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New Chelsea owner Todd Boehly sends warning as UEFA make complete rule changes that will impact Liverpool

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New Chelsea owner Todd Boehly sends warning as UEFA make complete rule changes that will impact Liverpool

This month, UEFA introduced its updated financial rules to replace FFP.

They are motivated by the desire to ensure the financial stability of football teams in the future.

The pandemic exposed the finances of football across Europe, with the struggles of Spanish giants Barcelona in trying to pull themselves back from a financial cliff edge after years of lavish spending left them with enormous wage liabilities and more than £1bn in debt, a significant portion of which was due in the short term.

This month’s release of new FFP regulations marks the first major revision to the programme since its inception in 2010.

While UEFA maintains that its implementation “helped pull European football finances back from the brink,” according to president Aleksander Ceferin, it hasn’t been without its detractors, who point to its lack of teeth in punishing clubs that break the rules and its inability to stop the gap between the biggest clubs and the rest from widening.

UEFA resident Aleksander Ceferin is attempting to address the need for a change in FFP laws

UEFA is attempting to address the need for a change in FFP laws through solvency, stability, and cost control.

A new no overdue payables rule directed at football clubs, employees, social/tax authorities, and UEFA serves to protect creditors, with this rule being reviewed every quarter and ‘less tolerance’ exhibited toward late payers.

The new football earnings requirements are a modification of the existing FFP standards. 

UEFA has given clubs a three-year opportunity to get their houses in right, and the ‘acceptable deviation’ of €30m losses over a three-year period has been increased to €60m for the next three years to offer them breathing room.

UEFA claims that the requirements for ensuring the fair value of transactions, improving the teams’ balance sheets, and reducing debts have been’significantly reinforced.’

Clubs who handle their finances well might find themselves with an extra €30m FFP wiggle room over a three-year period, given that a €10m cushion would be granted to clubs with excellent balance sheets and under control costs.

The adoption of a squad cost rule meant to bring tighter control in relation to player wages and transfer costs, with new regulation limiting expenditure on wages, transfers, and agent fees to 70% of club revenue, has been a primary focus of UEFA in drafting the new laws.

UEFA had previously used 70% as a soft guideline for what teams should be operating at when it comes to spending vs revenue, but it was merely advise, and failing to meet the benchmark resulted in no sanction. 

According to UEFA, the new rule’s assessments “will be performed on a timely basis, and violations will result in pre-defined financial fines and sporting sanctions.”

But where does Liverpool fit into this?

Fenway Sports Group’s financial approach to Liverpool has been well chronicled when they first purchased the club from the catastrophic dictatorship of Tom Hicks and George Gillett back in 2010, purchasing a team significantly in debt and nearing insolvency.

Cost control was one of the first measures implemented, with FSG establishing a structure and strategy for how they do business, as well as using infrastructure investment, which does not count toward FFP calculations, to drive revenues forward and support wage bill growth and investment in the first team.

Liverpool’s overall squad cost for the most recent 2020/21 season was £391 million, placing them fourth among the big six. 

It has been a model that has been criticised at times for being too rigid for a club that needs to compete with the spending power of teams owned by sheikhs and oligarchs, but it has also been praised for introducing a dynamic of success and sustainability to the Premier League, presenting a model that other clubs have since tried to emulate but have failed to surpass.

One of the new regulations’ intentions is to encourage equity investment from club owners, which FSG has already done with their inter-company loan for the work of the Main Stand at Anfield, a loan with no interest rate attached.

UEFA’s goal is to avoid a multitude of high-interest loans.

The combined total of wages, the amortisation cost on the balance sheet (the value of transfer fees spread over the lifetime of a player’s contract for accounting purposes), player impairment charges (the write down of a player’s book value due to loss of form or other circumstances), agent fees (which are included in the amortisation charge in English football), and any severance costs will be considered by UEFA’s new squad cost control regulations (such as sacking a manager or paying up a contract early for a player).

According to numbers shared on social media by football finance expert Swiss Ramble, Liverpool’s overall squad cost for the most recent 2020/21 season was £391 million, placing them fourth among the big six. 

The top three positions are occupied by Manchester City (£484m), Chelsea (£479m), and Manchester United (£411m).

With the value of the squad costs assessed for the period, the revenues of clubs are next considered, with Liverpool’s overall income standing at £487 million for the most recent fiscal quarter. 

Manchester City made £570 million, Manchester United made £494 million, and Chelsea made £435 million.

When calculating the squad cost rule, the profit from player sales is also considered, which means Chelsea would have received an £85 million boost, Manchester City would have received a £69 million boost, Liverpool would have received a £39 million boost, and Manchester United would have received a £17 million boost.

For the first three years following the implementation of the new laws, clubs will be assessed based on the better of 12, 24, or 36 months, with the squad value % aiming to fall year on year until all teams are in line by 2025/26.

Liverpool’s overall revenue, including player sales profit, is £527 million, £16 million more than Manchester United but £113 million less than Manchester City.

That implies Liverpool will be of little concern to UEFA when it comes to cost containment, as they are now at 74% and have three years to go under the 70% mark. 

Manchester City is in a similar predicament, with 76%, while Manchester United is at 80%. 

Chelsea, which is now under new ownership following the Todd Boehly/Clearlake Capital takeover earlier this month, has work to do to reduce their squad cost ratio, which now stands at 90%, according to Swiss Ramble estimates.

Todd Boehly/Clearlake Capital takeover earlier this month, has work to do to reduce their squad cost ratio, which now stands at 90%, according to Swiss Ramble estimates.

Boehly stated earlier this month at the SuperReturn International conference in Berlin: “Financial fair play is starting to get some teeth and that will limit ability to acquire players at any price.

“UEFA takes it seriously and will continue to take it seriously. [More teeth] means financial penalties and disqualification from sporting competitions.”

Looking across Europe, other top clubs have tremendous work to do to reach to the position that UEFA has stated by the time the 2025/26 season arrives, with Barcelona’s squad cost ration at a whopping 109%, Inter Milan’s at 104%, and Paris Saint-at Germain’s 102%.

Arsenal is at 93% and has the most work to do of the Premier League’s big six, with Tottenham Hotspur comfortably at 71%.

Speaking in April after the new set of regulations were agreed, Ceferin said: “UEFA’s first financial regulations, introduced in 2010, served its primary purpose. They helped pull European football finances back from the brink and revolutionised how European football clubs are run. However, the evolution of the football industry, alongside the inevitable financial effects of the pandemic, has shown the need for wholesale reform and new financial sustainability regulations.

“UEFA has worked together with its stakeholders across European football to develop these new measures to help the clubs to address these new challenges. These regulations will help us protect the game and prepare it for any potential future shocks while encouraging rational investments and building a more sustainable future for the game.”

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