Financial Fair Play/Financial Report (merged)

[BlueAnorak]

I wonder how much you would have to spend to take a mid table side into the upper reaches of European football?

Suppose West Ham stay up this season and somebody high up in the Saudi Royal family who likes premier league football says 'I'll have some of that' and buys the club. How much would they need to spend to produce a team that is capable within 3-5 years of challenging for Champions league football, and capable having achieved it of going through the group stages and into the last 16/8/4?

I shouldn't have thought that you would be able to assemble a squad to challenge Liverpool/Rags/Spuds from a base like West Ham's without spending upwards of £200m. Then think of the wages that would need to be paid to get 8 x £25m footballers to West Ham.

The thing is, the FFP 'allowable losses' figure (€45m) comes nowhere near enabling that to happen. It is one of the reasons, perhaps the chief reason, why FFPR is potentially contrary to EU competition law. As of course, cynics stress it was designed to do.

I'm not sure the entire principle of opposing unlimited losses would be anti competitive - there comes a point where sustaining commercial losses over a sustained period is itself anti-competitive, as where for instance a wealthy business owner is willing to underwrite his company's losses in undercutting their competitors until they go out of business (because achieved a monopoly is self evidently anti-competitive). So I suspect there is a balance to be struck between a complete absence of regulation and imposing a ceiling on allowable losses which is so low as to stifle any club with ambitions to challenge Europe's elite.

But I'm bloody sure that the figure of €45m doesn't strike the right balance.

Totally agree. Certainly it's anti-competitive for a club to run aggressive long-term losses in the hopes of driving out a competitor with more limited resources. But FFP strikes me differently. It appears to make "illegal" venture capital funding. Surely VC investors expect the start-up, growing companies in which they invest to run operating losses as they move toward profitability -- they want the big return on the sale, or they expect the discounted cash flows over time to exceed the losses incurred during the start-up/growth phase with a return commensurate with their risk.

And the notion that FFP somehow "protects" smaller clubs is a sham. Exhibit A: Bolton Wanderers.

It's pretty near impossible for a mid table side to get into the CL going forward even with a big injection of dosh.
The TV pool money from CL qualification alone will be up to £30m+ a season with the new BT CL TV deal while under FFP you can only invest £25m over three seasons going forward - a difference of £(30m * 3) - £25m = £65m = £21.67m a season advantage (£65m/3).

To be considered even remotely fair, venture capital Investment would have to be allowed about 25% higher than the income obtained from participating in the champions league. It isn't so at some point it will be ruled illegal.

 

[Blue Mist]

Re the comments about other clubs being bought by rich owners and doing a City. West Ham would be the ideal target for a rich investor. They are about to move to the Olympic stadium so they will have a head start unlike Everton who would have to spend 50 million ? just on a decent stadium, BUT to try and muscle in on the top 7 (sarcasm alert) they would not be able to generate enough income to avoid FFP penalties. This highlights the flaws that we, and other decent fans have been saying for a number of years. We were just lucky in that the Sheikh arrived in the nick of time. The FFP rules were never designed to stop clubs going bust by stopping them spending above their income, it always was and still is about keeping the old top four firmly in place. We upset everybody by spoiling this little mafia.

 

[aguero93:20]

I'm going for our accounts to be released on Monday 17th February to take the pressure off the team for the Barca game.

or we could release barca's accounts that day, that would be much more effective.

 

[jrb]

Have I done something wrong? ;-)

So that's where Ed-ward Woodward has been.

 

[cibaman]

I wonder how much you would have to spend to take a mid table side into the upper reaches of European football?

Suppose West Ham stay up this season and somebody high up in the Saudi Royal family who likes premier league football says 'I'll have some of that' and buys the club. How much would they need to spend to produce a team that is capable within 3-5 years of challenging for Champions league football, and capable having achieved it of going through the group stages and into the last 16/8/4?

I shouldn't have thought that you would be able to assemble a squad to challenge Liverpool/Rags/Spuds from a base like West Ham's without spending upwards of £200m. Then think of the wages that would need to be paid to get 8 x £25m footballers to West Ham.

The thing is, the FFP 'allowable losses' figure (€45m) comes nowhere near enabling that to happen. It is one of the reasons, perhaps the chief reason, why FFPR is potentially contrary to EU competition law. As of course, cynics stress it was designed to do.

I'm not sure the entire principle of opposing unlimited losses would be anti competitive - there comes a point where sustaining commercial losses over a sustained period is itself anti-competitive, as where for instance a wealthy business owner is willing to underwrite his company's losses in undercutting their competitors until they go out of business (because achieved a monopoly is self evidently anti-competitive). So I suspect there is a balance to be struck between a complete absence of regulation and imposing a ceiling on allowable losses which is so low as to stifle any club with ambitions to challenge Europe's elite.

But I'm bloody sure that the figure of €45m doesn't strike the right balance.

Totally agree. Certainly it's anti-competitive for a club to run aggressive long-term losses in the hopes of driving out a competitor with more limited resources. But FFP strikes me differently. It appears to make "illegal" venture capital funding. Surely VC investors expect the start-up, growing companies in which they invest to run operating losses as they move toward profitability -- they want the big return on the sale, or they expect the discounted cash flows over time to exceed the losses incurred during the start-up/growth phase with a return commensurate with their risk.

And the notion that FFP somehow "protects" smaller clubs is a sham. Exhibit A: Bolton Wanderers.

It's pretty near impossible for a mid table side to get into the CL going forward even with a big injection of dosh.
The TV pool money from CL qualification alone will be up to £30m+ a season with the new BT CL TV deal while under FFP you can only invest £25m over three seasons going forward - a difference of £(30m * 3) - £25m = £65m = £21.67m a season advantage (£65m/3).

To be considered even remotely fair, venture capital Investment would have to be allowed about 25% higher than the income obtained from participating in the champions league. It isn't so at some point it will be ruled illegal.

I read an interview with a competition lawyer who was firmly of the opinion that the €45m limit will end up being trebled

 

[Bald fraud]

Got horrible feeling if the rags don't make top 4 they'll kick us out of the champs league for their cash cow united

 

[Bodicoteblue]

Perhaps one of the posters here who actually understand the financial intricacies of FFP can explain to an idiot like me ,where this figure of £45m comes from . Was it arrived at after a consultation with experts , financial and football , or is it just some arbitrary figure put up by Pratini and his henchmen?
Following some of the arguments so lucidly propounded above about this figure , presumably there is every chance that legal challenges could see this figure raised considerably to allow some more room for competition and room for more outside investment into clubs without it allowing runaway losses.

 

[Skashion]

And the notion that FFP somehow "protects" smaller clubs is a sham. Exhibit A: Bolton Wanderers.

UEFA's FFP rules have nothing to do with Bolton. That's the Football League's FFP rules.

 

[Prestwich_Blue]

Perhaps one of the posters here who actually understand the financial intricacies of FFP can explain to an idiot like me ,where this figure of £45m comes from . Was it arrived at after a consultation with experts , financial and football , or is it just some arbitrary figure put up by Pratini and his henchmen?
Following some of the arguments so lucidly propounded above about this figure , presumably there is every chance that legal challenges could see this figure raised considerably to allow some more room for competition and room for more outside investment into clubs without it allowing runaway losses.

It's s 45m euros not pounds. That's about £38-39m and it's €45m over 3 years. So it's equivalent to about a £12.5m a year loss. That's after deducting allowable expenditure which is about £15m a year for a big club. So you can make a net loss of just under £30m a year. It's just an arbitrary figure from what I can see.

The PL's own rules allow much more, with an aggregate loss of over £100m over 3 years being acceptable.

 

[Bodicoteblue]

Thanks PB - I don't know where we'd be without brains like yours on our forums.