UEFA must kick a rich club out of the Champions League or dock points in the group stage if they want FFP to be taken seriously... watered down fines for rule-breakers and watchlists won't cut it, warns specialist law firm

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UEFA must kick a rich club out of the Champions League, or at least deduct points, if it wants FFP rules to be taken seriously and create a more even playing field in European competition, insists a leading sports law firm.

Football’s European governing body has issued fines against eight of the continent’s biggest clubs, including AC Milan, AS Monaco, AS Roma, Besiktas JK, Inter, Juventus, Marseille and Paris Saint-Germain, for breaking FFP rules last season, but it will have little impact, warns Ben Peppi, sports commercial expert at JMW solicitors.

Two of those clubs met in the group stage of the Champions League on Tuesday, with PSG beating Juventus 2-1.

Paris Saint-Germain were fined by UEFA for breaching FFP regulations on allowable losses

Paris Saint-Germain were fined by UEFA for breaching FFP regulations on allowable losses

Paris Saint-Germain were fined by UEFA for breaching FFP regulations on allowable losses

The financial penalties imposed by UEFA for breaching FFP rules were immediately watered down, so that clubs only had to pay 15 per cent of the fine. The remaining balance is conditional, depending on compliance with targets set in each club’s settlement agreement.

This meant PSG, who had annual revenue of £480M last year according to the accountancy firm Deloitte, was fined £56m (€65m), but only had to stump up £8.7m (€10m).

‘In reality, fines are never going to put bigger clubs off continuing to swerve regulations, continuing to potentially fall in breach of regulations,’ said Mr Peppi.

‘If you are PSG and you get fined €10m because you sign Lionel Messi and you go on to win the Champions League, the fine compared to the riches of winning [the competition] is very insignificant.’

If found to have broken the UEFA’s FFP rules, clubs can be warned or sanctioned, which includes fines, relegation to a lower level of European competition or even complete exclusion.

‘UEFA need to send a stronger statement out…’ added Peppi. ‘Clubs are going to continue to breach financial rules in favour of pursuing riches unless there’s sporting sanctions imposed, that is they are going to be banned from competitions or there is going to be points deducted when they start the group stages of the Champions League.’

Juventus were also fined and the two clubs met in the group stage of the Champions League

Juventus were also fined and the two clubs met in the group stage of the Champions League 

Under UEFA’s FFP rules, the allowable losses - or the 'acceptable deviation' as the accountants put it - are just over £50m (or €60m) over three years. These losses can be offset by ‘healthy expenditure’ on infrastructure, women's football, academies, community programmes and Covid costs, which are deducted from the overall losses.

UEFA is increasing the level of scrutiny and operates a watchlist of clubs, which have been warned they are flying close to the wind.

Among those clubs are Chelsea, Leicester, Man City and West Ham, who only escaped sanctions this time around because of 'exceptional COVID deductions and consideration of historical financial results', according to UEFA.

But Peppi is not convinced the watchlist will act as significant deterrent either, since the wealth to be gained from progression in European competition is so great.

UEFA has been analysing the spending of European clubs for compliance with FFP rules

UEFA has been analysing the spending of European clubs for compliance with FFP rules

The winner of the Champions League can expect to pocket around £100m in prize money and broadcast income, but the potential commercial gains on top of that through global exposure are huge.

In addition, some clubs are managing their businesses more smartly to reduce the risk of a FFP breach, by offering new signings longer contracts.

Within a football club’s accounts, the cost of a player is amortised – or divided – over the length of the contract, which limits the financial impact in any single season.

At Chelsea, who spent more than £250m in the summer transfer window, the average length of contracts offered to players under 30 years of age, who were bought for a fee this season, was six years. That is up almost one year from the previous two seasons, when the average contract length was 5.1 years.

Five years ago, in the 2017-18 season, the average contract length offered was 4.8 years.

‘When Chelsea buy Wesley Fofana for £70m, it is over a seven-year contract, so the reality is they are spending £10m per year for seven years,’ said Peppi.

‘You will start to see is things like that, transfer fees spread across not three years but seven years,’ said Peppi.

Leicester boss Brendan Rodgers only got to invest 33 per cent of the £70m into his squad

Wesley Fofana become the third sale at the King Power Stadium this summer

Brendan Rodgers (left) was reportedly only be able to spend a third of the £70m fee received for Wesley Fofana (right)

‘There is new commercial real estate, too,’ added the commercial advisor. ‘The bigger clubs have more commercial partners than they have ever had spending huge amounts of money, so as sponsorship revenue increases it naturally falls into transfer fees and wages. And a broadcast income continues to go up clubs will continue to spend more money.

‘The way clubs will look at it, is they will try to keep in line with the regulation, but if they know there is a €70m fine of which they only need to pay €10m as an initial warning, like with the PSG example, they will take that if they can win the Champions League.

‘Unless UEFA start to introduce sporting sanctions and until clubs are banned from competitions or they are given a points deduction, then [overspending] will continue to happen.’

However, there is some evidence that clubs spending can be curbed by the current system. Leicester manager boss Brendan Rodgers faced frustration after reportedly being told he could only invest a third of the fee received from the sale of Fofana. 

The FFP rules and a 25 per cent sell-on fee to Fofana's previous club Saint-Etienne restricted Leicester's ability to bring in new players. However, the Foxes did sign Reims centre-back Wout Faes, 24, to boost their defensive ranks for £15m at the end of the transfer window.

In addition, there is a risk to UEFA if it decides to take firmer action against offenders, since excluding a top club could impact on the commercial income from the competition.

Manchester City spent £51m this summer securing the signature of Erling Haaland

Manchester City spent £51m this summer securing the signature of Erling Haaland

‘It is counter intuitive for UEFA to impose sporting sanctions because it leads to a loss of revenue for them if their biggest clubs are not taking part, but importantly as the governing body they need to set a precedent,’ said Peppi.

After this season, UEFA’s FFP rules are set to change, with clubs limited to a spending percentage of their revenue in a calendar year on player wages, transfers and agents’ fees. The limit will be phased in and set at 90 per cent in 2023, 80 per cent in 2024 and 70 per cent in 2025.

Scrutiny of club accounts will occur more regularly, however, the challenge of excluding a club from competition to signal a tougher approach to regulation will remain, says Peppi.

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