mrjc

This isn't quite right unfortunately. Basically, they allow £35m of losses for each year a club was in the PL, and then £13m for each year a club has been in the Championship. So in our first year down, we were allowed to have lost £83m ((2x£35m) + (1x£13m)) in the three years up to that point. This season, given it's our third year down, we are only allowed to have lost £39m (3 x £13m) in the last three seasons. From what Swiss Ramble said a couple of weeks ago, it sort of ties up with what a few (seemingly informed) people said in the summer - that we would likely 'breach' the test by quite a lot this year - c£25m, from memory. Sadly, he also said that one legitimate way around this is to sell Grealish in the summer...the FFP small print allowing "post year-end sale proceeds which can be demonstrated to have been used to fund previous losses".

Good question, and we can't be sure ultimately. Coming off the back of last season, with what we know from published accounts, the published FFP limitations, and some assumptions, it looked like we had huge problems. There was plenty of analysis done (not pure speculation, just inclusive of some sensible assumptions in my opinion), which suggested we would need to significantly alter the financial direction of the club from where it was last season. That would have seemed to suggest needing to sell Grealish to recognise a significant profit, as well as reducing the wage bill considerably. Clearly that sort of swing isn't happening, as you've highlighted. My thinking is one of three things is going on: 1. The calculations / assumptions were massively wrong. Personally, I think this is unlikely - we pretty much know the revenue as the largest amounts (parachutes and EFL money) are known to a good degree of accuracy, and I don't see what other material 'upsides' we would have missed. The accounts will show in the next couple of years I guess, but against the FFP test, I cannot see how we don't have an issue this season. 2. The owners have gone to the EFL and effectively negotiated some sort of deal. This could be along the lines of 'the previous losses weren't our fault, we have plenty of cash, making us sell our assets would weaken the club further, we will work to demonstrate that we are taking steps to run the club more responsibly, etc etc...'. This would be my preferred option as it's managing the situation, but it's speculation and I have no idea how likely it is. It has seemed increasingly unlikely with the Bolasie / Abraham / Grealish news, all of which must be adding to the wage bill considerably. 3. The new owners are gambling and hoping we can get up and then avoid sanctions. To me, this would be madness. Partly because we are the prime example of spending not equaling success. And partly because I think the rules have changed, such that the PL can now support the EFL in enforcing penalties (which I don't think they could for the likes of Leicester, Bournemouth, Brighton). So basically, who knows...?!

Who are the many others who have done this?

It’s £35m per season when in the PL, so 3x years of that would be £105m. But for every year in the Champ it drops to £13m per season. So for last season - £61m (1x£35m + 2x£13m). For next / this season it’s £39m (3x£13m).

But hasn’t it in some ways saved us (or even not been stringent enough)? Had we been allowed to spend more under FFP, you could easily have seen us offering bigger contracts last summer and in January, further chasing the goal. Which could have seen us go under had we still missed out on promo. We've invested plenty - not the rules that are the problem in my opinion, it’s the fact we’ve delivered so badly against significant expenditure.

I think the rolling allowable loss for this season was £61m. The rules allow for £35m for each year in the PL (2015/16), plus £13m for each year in the EFL (2016/17 and 2017/18). So much closer to the £62.5m forecast. And that sort of makes sense, as I think months ago the club suggested we would be okay this year, but that it would be pretty tight.

Agree, it’s impossible to know without inside info. None of the publicly available (factual) information can give us an insight, as far as I’m aware. Seems at best an admin error, and at worst a real issue if our cash flow is so bad we cannot afford it.

We wouldn’t have had an FFP issue had we got promoted though? So it’s not trying to stifle investment / ambition - it’s trying to stop irresponsible spending which is not backed up by results. I just don’t see it as a conspiracy theory - we are being penalised for disastrous decisions / results over a period of time

Probably right about liaising with the league somehow. Although maybe we should have done that in year 1, rather than entering year 3 in a what seeems a sudden panic (in fairness, maybe we did). But as I said a few pages back, it’s our fault, not the rules’, in my opinion. Yes, we inherited a legacy whereby we are still paying for long contracts that we are getting little to no value from. But equally, we then exacerbated that problem but (a) throwing the kitchen sink at it and ending up with even more long contracts with no value and (b) then failing to deliver the required results (admittedly narrowly). From a responsible business management point of view - it has been poor. If the plan was so dependent on promotion, which is far from easy, then the plan was wrong. I hope we can manage it sensibly from here, but the time to start tackling this should have been when we got relegated - even if that would have been unpopular at the time. The rules, for me, aren’t the problem.

Thanks. My view (sadly)... We'll only save half a season on Grabban and Tuanzebe, as they were only here for half of last season. I think with Amavi we actually ended up loaning him initially, and then selling him (sale announced in October, from memory). I have seen it mentioned a few times that the money may come in next season, but I'm not sure this is accurate and don't understand how it could impact from an accounting point of view. So I don't think Amavi has any impact next season (other than maybe from when we were paying him in July / August?). RDL / Gollini / Gil - agree, their wages shouldn't be counted in full. It depends how much we were paying of their wages - if 50%, then that is what we would save. So maybe a bit less than that above. Sorry - not trying to be negative as I like what you're trying to do! Loans out can be good for some players too - eg, McCormack, where we don't want to make a loss on his fee, but could ideally get someone paying a portion of his wages.

He’s certainly not right about us having had two years of austerity though!

Yes, that quote is true - the difference is in the technical explanation. Wages aren’t amortised (they are incurred each year as they are paid), whereas the transfer fee is amortised (it’s an asset which is paid for on day 1, and spread over the life of the asset - ie, the contract length). So when we sell hogan, we take the fee but have to write off any remaining unamortised asset value - as you have done with the transfer fee bit. But we only save his wages next year, because that is all we would have incurred in our P&L anyway. Sorry, maybe not explaining it the best - but on your spreadsheet our saving for next year’s FFP is the annual salary, plus transfer fee, less unamortised asset value.

Transfer fees do work like that above...unfortunately wages don't. The FFP test is on the amount of profit we make on a rolling three-year basis, so for next year we will be tested on 2016/17 - 2018/19. The numbers that people have come up with on how much we need to 'save' are a comparison to our 2017/8 cost base. Taking Hogan as an example, and if the above is correct at £35k per week, he cost us £1.82m last season. So if we sell him now, we save his wages of £1.82m across the season (and no more). If we sell him in January, we will have spent £0.9m this season, so would only save £0.9m compared to last season.

Taking the emotion of a Grealish decision out of this, I don't feel annoyed at FFP or the EFL. We have been horrendously mismanaged, and need to think drastically differently (and actually, need something to force us to do so). This was largely during the Lerner era, but for the expenditure vs achievement so far, currently extends to Xia's reign. These rules are there to avoid us continuously throwing good money after bad without success. If we had achieved this season - we'd have no issue. So it's not trying to stifle ambition. It's trying to stifle bad business management and putting clubs at further risk. The recent evidence shows that by having a free rein on our spending, we fail - so is it such a bad thing to have some controls put around that? Even next year, we are still allowed under these rules to make a loss of £39m across the previous three years. That's still a pretty big amount! It's just not enough right now, given our previous poor decisions. The risk of letting us go on is that Xia continues spending, we keep failing, then he leaves / loses interest / money dries up and we're left with another disastrous legacy. I get that it feels painful, and will continue to, because we now have to get in line. And we may have to make some horrible decisions. But for me, the blame lies with the management and decision-makers, not the rules.

Last season our sponsorship income in total was only £2.7m, so sadly not all that material! Not sure what naming rights / HS2 might get us

We could do. I think the problem with that is that a panel is now in place which changes it. I don't know the exact detail, but my understanding is that that (a) the PL has now agreed that it will support enforcing penalties, which it didn't do previously and (b) the EFL has suggested penalties may now include points deductions. I suspect any sanction would depend on how we've approached it. In that, if we've actively managed down our cost base and missed it by a few £m, we'd be much more likely to get off lightly than if we entirely ignored it and blew it completely to get promoted. I think the latter would be risky - and aside from FFP, just for the financial health of the club as a whole.

I see your point. But those clubs didn't have the legacy of costs / players / losses that we have. I know this may sound obvious, but we are suffering from several years of bad decision-making. The FFP rules are simply there to stop that spiralling. The last year we were in the PL we lost around £80m...£80m! This still features in the FFP test (this season) and therefore is still holding us back. There were one-offs in there, admittedly, but then we went and bankrolled a serious push at promotion. I'm not sure any of those clubs mentioned have the combination of legacy losses and investment in current squad...to have then not delivered. We are a fairly unique case, I think. Maybe it wasn't a rallying cry, but I took it as an honest assessment to the fans of what is to come - and actually, for that I take it positively. Whether it works immediately or takes time, I would rather someone takes proper control and hard decisions at this time than simply glossing over issues. Where I completely agree - whatever was in the statement, the action from here is critical.

I’m not so sure - he thanked him for his work, but made no comment on his future. I took it reasonably positively - it confirms we have a big problem, but I think we knew that anyway. It also confirms he’s keen to act on it and make proper change. If that takes time, so be it - just much more important to do it right rather than chasing the quick fix and getting it disastrously wrong. I thought he came across as pretty measured in it - now to see what the changes are...

It’s more to do with matching the cost of what you’re buying with the time period from which you ‘benefit’. If it was done the other way of cash in / cash out, we would have busted it by a long way last season when we bought Kodjia / MCCormack / Adomah / Chester / Hogan / Jedinak / Gollini / Elphick / Taylor / Tshibola / De Laet / Bree / Lansbury / Hourihane / Elmohamady..... Admittedly, it does feel painful when you are suffering from bad decisions for years though.

You’re right, he’s effectively estimating two years’ worth of results, so it is only an estimate. And he’ll be wrong in some of the ups and downs - but I don’t think he’ll be too far off overall. I think (can’t remember the link) that Wyness suggested we would be very close to the limit for this year. That would make sense, and would also make it clear there would be a big problem next year if we didn’t get up - so I think Terry was part of the gamble, and they genuinely believed it would be a case of securing promotion. You’re right re naming rights not being known, and there are a few other uncertainties - but given we know the big moving parts (parachute payments, allowed losses, transfers this season (ie, nothing major) and the fact we’ve only really got one big sellable asset - I can’t see the analysis being that far wrong. We’ll see I guess - I find it massively worrying though

He's got some reasonably detailed workings, with assumptions which I think broadly make sense. There are two main problems though: Our parachute payments drop by the best part of £20m next year. The FFP test is done on profit on a rolling three-year basis. For every year in the PL, you are allowed to make a loss of £35m, and for every year in the EFL you are allowed to make a loss of £13m. So this season (when we had 1 x PL year and 2 x EFL years for the test) we were allowed to lose £61m. Next season, we are only allowed to lose £39m. So the amount of losses we are allowed fall by £22m. Given that it looks like we are already close to the limit, and the fact that last season was boosted by an accounting profit on transfers of around £26m (which we can now only realistically match by selling Grealish), it starts to add up. I may not be explaining it the best as there are a lot of moving parts, but it does make sense. Looking at it another way - our wage bill is so so so so much higher than others in the division - they're basically saying you can't continue to do that without success. Maybe harsh (especially as we're dealing with Randy's legacy), but our reality.

Agreed, the test isn't perfect but I think it at least partly drives the right intention - ie, don't just keep spending money, losing money and causing longer term problems throughout success. This is becoming an issue for us because we've been mismanaged over a long period of time, and then gambled on a quick return.

We haven't balanced the books, we've simply managed to come in line with the FFP test (which allows you to lose a certain amount each year). From the most recent season's accounts (2016/17) we made a loss of £14m, but for the season before we lost something like £80m. We've been making substantial losses for a while now.

Swiss Ramble (credible twitter account on Football finance) estimates we need to cut costs / raise revenue / fees by around £45m next season to still comply with FFP. We don’t know all the moving parts, but the analysis looks sensible for the assumptions made. That would therefore be around £800k per week that we’d need to save / raise. If that is the case, it makes me think selling Grealish is inevitable (not even sure he’d want to go) - he’s our only materially valuable asset, and even the saving of wages from Terry / Gabby won’t get close enough. Really worrying.

They didn’t have the extortionate wage bill in the preceding years that we have had. We’ve made big losses in recent years as a result of (a) mismanagement when we were in the PL and (b) then investing in aiming for a quick return. Those clubs didn’t have that same burden