The AVFC FFP thread

[Zatman]

Quote

Championship 'bubble waiting to burst' with clubs posting record losses in Premier League 'gamble'

The Championship is a "bubble waiting to burst" because clubs are posting record losses in a "gamble" to reach the Premier League.

Former Wigan chairman David Sharpe, who sold the club in 2018, said the situation is "frightening" - following a BBC Radio 5 Live Investigation Unit analysis of the Championship's finances.

The analysis, conducted with accountants Deloitte and football finance experts Vysyble, found:

• Championship sides ran up a record high total of £307m in pre-tax losses in 2017-18
• Despite the league also bringing in its highest-ever revenue of £749m, overall spending on player and staff wages exceeded clubs' revenue by 11%
• That gap is expected to widen to an all-time high for 2018-19
• More than half of clubs are spending more on wages than they make in income.
• Many teams are recording significant losses over one or two seasons in an attempt to gain promotion to the Premier League

This follows the introduction of new profit and sustainability (P&S) rules by the English Football League in 2016-17.

The EFL told the BBC it has set up a "working group" of clubs to look at possible changes that could help the long-term sustainability of clubs in future.

'Thank God we're out' - what else did Sharpe say?

Sharpe said the "only reason" the Whelan family sold Wigan to the Hong Kong-based company International Entertainment Corporation was because they did not see the "scary" financial situation improving.

"The Championship is not financially sustainable, it's a bubble waiting to burst," he said.

"It can't continue if the model is just having enough billionaire owners to keep funding it - that's a strange, crazy model because there are only so many people you can attract."

Sharpe, who took over Wigan from grandfather Dave Whelan in 2015, said the family were putting in "nearly £1m a month just to keep it going" despite having the fourth-lowest wage bill in the Championship.

He said he "would not be surprised" if in the next five years a Championship club entered administration and dropped out of the Football League like Bury did in August.

"There are Championship clubs chasing that Premier League dream and when the gamble doesn't come off somebody has to foot the bill and if they can't afford it, the club could end up in administration," he said.

"It's a real problem and it's only going to get worse - thank God we are out."

What did the EFL say?

The EFL told the BBC: "Club owners are fully aware of the current financial regulations in place and are cognisant of the risks that such an increase in outgoings can have on sustainability.

"Clubs, however, must be given the freedom and flexibility to strive for success within the parameters of the regulations.

"It should also be remembered that 'operating profits' are not the primary aim of most professional clubs, with owners opting to compete for success in what is an increasingly competitive marketplace."

What are the new spending rules?

 

Figures come from published 2017-18 accounts of each club company or group structure.

New P&S rules introduced by the EFL from the 2016-17 season allow the majority of clubs £39m in losses over three seasons.

If a team has recently been relegated from the Premier League, its limits will be larger - and there are other caveats that allow some clubs to spend beyond the £39m limit.

Clubs that spend beyond their P&S limit can face sanctions, such as a transfer embargo or a points deduction, as happened to Birmingham City last season.

What about those with the highest losses?

5 Live's analysis found that the losses detailed on the public annual accounts for five Championship clubs were approaching or exceeding £39 million in 2017-18 alone.

The three clubs - Wolves, Fulham and Cardiff - to post the highest pre-tax losses all did gain promotion to the Premier League that year.

Fulham told the BBC that, despite posting losses of £45m in one year, they would not have broken the three-year P&S limit even if they had not been promoted.

QPR say their £38m loss is partly because of a £20m fine already imposed by the EFL under previous Financial Fair Play rules, and that this would not count towards the spending limit. Birmingham say since their points deduction they have worked to ensure compliance with all necessary regulations. Wolves and Cardiff provided no comment.

If a club does go up they receive promotion bonuses and their P&S limit is increased to more than £100m, meaning some sides are running up big losses over one or two years in a bid to make it up to the Premier League.

But if they don't achieve promotion, they will have to cut spending significantly in the third season - by possibly selling players or assets - to bring them under the £39m limit.

"You can lose £39m over three years in the Championship but it's clearly not stopping clubs - a points deduction is a slap on the wrist," said Sharpe.

The EFL said that it has "demonstrated that appropriate action will be taken in accordance with our regulations when breaches are identified".

It added: "But it is important to acknowledge that the majority of EFL clubs are well supported by experienced owners and their boards, who are very aware of the economic challenges faced when operating a football club."

 

'It's is a billionaires’ gamblers’ paradise' - former Wigan chairman David Sharpe on doing business in the Championship

What about stadium sales?

There have been questions raised about some clubs - including Aston Villa and Derby - and their ground sales. Both clubs deny breaching any P&S rules.

Sheffield Wednesday were charged with misconduct by the EFL last month, after an investigation into the sale of Hillsborough to the club's owner, which the EFL allege helped it meet P&S rules.

The Owls sold their ground to owner Dejphon Chansiri for £60m in June this year, allowing them to record a pre-tax profit of £2.6m for 2017-18, which allegedly helped the club meet P&S rules.

The EFL charge relates to "how and when" the stadium was sold and its early inclusion in the 2018 accounts. Sheffield Wednesday deny the charges, calling them "unlawful" and "stands ready, if necessary, to vigorously defend them".

The club, which is now bringing a claim against the EFL, says it has "numerous emails, letters and other documents in which the EFL gave authorisation to the transaction, and on which authorisation the club understood it could rely".

Lifelong Wednesday fan Chris McClure told BBC Radio 5 Live his club's situation "shines a light on a bigger problem" within the league and its finances, and he now feels "numb" going to watch his side, with their season in limbo as they await their fate.

"I love going to see Wednesday, but now the whole enjoyment has been zapped out of it before I even enter the ground," he added.

Are wages just too high?

 

Spending on wages in 2017-18 jumped by 11% from the previous year - an £83m increase, according to Deloitte.

Vysyble says more than half of clubs are spending more on wages than they make in income.

Deloitte say this gap between wages and revenue is likely widen further to what they call an "unwelcome record high" when the 2018-19 accounts are published next year.

Sharpe, who is now an agent, says that "a salary cap is the only way to solve the problem".

He added: "People talk about a new TV deal but it will all just go back to the players ultimately and the clubs and owners that want to gamble will just give out higher wages.

"A salary cap will be hard to pass on a vote but if it doesn't, they have a big, big problem on their hands."

What about parachute payments?

Figures from Deloitte show that parachute payments, designed to help relegated clubs absorb big losses in revenue caused by dropping out of the top flight, are having a significant impact on the revenue inequality within the Championship.

Parachute payments made up more than a third of the Championship's total revenue in 2017-18 - compared to just 9% when they were introduced in 2001-02 - meaning a third of the Championship's money now comes directly from the Premier League.

The average club receiving parachute payments had a total revenue of £13m in 2001-02 against £10m for those without.

In 2017-18 those receiving parachute payments had a total revenue of £51m against £21m for those without.

The EFL said: "The Premier League does remain an important part of the financial mix across the EFL through the provision of parachute payments and contracted solidarity payments," adding that "this assists in providing clubs with increased clarity when making long-term financial commitments."

https://www.bbc.com/sport/football/50674331

[Villan4Life]

 

[nick76]

1 minute ago, Villan4Life said:

 

Haven’t we been told by the club after we brought these players we were ok on the FFP front.  From what I read elsewhere this originated based on basically a guess that based on our spend we had to be, which seems off the mark from reality.

[Nigel]

Isnt the penalty purely financial in this league anyway?

[Teale's 'tache]

The Daily Fail article is pure conjecture, there's nothing new in there other than their complete misunderstanding of finance in football and FFP.

We've had a massive increase in income from TV money, then 'spent' a lot in the transfer market, but that is to be paid over the next 3-5 years, we pay something like the third lowest in the League in terms of wages, have increased sponsorship deals .etc The sale of the stadium put us in the black for last seasons accounts from my understanding, so there's only the season before where we reportedly lost ~£30m that will count in this FFP cycle, the limit in the Premier League is ~£60m over the three season cycle, so in theory we'd still have ~£30m of wiggle room for this season.

That's just my very basic understanding, in truth nobody is going to have any idea until the books are fully released for last season. I for one trust our owners and CEO to get these things right, not some no name journalist that wants to push Grealish/McGinn transfer rumours over January.

Standard of football journalism in this country is toilet. 

[The Fun Factory]

The Daily Hail making up lies for a clickbait article? No surely not.

[villa4europe]

get the bus out its time to drive through the holes...

aston villa are in danger

there's your 1st get out clause

and may need to sell

there's your 2nd

sportsmail has been told

by who? the cleaner? the bluenose who runs a blog investigating our finances?

 Without the sale of Villa Park and land near their Bodymoor Heath training ground

they also refer to the sale of the ground as controversial, no it wasn't, they also suggest that the land sale was to stay afloat, no mention of HS2 anywhere

no significant sales

nope, just the 16 players that left in the summer and it would be safe to assume that Richards, jedinak and Whelan alone were worth around £6m in wages

the big surprise of the article is they haven't put a "we understand" or "rumoured to be" type comment in the statement about jacks buy out clause, other than that there's absolutely nothing to see 

[villa4europe]

but with all that in mind im still fully expecting gary the 47 year old fan to comment on the official facebook page that the club should sack smith, get poch, must beat everyone, ruined his Christmas when we don't with some colourful language and interesting spelling thrown in 

[Dave-R]

Wasn't there an article not to many months ago stating we were around the bottom club for low player wages in the premier league. The work that was done between the championship and now in decreasing player wages was pretty darn fantastic.

What about the money the club won in the play off final, that goes towards your account and FFP doesn't it, I thought contest money counted.

I also thought that once you enter a new league that FFP isn't looked at for three years.

The sale of our stadium to inject cash into our club wasn't breaking any rules at the time, there was nothing stating that a club couldn't do that with its stadium and as far as I know it's still not a rule now. Also didn't the EFL come out themselves when this last come up and state Aston Villa hadn't broken any rules along with other clubs who had used this method.

The problem with FFP is that it's a complete mess, the leagues cant get it right between them and clubs do not know what they can and can't do until it's to late. FFP should be shut down and a new system  rought in that stops clubs who are in trouble from makeing errors, clubs that can afford to inject should be able too so long as they can prove they have the currency to back it up.

I'm really sick of this keep popping up, it's like a bad cloud hanging over someone and it never goes away because people are constantly judging you.

Get rid of this pointless system because it hasn't worked, just look at BURY, where was FFP then.

[Farlz]

So the Daily Mail is making up some rubbish again, great 

[ciggiesnbeer]

This again? FFS this FFP bollox just needs to be put out of its misery. Its like an anchor around football.

[villa4europe]

19 minutes ago, ciggiesnbeer said:

This again? FFS this FFP bollox just needs to be put out of its misery. Its like an anchor around football.

If they get rid of it though man City and psg will be able to spend more money than everyone else... 

[KenjiOgiwara]

1 hour ago, villa4europe said:

If they get rid of it though man City and psg will be able to spend more money than everyone else... 

They already are. How will anything change? 

[Keyblade]

27 minutes ago, KenjiOgiwara said:

They already are. How will anything change? 

Think it was sarcasm.

FFP just prevents the likes of QPR in 2012 from being the new Man City. It just closes the gate behind them, nothing more.

[brummybloke]

I thought the rules changed again in june ?

I also thought that it resets when you change divisions ? So if you go up to premier league then the 3 year FFP guidelines only start from when you join the league. Which would make the last 3 years irrelevant?

[DaveAV1]

8 hours ago, brummybloke said:

I thought the rules changed again in june ?

I also thought that it resets when you change divisions ? So if you go up to premier league then the 3 year FFP guidelines only start from when you join the league. Which would make the last 3 years irrelevant?

Additionally isn’t there some sort of leeway for new owners?

[sidcow]

Its not like it even works, clubs are getting into all sorts of trouble and going bust anyway even with it so what's the point? 

[DaveAV1]

15 minutes ago, sidcow said:

Its not like it even works, clubs are getting into all sorts of trouble and going bust anyway even with it so what's the point? 

You’re right. The problem is that football is a glamorous business that attracts all sorts of dreamers and crooks. The dreamers run up debts that they have no chance of repaying unless they hit the jackpot of the PL. EG Tony Xia. The crooks know that if they get close enough to the money they’ll get the chance to skim some of it off. They con a few dreamers into investing then walk away when everything goes pear shaped. EG Tony Xia. 

[JAMAICAN-VILLAN]

On 19/12/2019 at 18:03, villa4europe said:

but with all that in mind im still fully expecting gary the 47 year old fan to comment on the official facebook page that the club should sack smith, get poch, must beat everyone, ruined his Christmas when we don't with some colourful language and interesting spelling thrown in 

So true

[Dave-R]

Oh this is the best one yet that's so overjoyed lol. Birmingham mail ramp this one up so much saying Villa ha e no choice but to sell players to meet financial fair play. They even go as far as listing obvious players who may be moving on anyway as part of the next wave of culling and replacing. They even go into how we spent over 120 mill on 12 players in the summer and that money needs to be recouped, which is obvious that there will be sales because it's obvious has to be eased by any club who go and spend 100 mill plus 

The best bit though i think is how they bring this list of players up and not just that but how much they are worth totally, which isn't very much lol.

You have firstly: Jonathan Kodjia who in there mind is rated 6.3 million. Well Jonathan, do we sell or do we keep, I don't think it's a question we should sell, we should of sold when 9 mill was on the table.Our mistake big time because he's scored two goals since against a bunch of kids, when you think of it lile that, nine million sounds like a god damn party doesnt it.

Secondly: Andre Green who is the lowest at 1.8 million. I thought played decent in the championship then all of a sudden was shipped out and it's been an ever repeating cycle. Now whether Smith will recall to sell, to play or to loan back out is anyone's question, but you can't help feel for the lad as he hasn't really been given a chance at his cured t loan club.

Thirdly: Lovre Kalanic, worth just 3.15 million, a loss for sure but we always knew that didn't we. Didnt make it at championship level let alone premier level.

Fourth and finally: James Chester: who at 4.05 million may be moved on anyway because the injury he has sustained and may never recover fully to become fully fit to play at this level. The James Chester sale would be the most saddening of the lot because of how he put his body on the line for our club when we truly needed someone he was there.

Right Back to the player sales and how they will ease FFP. If the mail or any of these papers think the sale of these four players, would appease FFP, they seriously need there heads testing. These players would be the next set of players to obvious leave and who are from the old regime, anyhow. They would bring a total whopping 15.3 million pounds to FFP which would only ease FFP abit, yes that's right a massive 15.3 million pounds think again if it would totally cool down FFP. The one thing selling these players does is it cools down FFP and tells the right people behind FFP that we are also selling as a business and not just buying. It's all an obvious move anyway and I spose my post in which I have written is as pointless to read as reading any of this FFP rubbish is lol.

The main thing is, we have moved away from last year's model of having nothing but loans in house. I just don't know why this is ringing alarm bells with the media and us, is it the fact we have finally turned a corner and if we sell for the first time open us up as a business again because players are ours outright and do not belong to other clubs. Whether we stand to make a profit or not doesn't matter so much here, because it's the fact we are now at the point we would be selling again, which is fantastic. we choose who we want to sell this time and not who we have to sell like the old times when our best would of gone to the likes of Man UTD for next to nothing.

Yes Aston Villa may be finally open to business again in January and its not to ease FFP as much as what others think, it's because we've adapted and evolved into what we needed to be for the future, which is selling who we want when we want to bring something back onto the table, which every club needs to do every so often.

Edited December 21, 2019 by Dave-R