A quick summary of Uefa’s Financial Fair Play regulations:
Under normal circumstances, Financial Fair Play (FFP) requires clubs to run at a financial break-even, with certain allowances and an acceptable deviation, over a three year period. Money spent on youth or women’s’ football, as well as depreciation (which includes money spent on stadiums), are excluded from this responsibility. A club, therefore, that makes a €10m annual loss while spending €11m on youth football, women’s football and depreciation, will have an FFP surplus of €1m.
The acceptable deviation is a €5m cumulative loss over three years. However, if a club supplements its loss by “contributions from equity participants”, they are permitted to run an aggregate loss over the three years of €30m.
Due to the extraordinary nature of last years’ finances across football, the current monitoring period covers the last four years. Clubs are also allowed to add back any lost revenue due to shutdown, playing behind closed doors, not playing at all, or for closed retail facilities.
See the graph below detailing a summary of Newco’s finances for the last four published accounts (year ending 30 June 2018 – year ending 30 June 2021). Items on yellow are my estimates. The Youth/Women add back figure is based on peer data from elsewhere and is generous to Newco. The Shutdown add back is also based on peer data, adjusted for the number of cup games, absence of a refund programme and is also generous to Newco.
I estimate the Newco FFP loss at £40.235m. At a (generous) £/€ conversion rate of €1.14/£ this gives an FFP loss of €45.868m, €15.858m over Uefa’s acceptable deviation.
So where is all this right now? Clubs submit accounts to Uefa along with their claims for spend on depreciation, youth and women’s football, and for this year, a Shutdown add back. Newco do not specify these add backs in their accounts, but page 11 of their Annual Report states, “Initial estimates are that the adverse effect on revenues was over £20m”.
“Initial estimates” are doing a lot of heavy lifting here. You can be sure that where I estimates last year’s hit at £10m, Newco’s signal of “over £20m” was consistent the figure they submitted to Uefa. My expectation is that whatever they have claimed, it will be high enough to get them through the first pass.
Newco have run an operating loss every year they have been in business. Persistent loss makers who compete in European football have more onerous FFP reporting responsibilities, I expect Newco to be under this scrutiny. Claims made for add backs can and should be scrutinised by Uefa, who are well versed on how clubs that work at the margins operate.
What is going to happen? Under normal circumstances, Uefa would act with instructions to reduce spending, or face severe action. These are not normal times, though. There is red ink all over European club accounts, many are unable to raise equity capital, even where permitted under FFP.
Uefa’s special provisions for this year are published and make no indication that we are in a free for all. Clubs have experienced an income shock, some are unable to raise finance as a consequence, but there is no cover for persistent FFP deviants. For the sake of “fair play”, we have to hope they apply the rules. Your guess is as good as mine on what will happen, though.
What does all this mean long-term? Newco cannot run at a loss of the scale they do under normal circumstances. They either have to sell for the kind of money Celtic did this year and do so regularly, or reduce spending on wages (their only significant expenditure, as transfer spend is always low). The £4.5m for Gerrard & Co. will only scratch the surface, they could do with selling another three management teams before June next year.
Champions League football next season is all. It is literally everything, and you thought last season’s title was important. The additional income would not resolve Newco’s structural problems, but it would give them a short-term stay of execution while they try to transition to a sustainable model. Without it, the prognosis is dire, whether this season is a Uefa free for all or not.
………and remember, irrespective of FFP, they still need to fund those losses. None of this is about defending corner kicks or putting the ball in the net, but appropriate financial governance wins more trophies than any tactical formation.
123 Comments- Pages:
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Fair Play down Ibrox Way? No chance, por cierto
Correct por cierto, there is no appropriate financial governance in this country and any uefa submissions via our sfa, well we have been here before😱
unfair play
My guess is that there will be no external intervention. There wasn’t with the old huns and this mob have only doubled-down on the liquidation model.
Instead any consequences will arise as per the original huns, via the inescapable economic fundamentals you describe. Unless they do achieve that stay by winning the league. I don’t think they will as they show every sign of a group that agrees with Slippy that they “have delivered on their remit” and are soft pedalling.
If we recruit as well in January as we did in the summer, even just a couple of key additions, they are toast and karma can once again be celebrated.
“appropriate financial governance wins more trophies than any tactical formation”
———————
Using finance in the right way wins even more trophies. Sitting on a pile of cash when your team needs improving isn’t the way to go.
We had two years of CL money under Brendan Rodgers but improving the team for Europe would have taken us too far ahead of partner club.
Look where that took us!
Loved Klopp’s answer when he was asked about Solskjaer yesterday:
“I didn’t think about Manchester United for a second. Sorry.”
The huns will hide behind the pandemic, move along nothing to see. Seems Aston Villa reported the Slippy G buy out at £2.3 million, i know who I believe.
Nice one. Interesting one too.
“The £4.5m for Gerrard & Co. will only scratch the surface, they could do with selling another three management teams before June next year”
If I were you Pablo, I’d stick quotation marks around this £4.5m figure (given Aston Villa’s announcement on compensation levels paid)?
The “three management teams” dig made me laugh.
On a serious note though – you think they need a c.£13.5m injection before June 2022?
Staggering.
Season Ticket money will cover it as usual though?
Should we run a sweep on the date of their first renewal letters going out?
If so, I’ll go for 14 February (with some naff angle about Sevco being “your true love”)
“Claims made for add backs can and should be scrutinised by Uefa, who are well versed on how clubs that work at the margins operate”
Translation from English to Glasgow vernacular ….
“UEFA know who the wide boys are” ?
So Paul
What does the end game look like fr Park and co as they “invest” thier children’s inheritance into keeping Morellos in Lamborghini’s and Ibrox with utilities.
Cash for equity is diluting the value the shares and in nu event is pretty worthless until sold
Kings shown his hand circa £1m interest on a £5m loan, bur the others seem to be playing the long game.
Just not sure what that is
Thanks for the article Paul
Saved by a pandemic ?
Are the stakes to high for Newco to fail ?
Will anyone shine a light on what happens if their plan goes tits up ?
So Paul have you contacted the SFA/Uefa with your findings as a concerned supporter.
Maybe you could start a petition around all football supporters in Scotland.
D :)
NOTTHEBUS
“What does the end game look like for Park and co as they “invest” their children’s inheritance into keeping Morelos in Lamborghini’s and Ibrox with utilities.”
This confuses me too. However, I assume that the rule changes that were pushed through after 2012 that now allow companies/clubs to effectively ditch all debt and carry on in the top flight with only an admin penalty mean that they can perhaps stiff other creditors yet retain a high percentage of shares in the club/company.
The only long term goal I can see making it worthwhile is a re-structure of football across Europe that would massively increase the value of the shares if Sevco were involved in a new league setup not hindered by the size of Scotland’s population / tv audience.
The only other reason I can think of is that they love “Rangers” / hate us so much that it is worth the money just to stop us / be seen as saviours to the Sevco fans. Of course, if the money has come easily to them then it may be a case of easy come easy go?
QB
Paul confirming that last season’s title win was intrinsicly about “bragging rights’ for the Ibrox club – this season a title-win coupled with CL auto-qualification is in the existential category. That statement could be stuck on ‘sandwich-boards’ and paraded on the pavements in Govan.
Turning to fair play adherence – do we really think that those running the show at Ibrox are blind to the ramifications & consequences of the wilful flouting of UEFA’s rules? Have they underwritten £millions in losses season after season to come unstuck now? I’m sure all checks & balances have been studied and the ‘muddying of the water’ Covid effect factored in to all calculations. It seems ‘nailed on’ that player-sales must now be be a priority, if not a necessity, although it may be the summer of ’22 window before this transpires – are they really going to enforce January departures on GVB?
Although Ibrox business is Ibrox business, Celtic can exert huge pressure on what happens by (1) ensuring that the points gap is reduced, or, not increased at the end of the year, (2) investing properly in January ’22, (3) ultimately winning the league in May ’22.
Do any of us really believe that Ibrox is going to be ‘jumped on’ by UEFA?……I doubt it!!
Great article Paul. Also fairly straightforward to follow, thanks
Win the league,and bury them.
Thanks Paul67
Very important as it will have a direct impact on their financial planning, but not anything you’ll even see mentioned anywhere else.
Any restriction on signings or future spending would probably go down well with Park & co. It gives them a ready made excuse and sets Uefa up as the next focus of their ire.
If, as has been floated, the new regs do focus on wage/revenue percentages it presents a whole heap of other problems. But it also raises the possibility that they’ll gamble even more heavily on the CL free cash. Unfortunately for all of us qualification is going to get harder in a few years time.
Forget about them.
Get 3 first team ready players in during the window and win the league.
That’s all that matters.
JHB on 24TH NOVEMBER 2021 1:08 PM
Paul confirming that last season’s title win was intrinsicly about “bragging rights’ for the Ibrox club – this season a title-win coupled with CL auto-qualification is in the existential category
He isn’t. If you’d have been paying attention you’d have seen Paul saying before their Champions League calamity against the mighty Malmö (1 point in 5 games in the groups, a draw last night against ten men who missed a penalty) that qualification for this years CL was the real prize and that it would have an effect on their and our fortunes for as long as ten years.
That was the big one, they blew it and Paul67’s prediction is being proven 100% spot on. A demotivated team with a new manager and no cash to improve a slowly decaying squad
That awkward moment when the match analyst can’t get in to analyse the match.
Why don’t you go home CSC
st tams on 24th November 2021 1:41 pm
That of course makes absolute sense to you and I, however will it make sense to our inactive, incompetent board? That sadly is by no means certain, I reckon a bad December for the huns will result in zero transfer activity for Celtic.
“Turning to fair play adherence – do we really think that those running the show at Ibrox are blind to the ramifications & consequences of the wilful flouting of UEFA’s rules? Have they underwritten £millions in losses season after season to come unstuck now?”
You didnt read the article did you?
Unless you’re disputing Paul’s numbers they are in breach of the FFP regs. If you are could you please point out where he’s got it wrong?
Or do we file it in the same folder as your comments about zero debt, 100m champions league cash and celtic finishing in the top 6
I wonder whether a league cup final appearance or better was included in their cash flows
Or a run in the Europa league knockouts
A very worrying couple of weeks at ibrox
Still, they kept Sutton out on Thursday so the fans will be happy
CELTIC40ME on 24TH NOVEMBER 2021 2:01 PM
A very worrying couple of weeks at ibrox
Let’s hope their worries increase as their problems multiply.
we can play a major part in that by winning this league . Let Eufa dispose of the putrid remains .
Ange ….👏👏👏👏👏👏👏👏👏👏👏👏
https://twitter.com/i/status/1463488977143484433
https://twitter.com/craigcelt/status/1463492572714872837?s=24
AP ripping the SMSM a new one
According to their website, the Uefa Executive Committee comprises the President, Aleksander Ceferin, 16 other members elected by a Uefa Congress, plus two elected by the European Club Association and one by the European Leagues.
The cynic in me would guess that all the above are riding a pretty lucrative gravy train and staying on that gravy train is their priority. I doubt very much that the finances of an SPFL club, playing out of Govan in Glasgow, is on their radar, now or in the near future.
Ramping up my level of cynicism, I would suggest that the big hitter clubs, who earlier in the year formed the European Super League, have already informed Uefa where they can stick the FFP rules . It may only have been the 48 hour Super League but who knows what happened behind the scenes during those few hours ?
Using the Covid Clause, Uefa will be happy to keep the FFP rules in a box under a desk in Nyon forever and a day. What would Sepp Blatter do, I wonder ?
Could be wrong on all counts of course, but no point being just a wee bit cynical, may as well go the whole hogg.
I don’t doubt a word of Paul’s article but with the greatest respect to him, it will be seen as blah, blah, blah. Nothing will happen. Absolutely nothing.
JIMDOM
“Using the Covid Clause, Uefa will be happy to keep the FFP rules in a box under a desk in Nyon forever and a day. ”
On the contrary, using Sevco to show others what will happen is exactly what UEFA do, if they chose to, big if. Hit the little clubs hard, to be seen as strong taskmasters, por cierto.
Here Posti, have you got any spares for the game
GLENDALYSTONSILS on 24TH NOVEMBER 2021 2:21 PM
I think they’ll finish themselves off. A couple more poor results and the fans will turn in the players. And we all know how that ends for this particular squad
The list of clubs punished by UEFA is long a d varied, bigger and smaller clubs than them have had all all manner of penalties.
There’s no reason they wouldn’t punish them if they’re in breach and no reason why, having laid out what the allowances for Covid are, that any more leeway should be given to clubs who show they can’t operate within the rules
If they’re sanctioned for results to last year, they will be seriously concerned about thus year.
Why can’t Celtic copy the Ibrox model?
JHB/EL CSC
Debt>broken rules>admin>liquidation>reanimated as Sevco Pt 2>liquidation lie maintained by all>Celtic board’s tacit support for OF model>rinse and repeat. Forever.
They are there and they’ll always be there (Sorry Tommy).
HH
https://twitter.com/celtic_ylvids/status/1463501280467374081?t=WsCIRHqoMVmjMuyhM9pZXg&s=08
Check out the cheating here in the B Team game,totally ridiculous
What Lagan and St Tams said.
Board give the team full support.
Buy well, execute properly.
Improve our chances / shorten our odds