How do NUFC fit into the Financial Fair Play spectrum?

Financial Fair Play awaits - or does it?
Some time ago I was asked by one of our readers to take a look into the new Financial Fair Play (FFP) regulations and just how Newcastle United fit into them.

Most people are now familiar with what the aim of FFP is, but just in case you aren’t the aim is essentially to get football clubs running in a self-sufficient manner which will, hopefully, lead to other aspects, like the transfer market and player wages, being brought under control naturally.

The penalty for failure to adhere to these rules is as yet unspecified. There have been rumours that clubs who break the rules will be banned from UEFA run European competitions such as the Champions League although I personally feel that will be a last resort kind of punishment. We’ll have to wait and see of course as the list of punishments is set to be unveiled by the end of this month ahead of being ratified in March.

Anyway, back to Newcastle United. How do we fit into it?

Well the first thing to understand are the rules themselves. Some of them are pretty clear cut while others are very hazy. Let’s just say that when it comes to FFP, not everything is as black and white as it seems.

As Platini’s puppy leaps into action we are now at the stage where accounts are being looked at. From now until the end of the 2013-2014 season clubs can amass losses of £39.5m (just over £13m each season) but only if these losses are subsidised by an owner who is taking shares in return or is underwriting an infrastructure project, such as a new stadium or training ground upgrades. If this isn’t the case then losses are limited to just £4.4m.

From 2014-2017 losses are limited once again and will be capped at £8.4m a season but only in the same instance as above – if the owner is taking shares or underwriting infrastructure projects.

At the moment we are well within these limits although it feels like a hollow success when you see other clubs posting such significant losses. With the first penalties set to be imposed at the end of the first reporting period surely we could start to see some vindication of our owners approach?

Perhaps not.

There are many loopholes that are yet to be fully exposed, but one of them which has been exposed is advertising revenue. I’m talking about Manchester City here in this instance. It’s well documented that they’ve signed a deal worth in the region of £340m with Etihad for the naming rights to what is now the Etihad Stadium.

Now under the FFP ruling each sponsorship deal is to be looked at by a dedicated panel to see if it is comparable to what can be achieved in the open market – particularly pertinent considering the Mansour family owns Etihad raising accusations of foul play to try and get round fair play.

However when questioned Manchester City got all ambiguous and said that the sponsorship was for the entire 210 acre site surrounding the stadium which will eventually house an academy, a second stadium for reserve fixtures, sports science centre along with retail and office space. That makes it an infrastructure project which means that none of the costs involved will be counted towards the FFP calculations.

What does that mean for us? Not a lot really, but it does show that there are loopholes in the rules. Another one is transfer fees. An accounting term called ‘player amortisation’ comes into play here. Basically, say we sign a player for £5m on a five year contract and pay him £1m a year – a total cost over the five years of £10m. Not all of that comes off the accounts at once. Instead it will show as £2m per season (fee ÷ length of contract + annual wage). Using a more extreme example, £50m Fernando Torres would only show as a £17m hit on Chelsea’s accounts (£50m ÷ 5.5 years + £8m a year in wages).

It’s hard to quantify just what our income is. The last official accounts available are relevant for our Championship season which means that the next set will feature last season and so on. They are generally released late so I expect we’ll get them around March time again which makes them outdated before they are even released. This is the problem which trying to guess the finances of NUFC – people guesstimate based on out of date information. However if you wish to look at the last set of accounts you can do so by clicking here.

Using rough estimates we are well within the guidelines of the FFP regulations and should, in theory, be well placed to capitalise should the rules be followed through. I mean we have resources that outweigh all but a few clubs so if the rules are followed then we should naturally float back towards the top, even with the Ashley approach which is basically following the FFP guidelines.

Debt is not an issue under FFP. A club can be saddled with it in truth but as long as it can afford the repayments from it’s own revenue then it is not seen as being a problem. Of course the knock on effect is that if a club is spending all it’s money on debt then how can it afford to pay for transfers and stuff like that. We are in debt ourselves but we don;t owe any of it to the back so there are no structured repayments which effectively means that this doesn’t really affect us.

The problem is that there are a lot of “if’s” in there. If this, if that. It’s a huge problem. For these rules to work UEFA need to stick to their word and be strict with clubs who are found to be breaking the rules. Failure to do that will render Platini’s puppy useless because if one club finds a way around things or escapes punishment then the rest have a precedent set that they can follow, and with all this talk of court cases and claims for restriction of trade you have to wonder if UEFA have the bottle to go through with it all.

The concept is great but I fear the execution may be lousy which is a shame, because if it wasn’t and they did work out it would be very good for Newcastle United as we already have a head start on the majority of clubs when it comes to FFP. Time will tell all I guess, but some huge names have a reputation hinging on the proper introduction of FFP.

Don’t you Michel Platini and Karl-Heinz Rummenigge!

About toonsy

A lifelong Newcastle fan and current webmaster of this very 'blog who has the sole aim of creating a place by Newcastle United fans, for Newcastle United fans.

132 thoughts on “How do NUFC fit into the Financial Fair Play spectrum?

  1. Very interesting toonsy. As you say it is hard to predict how hard this will bite teams like Man City as there are some obvious loopholes. My guess is that the rules will eventually begin to level the playing field somewhat but because club revenue varies enormously teams like Man U, Arsenal, and Chelsea will still have a huge income advantage over most of the other clubs. Man City is sort of a special case and it is much harder to predict what will happen with them especially if Mansour gets bored with owning a club. We should continue to do fairly well with our relatively large ground and fanatical following. Top 6 seems possible to maintain now which seems like a dream to me. My 9th place prediction looks out of date now with the signing of Cisse but let’s get through the rest of this window without selling anyone important! 😀

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  2. Cisse is an excellent sighing especially if we can get Ba to sign a new contract without a release clause. Press are claiming now that the release clause is only valid in the summer not now so that takes some of the pressure off if true. Now concentrate on a good CB 26 or under but with a good amount of experience Llambias. Can’t believe we got Cisse for as little as 7.5M pounds if true? Why sell for that little when they were asking for 14 M pounds last summer? They must be truly desperate.

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  3. Interesting article. The thing about this is no matter what restrictions are put in place the likes of City ,Chelsea ,Manure and Pool will have an army of wizard accountants with answers to everything. Pardon me for being a cynical old get but i don’t see any way these new regulations/rules will be adhered to by the bigger clubs it will be the smaller clubs who kop it as always.

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  4. The Man City advertising deal is a blatant violation of the fair market value provisions. Would any company pay 340M for naming rights? Surely not. would anyone even pay 100M? Possibly, but I doubt it. Frankly, only the FMV portion (let’s say 100M) should be counted. This will be the first test as to whether FFP has any teeth behind it.

    The other BS component is that you can avoid penalites by showing improvement starting this year. So Man city essentially spends to death in the previous couple of years and buys its team, then are suppsedly OK if they throttle back a little starting this year.

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  5. Rumours coming out now we are going to buy Rhys Williams from Middlesbrough in the next couple of days. Has anyone seen him play? He is 23, an Aussie international and looks a decent size (wiki is down so don’t know too much more).

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  6. Toonsy good write up but as I said then when this came out, I still think the big clubs will get around it, and I don’t think UEFA have the balls to stop them.

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  7. the top clubs in europe will not allow these rule to come in.
    they will threaten to break away.
    didnt a bloke from bayern munich say as much.

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  8. am i bein greedy keep checking ssn and twitter if we have signed a new defender … it was defo a treat to get cisse yesterday and he should be a massive hit on tyneside but i still think our squad is a wee bit thin and i would be happy for even a couple of players to come in on loan!! no offence to perch but i dont wana see him play at center back ever again lol , a new center half on loan and this window is cracking business !! papiss and demba upfront WOOOHOOOOO

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  9. Rumours about Krul going to spurs now? Don’t believe it. More likely to get an offer from ManU in the summer. We can’t afford to lose Tim and we don’t have a good enough backup to even consider it. We wouldn’t have brought in Cisse if we were going to sell Krul. Much more likely to see Tiote leave. Hopefully not. Would like to see everyone stay and see how high we can finish this season, then build again for next season hopefully including Europa league. 😀

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  10. Good read Toonsy, as I’ve said before, I doubt they’ll ever be enforced properly. UEFA are **** scared of the big clubs and always will be, corrupt organisations can’t enforce owt to do with “fair play”.

    Geordie2…there were stories about him yesterday, all I know is he’s owa 6ft and can play across the back 4 and def midfield.

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  11. GeordieTwo – My mate knows a Boro fan who has been raving about Rhys Williams, said he is going to be a top class player. Whether that’s him looking through smoggy specs, I don’t know, but he said definate PL quality player in the making.

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  12. Eventually, these rules will be adopted in some modified way. If the big boys decide they want to form their own league, then one asks if there are enough with the resources, or can they sustain themselves as they accumulate the massive annual debt? If a super league cannot be sustainable, then the non-super teams in each country can call the tune. We could see revenue sharing like the North American leagues use, or a draft system, salary cap, or roster size cap. The benefit of those is that each year sees different teams coming to the top due to some form of astute operation. In either case, by essentially following the FFP guidelines, NUFC is not saddling itself with excess debt, and can capialize on those who end up in the must sell category.

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  13. As far as FFP goes, I think it will definately help us get back to the top of the game, but not for a long, long time. There are too many kinks and loopholes to be exploited and subsequently corrected. By the time the rules are implemented as they intend, i’ll be at an age where i’ll have no choice but to amdit i’ll never play for the Toon. 😆

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  14. Interesting article Toonsy.

    The way I see it is, as long as we keep to a blueprint of our own then we can still compete against the top sides even if they do find the loopholes because in realistic terms, only Man City are in a position to splash sickening amounts of cash about on players and even Chelsea under Abramovich have to tighten their purse strings compared to what they used to splash out on.

    I mean, these clubs have made a massive rod for their own backs because all players see in those clubs is simply pound signs and they are forced to pay over inflated transfer fees to get similar talent that we can get for a 10th of the price.

    Basically, the new rules will apply to all clubs and supposedly make all clubs equal in their respective revenues but as we know, money talks and some clubs are more equal than others.

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  15. Thanks richietoon and archiemag. Boro have developed and bought quite a few decent players over the years. From pictures he looks to be 6’2” or 6’3″ at least and the age is right. The fee sounds to be about 4M which sounds right for us too. I guess we wait and see now. Sounds versatile as well which is another good sign. Some of the European options sound too expensive to me since we have already spent more than we usually do. Anxious for us to get cover in there soon though. CB is a real weak spot on the depth chart for us and has to be fixed.

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  16. I have said the same about Man City and Chelsea being their own worst enemies wolfie. They have made the wage structure for the Prem a mockery with their ridiculous wages. Now most teams can’t even get players on loan from them because even half a wage is ridiculous. I have to eat some crow about our spending in this window. However I always said 7 or 8 M pounds was about the max we would spend on one player and it looks like by some miracle we got Cisse for around that! He will be worth much more in a couple of seasons with us. Still I didn’t expect us to swing that deal with Llambias in charge. Now we definitely need a good CB in and I will be over the moon. 😉

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  17. Agreed, I think if we add a CB and manage to keep hold of everyone it will have been a brilliant window.

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  18. Good article but a bit to complicated for my 55yr old brain to take in,but I agree with others on here, the rich clubs will get round this one way or the other,they will pay for some hot shot barrister to punch holes in it left right and centre.Let them carry on I say coz one day (soon I hope) it will all come back and bite them on their arses.I am sure I read somewhere that SILVA said he always wanted to play for City,oh yeah David the same City that not long ago could not buy a ****ing bag of chips never mind a footballer of your quality,dangle the carrot and they will come.That carrot will not last forever.Anyway am a very happy chappy at the moment,we are getting there lads,like I have said before we have players here who want to play for the club,the fans and the history of our beloved NUFC,not the wage packet,these are the type of players we need,they will become heroes and legends and take us to the next level,where that will be I do not know,but lets enjoy the ride

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  19. Preman….says he’s a midfielder on there, he’s actually a defender who can play defensive midfield…..according to the boro site anyway.

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  20. KIMTOON
    January 18, 2012 at 17:39
    Interesting article. The thing about this is no matter what restrictions are put in place the likes of City ,Chelsea ,Manure and Pool will have an army of wizard accountants with answers to everything. Pardon me for being a cynical old get but i don’t see any way these new regulations/rules will be adhered to by the bigger clubs it will be the smaller clubs who kop it as always.

    I might be a bit biased here given that im training to be an accountant but the accounting regulations in this sense are a lot better in Europe than the US. In europe transactions ttransactions are recorded based on their characteristics not on what the company tries to calls them, ie in America you might be able to dress up interest payments as something else and try not to count them as an expense, whereas here, if in reality its interest, that’s how its treated, no matter what the company try to call it. Anyway…..

    I think like most have said, UEFA’s implementation will be the problem as they dont want to risk annoying their biggest clubs and risk the future of the champions league and its income for them etc.
    Like toonsy says, the concept is great but the implementation is the worry.

    Toonsy – any idea if club owners will be still be able to give interest free loans to their clubs or will imputed interest be ‘charged’ by UEFA? Also, come across any rumours of possible sanctions for clubs not in european competition? Can they sanction clubs by docking points in domestic leagues? Might stop a Gretna-type of situation? Fines wouldn’t seem to make much sense unless penal and charged to the owner instead of the club. They’d need agreements with the FAs though

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  21. financial package? ive nee money worrys got none so why worry (batty skimmed all mine) as little bobby says let them worry who want it 😀

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  22. Jay 1 nowt at half time so ya might get one, dunno why the commentators keep saying it’s a sell out….if it is then it must be fancy dress night and loads of the ****ers have gone in the same costumes, disguised as empty seats :mrgreen:

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  23. toonsy! Good read but have you though about a chapignon league without real madrid, manure, ac milian etc.. Non off them will hit rules! Which if uefa was to suspend them from the comperition sponsirs woul jump ship and the uefa would score an owngoal! Which tv station would pay big buks to watch rubin kazan vs basel with ni disrespect to either team! I support the rules but dont see them enforced as uefa cant afford it!

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  24. Ice – must be why he’s jumping up and down with that grin on his face in his new avatar 👿 bastad

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  25. Richietoon/jay jay
    Would be great if we were to play wrexham, not only for us but imagine how excited they’d be playing a top PL club at their own stadium. Reminds me a bit of ‘the damned united’ when leeds went to derby and clough was really excited (then there was the grudge). By the way where is wrexham?

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  26. You’ve got to love the fickleness of sunderlandl fans , been reading through a thread on SMB forum about Cisse. Here is a selection of the comments :-

    Sunday
    10.45pm – (after reading Daily Mirror article linking Cisse to Sunderland) – Hope it’s true, despite it being in the Mirror
    10.50pm – i wish, quality player, looks to be a goal machine, what we need
    10.59pm – love to have him here , and not just a 6 yard box player either ,think would be more than 10 mill like
    10.59pm – Please God, let this be true. This man is the difference from an average season to a top 10 finish imo. He is a pure beast in front of goal.

    Monday
    01.13pm – Get a bid in Ellis, or swap him for Bendtner… we might get away with it!
    07.08pm – He’s at the ACN so how do we do a deal? There is no way we could sort out a medical, personal terms,fee etc before the end of the month, while he is in a competition. No chance.
    07.12pm – This guy seems to be some player. Hope we can do a deal or sign a player of similar ability this month would be great.

    Tuesday and things are starting to hot up !!!
    06.20am – love the way he belts the ball into the net, looks a natural and confident finisher – left foot, right foot and headers.
    (LOVE THE NEXT 2)
    06.29am – it actually might help us sign him when he realises that Ba’s club is only 12 miles from Sunderland
    11.10am – Would be a tremendous signing like! great goal scoring record considering it is a tough league and he plays for one of the poorer teams, just what we need at the minute, Cisse along with the return of Fraizer, we will be sorted for this season, top ten easy under MON maybe even challenge for a EUROPA place
    11.24am – This one looks to be gathering pace
    01.15pm – They reckon we’ve had a bit accepted, even if they are only quoting L’Equipe.
    01.57pm – Yellow Ticker Watch !!!! (referring to the breaking news yellow ticker on sky sports news)
    THEN IT HITS THEM
    02.13pm – For F Sake ! sky sports news yellow ticker mags in talks with him grrrrrrrrrrrrrrrrrrrrr
    02.16pm – you’ve got to be kidding
    Then the 180 u-turn is complete
    02.19pm – He’s sh-it anyway

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  27. nowt as fickle as a football supporter, except me, who’s always honest because I’m a good boy 🙂

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  28. cheers richie, never been to Wales + my british geography is unbelievably poor. :mrgreen:

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  29. Great article Toonsy, nice to get a well reserached piece ona subject a lot of us know little about. Personally, I cant see this financial fair play thing working. Like a lot of others have said, UEFA dont dont have the balls to see it through. They cant push some of the top sides out of European football as a punishment, as it would hurt them themselves (less viewers due to less top quality sides/players taking part).

    Just look at what they do with the Uefa Cup – Let Champion’s League teams drop down once knocked out. Totally unfair on the smaller clubs and makes it almost impossible for them to be successful or attract more foreign fans. I mean the big clubs already pretty much guarantee themselves huge global exposure and purses just by qualifying for the Champion’s League despite not being Champions at all – or even runners up, or even 3rd! Ridiculous.

    It’s a case of the rich getting richer and the poorer sides having absolutely no chance to compete fairly. We are lucky in that we have a big stadium and a fanatical support, so we can pul off the odd £10m transfer and be in there with a fighting chance of competing, but the likes of your Stokes have no chance unless they take a massive risk by getting into huge debt. Then, becaus they dont have the estate and established lawyers that Citeh have for example, they have no comeback when Uefa come looking for an easy target to show they ‘mean business’.

    End of the day it will be the same old story, different day and football will continue to be the dirty, greed driven corrupt business that it has become.

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  30. Steven Spielberg is to make a sequal to War Horse as it has been such a huge hit…… It will star Shola Ameobi and will be called WOR DONKEY………

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  31. I have a feeling Wrexham will win this, so I’ve made a song up about them to the tune of Elton Johns candle in the wind.

    Goodbye preston jeans, you have just been knocked out by a non lea…heague team called wre….hex…hammmmmmm..
    Now they’re playing …uh….ussssss…in the ne….hex….t….round….o…hov…the FA cu…..hu……upppppp

    and it seems to me, that we will win, like a cukey up me bum…..even though it was old Toonsy …that lost the bettttttt….but wouldn’t you like to know that this …songs a load os hit….and it …does….hent …rye….hime….and …i don’t give a fluck. 😀

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  32. nice post icepup, unfortunately i think its fake as mackems can’t type and Sunderland hasnt got the internet yet…theyre still playing chuckie egg on the BBCMicro

    apparently theyre after Debril Cisse again, the glassed legged, older, ****tier version Cisse

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  33. Mark
    was he the one who kicked O.Martins in the goolies. i.e. used to play for sunderland, had wierd blonde beard that made him look as though he’d just fallen over onto tynemouth beach.

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  34. @ANDYMAG

    aye, was a canny player in his day. smashed his leg or was it both.

    wasnt that good at L’pool, not sure why Sunderland would want him back..

    its quiet on here without Troyore and the heffalumb gloomers, apparently theyre at the coast road auctions trying to flog a **** bus 😯 😆

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  35. Mark the dreamers have a bus lad, we needed a train with 3 carriages and it’s still on track mate until the window slams shut.
    Theres nowt as bad as getting all excited only to get a slap on the face at the last minute 😉

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  36. You still bouncing Tigger.

    Cos I bounce I bounce I bounce cos that’s what Tiggers do best. 😛

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