An interesting feature of FFP

Looking into next year, QPR will benefit from a £23m parachute payment. However, this does not make up for the lost TV income (see TV Revenue row for the impact). It seems likely that the club will be able to manage some players out of the club and it will probably have some wage-reduction clauses in the existing contracts (although reports suggest that most high-earners don’t have these contract clauses). The heavily caveated projection suggests the club could report a loss of around £61.5m during their first season in the Championship. This figure is well above the new FFP rules for the Championship and will have significant implications for the club.

From next season, strict new FFP rules for the Championship have been introduced (with penalties). All clubs (including QPR) will need to keep future club losses below £8m for the coming season. Any overspend will become apparent when the accounts for the 2013/14 season are submitted in December 2014. An overspending club will be given a transfer ban (with the first ban coming into effect in January 2015). Once this is understood, the need for QPR to ‘bounce back’ and win promotion at the very first attempt becomes apparent. If they don’t bounce-back immediately, QPR will almost certainly not be able to sign any new players after end August 2014. This would severely hamper their campaign during their second season in the Championship.

Given that only one club out of the last 9 have bounced back at the first attempt, QPR’s challenge should not be underestimated. The matter becomes even more pressing when you consider that the Transfer Ban would not be lifted until the club can prove that it was on track to bring losses below £6m in the next season (£5m from 2016) – conceivably QPR could have Transfer Ban in place for several seasons.

If QPR were fortunate enough to win promotion at the first attempt, they would be affected by the new ‘Fair Play Tax’. Any club that wins promotion as a result of overspending will have to pay ‘tax’ based on a sliding scale. Assuming QPR lose £61.5m next season, the club would end up paying a tax of £48.7m – a huge amount (see here for details of the rules and the calculation). This tax would then be divided up and allocated to those clubs in the Championship that have complied with the FFP rules (adding an extra incentive for overspending clubs such as Leicester to comply). Interestingly, as any unused parachute payments are also divided up amongst clubs, some Championship outfits may ultimately be happy to see QPR bounce back as the scenario would benefit them by a further £2m.

Given the need for QPR to win promotion at their first attempt, it will be interesting to see if the new FFP rules actually encourage QPR to continue their overspending. The club will have to weigh up the potential benefits of a place in the Premier League, against the Transfer Tax and the risk of becoming a 'zombie club' with an almost indefinite Transfer Ban should they fail to quickly return to the top flight.

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beorhthelm said:

i think you'll find the rule about parachute payments being shared out in the Championship, if a receipient club is promoted, has always been the case. the punishment from FFP point of view is that they'd effectivly not get any financial reward for promotion in the example.

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Gary Gurr said:

Would the transfer ban be like the one Watford are under at the moment where it seems they can sign anyone they like?

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Gary Gurr said:

Would the transfer ban be like the one Watford are under at the moment where it seems they can sign anyone they like?

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Seagull73 said:

Yeah what the f*** is all that about? I can't find any decent explanation for it anywhere?

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Postman Pat said:

The club has been made the subject of a transfer embargo, but wishes to emphasize that the embargo referred to falls under Regulation 19 of the Football League Regulations. This is not an absolute bar on transfers, but rather a mechanism by which transfer business can be conducted by the club provided that the prior authorization of the relevant football authorities has been obtained.

So they can only sign players once they prove to the footballing authorities that the paperwork has been filled in correctly.

The most pointless 'ban' in the world.

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portslade seagull said:

Once a big club is hit a legal challenge will see FFP eventually falter and fail

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portslade seagull said:

Once a big club is hit a legal challenge will see FFP eventually falter and fail

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