When Financial Fair Play regulations were brought in a little over 12 years ago, its core directive was that no club could make a loss exceeding €90m over a three year period. Should a club fail in this regard, then fines and sanctions would be imposed.
In extreme cases, points could be deducted or revenue withheld from UEFA competitions and certainly when it comes to fines we have seen countless examples of financial penalties dished out to clubs who have - deliberately or otherwise - breached FFP rules.
Pertinently, given the subject matter here, one of the most recent examples of a club falling foul transpired this summer when Chelsea were forced to shell out £8.6m for ‘submitting incomplete financial information’ though in the interest of clarity it should be pointed out that any misdemeanours solely took place during Roman Abramovich’s time in charge.
The next Premier League club expected to face punishment is Everton, with an Independent Commission revealing its findings on October 25th. The Toffees have announced financial losses for five years running, a deficit that scales north of £430m.
If their football betting odds suggest relegation awaits, it might all get infinitely worse for the Merseysiders very soon.
In July meanwhile, Manchester United were another major club penalised, fined £300,000 for a technical breach that saw the Red Devils fail to properly adjust to Covid losses and United’s plight is highlighted to illustrate just how complicated these regulations can get, and very quickly.
Naturally, with a framework intended to govern the spending of a multi-billion pound industry there are a hundred and more ways to fail FFP, and unless you are a financial expert it can all get rather confusing.
Let’s then go back to the top and focus only on the €90m deficit limit over a three year period. For that rigid mandate, intended to prevent clubs from wildly exceeding their expenditure over their income, is what lies at the heart of Financial Fair Play.
Furthermore, that is a figure even us laymen can ascertain Chelsea will really struggle to meet going forward.
That’s because since taking control of the five-time Premier League winners, Todd Boehly - along with the consortium he fronts that also includes the private equity group Clearlake Capital - have spent over £900m on new players across three transfer windows.
It has been an unrelenting splurge that brings to mind the wild west days witnessed in the top-flight prior to FFP’s existence, when Chelsea under Abramovich would purchase two or three made-to-measure superstars each summer and when Manchester City embarked on an unprecedented scale of spending following their takeover.
Yet with sales amounting to less than a third of their expenditure, and with no Champions League revenue for 2023/24 - not to mention the continued absence of a shirt sponsor, a lucrative source of income for any club - even those among us with scant knowledge of finance can easily work out that the sums don’t add up, and by quite some margin.
Are Chelsea therefore riding roughshod over regulations every other club must abide by? Are they even purposely disregarding the rules put in place, factoring into their plan the necessity to face the consequences at a later date?
Well, no, not at all.
For it is Boehly’s belief that a work-around has been found, a way and a means to navigate the restrictions of FFP all while still affording lavish sums to be consistently spent in the market. And it all centres around the accounting technique of amortisation.
Amortisation in its simplest term is the value of a footballer spread out over the course of his contract and this explains why Chelsea have been tying their new signings to ludicrously long terms, in some instances extending to eight years.
Moises Caicedo, for example, was bought for the astronomical sum of £115m from Brighton last month and handed an eight-year deal. This means that in the next financial year his ‘cost’ will be £14.3m, then a further £14.3m the year after, and so on.
It will also have not missed your attention that Chelsea’s shedding of 14 players this summer, as part of a colossal overhaul, all fell into two distinct categories, they being players in their thirties, on huge wages, and homegrown talent sold as ‘pure profit’.
Even critics of Chelsea’s methods of late have to cede they have maximised their money from sales this summer, even if heavy investment from Saudi Arabia has helped them enormously.
Finally, by targeting young players who are more open to incentivised bonuses, it means that Chelsea have managed to significantly lower their overall wage bill.
Will all of this be enough to avoid punitive repercussions further down the line? In theory, maybe, but the other foot that now threatens to come down has one hell of a stamp.
Chelsea clearly cannot continue with this level of spending, which means that, by and large, what they have now, they must go with, for several long years.
Should the dressing room turn toxic, or if the players collectively under-perform across the long-term then the Blues are in serious trouble for the duration.
Moreover, it is a high-risk, one-off-strategy that now demands Champions League football is attained, in order to bring in essential revenue. Chelsea are currently long-priced in the Premier League top four odds after starting their season poorly.
And then there is another consideration, a semi-abstract thought that should have all Chelsea supporters extremely worried.
Because the contract length/amortisation loophole the club have so wantonly capitalised on - a loophole that has subsequently been closed by UEFA, with player contracts now capped at five years - has always been there, an unethical option for a decade’s worth of erudite club owners to exploit.
Why hasn’t it been done before? What has put them off?
Chelsea haven’t just put all of their eggs in one basket. They have hermetically sealed the basket, meaning they cannot touch it until the end-game is reached.
And if that end-game is bad for the West London giants, then the punishments dished out by the footballing authorities could be severe and unprecedented.
*Credit for all of the photos in this article belongs to AP Photo*
