So after we've posted the predicted £8m loss again in December 2014 we will then be able to increase our transfer budget substantially if we are still in the Championship?
Got something to say or just want fewer pesky ads? Join us... 😊
Please explain FFP in very simple terms
- Thread starter Hastings gull
- Start date
So after we've posted the predicted £8m loss again in December 2014 we will then be able to increase our transfer budget substantially if we are still in the Championship?
No, as under FFP losses have to be reduced to £6 million and then £5 million in the two subsequent years.
We also have a unique cost at the Albion caused by transport costs. The club are very reluctant to reveal how much they pay to the transport companies, but if there is (say) a £3 charge per spectator, then on an average attendance of 26,000 the cost to the club is £1.8 million for league matches alone, add in three cup matches and we're through the £2 million barrier.
This is an example of my point though. The administrative, operational and salary costs have increased disproportionately to revenue ( despite the fact that this has also increased significantly) to the extent that these costs, under FFP, restrict our ability to invest in the playing side and thus reach the promised land?
Buzzer
Languidly Clinical
- Oct 1, 2006
- 26,121
Your analogy simply doesn't work.
1) Capital investment is not what FFP is about, it's about capping non-capital expenditure.
2) Widget factories do not work in an environment where there are punitive penalties from non-HMRC bodies for running at huge losses.
3) Most if not all factories (widget or otherwise) are run for bog-standard business reasons. They make a profit for the shareholders or they run at a loss until they are deemed economically unviable. Football clubs just aren't like that (and that is why we have FFP). No factory producing goods is run as a hobby by a rich sugar daddy in competition with other sugar daddies.
4) Factories make things to sell and the things they make tend to be of uniform quality and if, after a certain time they don't then they scrap the idea and try something else. In fact, in all probability, they would look at rates of return and apply normal investment rules on the project. Football academies are not factories. The quality cannot be guaranteed at any level for any length of time, the players produced are often retained within the football club as a valuable income-generating asset or they are sold or they are discarded but it is very much an art, not a science. Huge investment can produce fantastic results but as has been proved with Man U's youth system it can be extremely hit or miss. That's not to say that an excellent youth system is not worth it, just that it's not right to compare it to a factory investing in new machinery or new products.
5) Economies don't stagnate just through lack of investment neither do they necessarily stagnate because of a lack of investment. A good scouting network might well be just as profitable to a club as a decent youth academy. Certainly Brighton's brightest stars of late: Bennett, Bridcutt, Ince are cast-offs of other academies picked up for peanuts by talented Brighton staff.
6) Football clubs do not adhere to normal economics of supply and demand of most (if any) manufacturing companies. There is relative inelastic demand up to a certain point then extremely elastic demand and there is absolutely no analogy in the normal business world for explaining the finances of one year of promotion to the Premiership followed by relegation the next year.
I say again, Football finance just doesn't follow any 'normal' rules of business, it's all Alice in Wonderland stuff and this is why FFP has been brought in.
It's nice to see that you agree that these accounting principles aren't mere semantics.
Baldseagull
Well-known member
A lot of talk about whether it is damaging to Nottingham Forest or any other club if the owner wants to burn his cash, for me it doesn't matter if Forest's owners can afford to do it, because they and others do they are putting pressure on others to spend over the top to compete. FFP is aimed at curbing the financial arms race that is affecting ALL clubs.
The current situation with some owners pumping millions in to clubs made from businesses unrelated to football, denies the opportunity for success to clubs that try to run in a sustainable manner.
Only 2 or 3 clubs in the Championship do not run at a loss each season, this cannot be good and cannot last forever.
It is crazy that a rule has to be brought in to stop you from deliberately spending Millions more on wages and player acquisitions than you can hope to make season after season.
My concern is that it is going to be difficult to fine a club and put it into further debt, and risk of administration, for going into debt and risking administration. Having different rules for different divisions, and exemption periods for relegated clubs etc. is also going to cause problems.
The current situation with some owners pumping millions in to clubs made from businesses unrelated to football, denies the opportunity for success to clubs that try to run in a sustainable manner.
Only 2 or 3 clubs in the Championship do not run at a loss each season, this cannot be good and cannot last forever.
It is crazy that a rule has to be brought in to stop you from deliberately spending Millions more on wages and player acquisitions than you can hope to make season after season.
My concern is that it is going to be difficult to fine a club and put it into further debt, and risk of administration, for going into debt and risking administration. Having different rules for different divisions, and exemption periods for relegated clubs etc. is also going to cause problems.
Creaky
Well-known member
OK- I accept the analogy is not perfect but the principle remains that in order to expand, or in the case of a football club win more games, investment is a necessary. Whether that be in capital projects or in staff - in most cases it requires both.
1) I accept FFP is not about capital investment - it's the capping of 'non-capital' expenditure alone which makes it unlikely to succeed. Doing so decreases the potential benefit that can be derived from capital investment.
2)You are correct that 'widget factories' are not subject to additional penalties for losses incurred - good job too otherwise we'd never be able to buy a good widget!
3) Agreed that there are few commercial operations run by 'sugar daddies' at a continuous loss but they do exist and the people supporting such operations are generally called philanthropists.
4) I really wasn't comparing the physical output from a widget factory with that of a football club but rather the finances and how it is often necessary for both organisations to invest in the people employed in order to get the best end product.
5) This is where I do absolutely disagree with you - economies DO stagnate without investment - irrespective of what other measures are put in place - other practices may lead to stagnation as well but that doesn't alter the fact that investment is necessary for progress.
You can't just claim that a good scouting network could be profitable or likewise a youth academy - that is looking at the club in isolation and not at football as a whole - for every pound of profit made by one club through a good transfer policy a pound is lost by another club. Likewise with the training academy - for every player successfully leaving such an establishment and gaining a place in a team another player leaves.
Don't get me wrong, I believe that both a good scouting system and good academies are beneficial but to look at them as revenue streams other than at a club level doesn't work. Where they do work is at a competitive level - in the same way that as a fan I want BHAFC to have the best team possible I also want them to have the best academy and scouting network.
6) On this point I fully agree with you and I hope you'll agree that FFP does absolutely NOTHING to help bring the finances of the Premier League and the Championship in line - rather it is doing, or attempting to do, the exact oppposite.
Thunder Bolt
Silly old bat
The cup matches this season, don't have a travel subsidy.
We did last season, and that's what will be shown in the accounts when they are published.
Jimmy Grimble
Well-known member
I appreciate you're probably sick of questions in this field and might not be able to answer this one, but is there a possibility the club can drop the travel subsidy from season ticket prices next year in an attempt to cut losses? Or is it part of the club's commitment to provide sustainable travel?
I think this is a question for Lord Bracknell, as his knowledge of the travel regulations is far greater than mine.
However, I thought the club has now integrated a travel supplement into the cost of a ST to (partially) address the problem.
Jimmy Grimble
Well-known member
Thanks. [MENTION=6]Lord Bracknell[/MENTION] could you shed any light?
Baron Pepperpot
Active member
It's possible that clubs are flouting FFP in the hope that a court ruling will deem it illegal. It's a dangerous game, and a very unfair one.
Seems a bit odd given that the clubs voted for FFP in the first place (albeit my a majority, rather than unanimous decision).
Fines and embargoes already take place in football so difficult to see how a court ruling could overturn the internal constitution of the Football League, but there's always a crafty lawyer whispering in the ear of an ambitious chairman somewhere I would wager.
Uefa become ingenious on FFP punishments
It is well established that Uefa's financial fair play (FFP) rules are both very complex and open to the interpretation that the football governing body wants to put on them. Hence, there is plenty of scope for any punished club to challenge them in court, particularly if the punishment was as onerous as exclusion from the Champions League.
Recently we looked at the plea bargain arrangement which, presumably, allows clubs to get off with a lighter punishment in return for pleading guilty. This makes it easier to operate a scheme that involves more than 700 clubs, albeit some of them relatively obscure ones in the smallest European countries.
However was, as noted before, the devil is in the detail. Another club has ten days to challenge the deal. So if Uefa struck a deal with Manchester City, Jose Mourinho could get the hump (which he is doing regularly with City anyway) and extend his mind games by challenging the ruling.
Up to now, it has always seemed that the range of sanctions were either too severe or too light. The nuclear option of excluding a club from the Champions League could hurt Uefa as much as it hurt the club. However, a fine would not affect a wealthy club very much and might represent a good use of their money.
However, Article 29-1, sub-section g (yes, it is that complicated) has been modified in the last month. The wording is very convoluted, but basically it is a salary cap for offending clubs. So if you were £10m over your FFP limit, you would have to take out of your Champions League squad a player whose total compensation was £10m. So for Real Madrid that could mean Gareth Bale on £200,000 a week or five squad players on a mere £40,000 a week.
This quite an effective punishment. However, I still think it is all going to end up in court. You can just hear learned counsel saying, 'In respect of Article 29-1, sub section (g), could Your Honour turn to Document 728 in respect of the compensation of Mr G Bale.'
It is well established that Uefa's financial fair play (FFP) rules are both very complex and open to the interpretation that the football governing body wants to put on them. Hence, there is plenty of scope for any punished club to challenge them in court, particularly if the punishment was as onerous as exclusion from the Champions League.
Recently we looked at the plea bargain arrangement which, presumably, allows clubs to get off with a lighter punishment in return for pleading guilty. This makes it easier to operate a scheme that involves more than 700 clubs, albeit some of them relatively obscure ones in the smallest European countries.
However was, as noted before, the devil is in the detail. Another club has ten days to challenge the deal. So if Uefa struck a deal with Manchester City, Jose Mourinho could get the hump (which he is doing regularly with City anyway) and extend his mind games by challenging the ruling.
Up to now, it has always seemed that the range of sanctions were either too severe or too light. The nuclear option of excluding a club from the Champions League could hurt Uefa as much as it hurt the club. However, a fine would not affect a wealthy club very much and might represent a good use of their money.
However, Article 29-1, sub-section g (yes, it is that complicated) has been modified in the last month. The wording is very convoluted, but basically it is a salary cap for offending clubs. So if you were £10m over your FFP limit, you would have to take out of your Champions League squad a player whose total compensation was £10m. So for Real Madrid that could mean Gareth Bale on £200,000 a week or five squad players on a mere £40,000 a week.
This quite an effective punishment. However, I still think it is all going to end up in court. You can just hear learned counsel saying, 'In respect of Article 29-1, sub section (g), could Your Honour turn to Document 728 in respect of the compensation of Mr G Bale.'
Which football club has recruited the two accountants that worked on FFP on behalf of UEFA, and therefore know all the loopholes?
Forest Green Rovers?
Good call!