Financial Fair Play 2021/22

Dance This Mess Around

As we move into the close season, most of the football chat has once again begun to revolve around the transfer market with many fans obsessing about who their club is going to buy. Some of them simply cannot understand why their club doesn’t simply acquire all the players on their wish list.

Apart from the obvious fact that the vast majority of clubs do not have an unlimited budget, there is also the small matter of the restrictions imposed by Profitability and Sustainability regulations, though these are better known as Financial Fair Play (FFP).

But how many clubs are genuinely constrained by FFP?

To answer this perfectly, we would need to have access to the accounts for the 2022/23 season, but unfortunately these will not be published for many months. However, if we look at the situation in the Premier League as at the end of 2021/22, we should get a reasonable indication.

Profitability and Sustainability Rules

The Premier League’s Profitability and Sustainability (P&S) rules allow a £5m loss a year, which can be boosted by £30m secure funding, giving allowable losses of £35m a year. The monitoring period covers 3 years, so this works out to a maximum allowable loss of £105m.

Secure funding is defined as either an equity contribution or an irrevocable commitment to make a payment for shares. A loan from the owners is not sufficient.

These regulations are aligned with the EFL’s Championship, though the limits in England’s second tier are much lower, namely a £5m loss plus £8m secure funding, giving an allowable loss of £13m a year. In other words, a maximum allowable loss of £39m over the 3-year monitoring period.

The allowable loss for clubs promoted from the Championship to the Premier League during the 3-year monitoring period are therefore adjusted , e.g. 1 year in the Championship and 2 years in the top flight would give a limit of £83m.

The Premier League has relaxed the regulations to neutralise the adverse impact of COVID, which means that the 2022 monitoring period assessed the seasons 2019/20 and 2020/21 as a single (average) period. It also means that this period effectively covered 4 years.

Operating Profit/(Loss)

On the face of it, things don’t look too good for Premier League clubs, as they consistently lose money from day-to-day business, adding up to a hefty £2.9 bln over the 3-year monitoring period.

Four clubs lost over a quarter of a billion with Chelsea “leading the way” with £552m – and this was before the Todd Boehly splurge last season. They were followed by Everton £381m, Aston Villa £281m and Leicester City £251m.

Only one club managed to post an operating profit in this period, namely Tottenham Hotspur – and that was only £5m.