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Financial fair play scores own goal


We have long argued that financial fair play could have unintended and perverse consequences.  This view is supported by the latest authoritative annual survey of football by accountancy firm BDO.  The survey found that few clubs thought the rules were having the desired effect.

Sponsors are increasingly concentrating their marketing budget on clubs that can give them a global profile.  Trevor Birch, a partner at BDO and a former chief executive of Chelsea, told the Financial Times, 'The top six or seven clubs in the Premier League will be able to consolidate their superiority with bigger and better commercial deals.'   He added. 'We are seeing the creattion of super clubs breaking away from the rest of the league with budgets and expenditure beyond the wildest dreams of other teams.'

BDO note in their report,  'In many areas we continue so see further divergence between the English Premier League and the Football Leagues and, at the same time, increased polarisations within the English Premier League and within the Football League Championship:

  • 94% of respondents believe the gap between larger and smaller clubs is widening; 79% of English Premier League (EPL) respondents and 76% of Football League Championship (FLC) respondents see the gap within their own league widening
  • economic recovery has had an overall positive impact across all revenue streams for English Premier League clubs whereas Championship clubs have experienced an overall negative impact across all revenue streams
  • there is a wide variation in confidence levels between leagues - ranging from the English Premier League and Scottish Premiership (SP), where 86% and 83% of respondents respectively are expecting to make a profit (before player trading), to the Football League where 35% of Football League Championship, 21% of Football League 1 (FL1) and 19% of Football League 2 (FL2) expect to make a profit
  • 79% of English Premier League clubs are seeing sponsorship revenues increasing whereas in all other leagues the majority of clubs are either seeing decreasing sponsorship revenues or no change.

As this disparity widens, are we seeing other factors, such as enhanced TV revenues, increased parachute payments, Financial Fair Play (in its many guises) and globalisation, effectively locking-in this differential?

  • loss of income through relegation is the primary concern for English Premier League clubs whereas the other leagues are more concerned with inflexible player salaries (presumably impacting on their ability to invest in search of promotion), attendances and their ability to attract sponsorship revenues
  • 90% of respondents say they have complied with Financial Fair Play (FFP) requirements, and the Scottish clubs believe the Scottish Premiership should adopt something similar.

However, is an unexpected consequence of improved financial security/performance that owner investment is being stifled?

  • 21% of English Premier League respondents believe that their owners are considering a full or partial exit in the next 12-18 months compared with none in 2013
  • 57% of English Premier League and almost half (47%) of Football League Championship respondents would be prepared to invest more were it not for FFP
  • where clubs are expecting to reduce or hold constant playing squad payroll costs in the next season, 43% of Football League 1 respondents' and 35% of Football League Championship respondents' decisions have been influenced by FFP to some or a considerable extent.

The top six or seven clubs in the English Premier League will be able to consolidate their superiority whilst the rest of the league are in a relegation battle. 

Similarly, the impact of high parachute payments and FFP may have the same polarising effect as in the Football League championship as we see in the Premier League.

However, the number of clubs reporting an interest from third party investors has increased from 21% last year to 29% this year, with the Football League Championship and Football League 1 clubs having had the most approaches (41% and 43% respectively).

Financial performance is improving, and there is still demand for football clubs, though the preference still seems to focus on taking on Football League clubs and investing in seeking promotion to the English Premier League rather than investing in an English Premier League.  Possible reasons for this might be the combination of the lower initial capital outlay, the revenue gap and the application of FFP rules preventing investors from buying success.'