows this type of investment.

However, a benefactor who "funds a promotion push for 1 2 or 3 years" is most definitely not investing in the club. That type of funding, merely increasing a club's operational expenditure, is the very opposite of being sustainable. It does nothing to improve a club's fixed asset base. By definition, it DOES damage the financial well-being of the club (and, to a degree, of the football industry in general, because it artificially distorts the market rate for players wages).

An "investment" can be short term. Of course it isn't improving the clubs fixed assets but I can't see how it damages the financial well being of the club if at the end of the period the club is in no worse a financial position than it was at the beginning.

Don't get me wrong, I think the way money has taken control of the game is obscene but I don't think FFP addresses the bigger issue of the absolute gulf between the haves and have nots

 

[Dunk]

It is a very fiddly bit of legislation isn't it?

So the reason TB wants to comply is because any loss we make above £3m would have to come directly out of his pocket (not from a bank loan) and potentially any loss above £8m would be subject to an additional and significant fine that goes to charity- ie out of the club completely. Fair enough.

I suppose the point of a transfer embargo would be to force clubs to sell players on high wages. Once they can project a significant reduction in wages the embargo will be lifted and we start again.

If a lot of clubs have an embargo then there will not be anyone available to take these players. Interesting times ahead.

 

[AZ Gull]

An "investment" can be short term. Of course it isn't improving the clubs fixed assets but I can't see how it damages the financial well being of the club if at the end of the period the club is in no worse a financial position than it was at the beginning.

Don't get me wrong, I think the way money has taken control of the game is obscene but I don't think FFP addresses the bigger issue of the absolute gulf between the haves and have nots

If an owner pumps money into a club and uses that money to pay transfer fees, and enter into contracts with players, that the club would otherwise not be able to afford, OF COURSE that is damaging to the financial well-being of the club.

 

[Rugrat]

If an owner pumps money into a club and uses that money to pay transfer fees, and enter into contracts with players, that the club would otherwise not be able to afford, OF COURSE that is damaging to the financial well-being of the club.

Not if he/she was required to cover the entire cost of the contract at the outset ... such as putting the £££'s into an FA managed escrow, or a similarly watertight arrangement.

 

[Creaky]

The reasoning behind FFP is to ensure financially self-sustaining clubs. The only practical way to achieve this is to set regulations that tie a club's expenditure to its revenue. This is what FFP does. How a club chooses to fund itself (ie the relationship between equity and debt) is a matter for each club to decide; it is not something that the authorities can, or should, be regulating.

I don't agree - tieing a club's expenditure to its revenue is a recipe for stagnation not growth - revenue in most cases follows investment - not the other way round. Debt, unless it is sustainable, is what causes problems.

To say that authorities can't and shouldn't be regulating is nonsense - a company becomes insolvent once its liabilities exceed its assets and continued trading can be an offence under the Companys Act.

This is simply not true. Go back and look at our accounts for those years.

The accounts for the first year at the Amex and for the last year at the Withdean for Brighton and Hove Albion FC Ltd are £8.6M ad £6.3M - both figures in excesss of the proposed FFP figures of a Max of £2M loss or £5M with the purchase by the owner of equity to the value of £3M.

Of course Forest's dodgy sponsorship deal threatens the club - it has allowed the owner to saddle the club with massive commitments in terms of transfer fees and players wages. If the owner were to suddenly decide to remove this largesse (or run into financial difficulties) the club is left with excessive spending that cannot be met by revenue (because the sponsorship deal could not be replicated at anything like a similar sum, as it was so far above a real, market rate). It is EXACTLY this type of funding that FFP is seeking to curtail.

Irrespective of the level of the wage bill any club running at a loss, (ie the vast majority), which suddenly lost the guarantees made by the shareholders to cover those losses would be in financial difficulty, (including BHAFC) - FFP does NOTHING to ameliorate that and if anything does the reverse by discouraging investment in the clbs by wealthy individuals.

As already explained, FFP is targeting the sustainability of a club's finances. If a club has high (legitimate) revenue, it will be able to afford commensurately high expenditure. If it has lower revenue, it will have to cut it's cloth accordingly. That is as it should be.

Again you are putting the cart before the horse - it is investment that creates the growth in revenue and thus allowing a higher level of spending. Just look at a club like Chelsea before Abramovich ploughed a fortune into it and compare its revenue now to what it was.

As a club moves up the league, it's revenues increase accordingly. The Albion seems to have been successful at gradually building a squad that is competitive in the higher league. What FFP will mean is that clubs will have to ensure their expenditure in the higher league doesn't outstrip their larger revenues - how is that a bad thing?

FFP not only actively discourages movements up the leagues but penalises those clubs that do manage to do so by requiring large investments in playing staff at each step. The difference in the squads between each league is quite marked already and ensuring that the top teams in each league can't compete with the bottom teams in the league above them in terms of what they spend on players will only make this gap wider.

For instance in the PL, irrespective of what level of profit or loss a club is running at they are permitted to spend a million pounds a week on players wages - how many Championship clubs would ever have the revenue to match that type of spend and still meet the FFP requirements

I think it would help clarify things by underlining the key difference between the club, as an entity, and the rich benefactor. There is absolutely nothing wrong with a benefactor investing in a club, ie pumping money in to build long-term, fixed assets that will help sustain a club long after that benefactor has ridden off into the sunset. This is what Tony Bloom has done; the fantastic stadium and the academy are incredible assets that belong to the club (not Tony Bloom), and will help secure the long-term, sustainable, financial well-being of the club. FFP explicitly allows this type of investment.

Simply NOT true - the Amex does NOT belong to the club, (Brighton and Hove Albion Football Club Ltd), but to a separate company, The Community Stadium Ltd - the majority shareholder in this company happens to be TB who is also the majority shareholder in BHAFC - does not mean the club owns the stadium nor that at some future date the two entities couldn't belong to different people.

 

[symyjym]

It is a very fiddly bit of legislation isn't it?

So the reason TB wants to comply is because any loss we make above £3m would have to come directly out of his pocket (not from a bank loan) and potentially any loss above £8m would be subject to an additional and significant fine that goes to charity- ie out of the club completely. Fair enough.

I suppose the point of a transfer embargo would be to force clubs to sell players on high wages. Once they can project a significant reduction in wages the embargo will be lifted and we start again.

If a lot of clubs have an embargo then there will not be anyone available to take these players. Interesting times ahead.

To me the embargo could mean that it will be easier for us to sign players next season and we could have a queue of them at the Amex for less money.

 

[El Presidente]

If an owner pumps money into a club and uses that money to pay transfer fees, and enter into contracts with players, that the club would otherwise not be able to afford, OF COURSE that is damaging to the financial well-being of the club.

No it isn't. *cough* Manchester City

 

[AZ Gull]

I don't agree - tieing a club's expenditure to its revenue is a recipe for stagnation not growth - revenue in most cases follows investment - not the other way round. Debt, unless it is sustainable, is what causes problems.

You are absolutely right - and hence why FFP explicitly allows capital expenditure on fixed assets. Albion's combined ticketing and catering income in the first season at the Amex was 9.1million, compared with 2.3million in the last year at Withdean. I am in full agreement with your argument here, and FFP fully supports it. But for a club to be financially self-sustaining, expenditure HAS to be tied to revenue. The formula is simple: invest in capital assets --> increase revenue --> expenditure can rise sustainably. This is exactly the blueprint that Albion are following.

To say that authorities can't and shouldn't be regulating is nonsense - a company becomes insolvent once its liabilities exceed its assets and continued trading can be an offence under the Companys Act.

The accounts for the first year at the Amex and for the last year at the Withdean for Brighton and Hove Albion FC Ltd are £8.6M ad £6.3M - both figures in excesss of the proposed FFP figures of a Max of £2M loss or £5M with the purchase by the owner of equity to the value of £3M.

FFP is following a structured timetable of implementation; the maximum allowable losses of £5M come into effect in the 5th year of implementation (having been £12M in the first year). Of course a club who is in the process of moving from a small, rented stadium into its own £100M new-build is likely to incur abnormal losses. Even so, it's losses still fell within the FFP timetabled deviations. Your argument here is specious.

Irrespective of the level of the wage bill any club running at a loss, (ie the vast majority), which suddenly lost the guarantees made by the shareholders to cover those losses would be in financial difficulty, (including BHAFC) - FFP does NOTHING to ameliorate that and if anything does the reverse by discouraging investment in the clbs by wealthy individuals.

How can you seriously argue that FFP discourages investment in clubs by wealthy individuals? Have you heard of a club called Brighton and Hove Albion, and their chairman, Tony Bloom?

Again you are putting the cart before the horse - it is investment that creates the growth in revenue and thus allowing a higher level of spending. Just look at a club like Chelsea before Abramovich ploughed a fortune into it and compare its revenue now to what it was.

FFP not only actively discourages movements up the leagues but penalises those clubs that do manage to do so by requiring large investments in playing staff at each step. The difference in the squads between each league is quite marked already and ensuring that the top teams in each league can't compete with the bottom teams in the league above them in terms of what they spend on players will only make this gap wider.

For instance in the PL, irrespective of what level of profit or loss a club is running at they are permitted to spend a million pounds a week on players wages - how many Championship clubs would ever have the revenue to match that type of spend and still meet the FFP requirements

You seem to be arguing that a club in a lower league should be able to spend massively on players wages, in the hope of eventually gaining promotion. If that isn't a recipe for disaster, then I don't know what is. (In fact, if you were to examine every case of clubs getting into financial difficulties over the last 30 years, I would suggest this very reason would lie at the heart of the matter in nearly every single case). It is this attitude that is putting the cart before the horse (ie spending money that the club doesn't have). I think you will find that FFP will actually have a beneficial effect here because it will force clubs to reign in their spending on players wages - in fact David Burke alluded to this in his interview the other month, saying he had seen firm evidence that this was the case.

Simply NOT true - the Amex does NOT belong to the club, (Brighton and Hove Albion Football Club Ltd), but to a separate company, The Community Stadium Ltd - the majority shareholder in this company happens to be TB who is also the majority shareholder in BHAFC - does not mean the club owns the stadium nor that at some future date the two entities couldn't belong to different people.

The Community Stadium Ltd is a wholly owned subsidiary of Brighton & Hove Albion Holdings Ltd (the entity that, to all intents and purposes, is "the club"). The Amex was built by, and is owned by, "the club".