For FFP’s sake ‘ how the rules impact Newcastle United!

While most Newcastle United fans eagerly refresh Twitter for the latest news on incoming transfers or pour through the fixture list planning away days and plotting where we’ll finish in the league next season, I have been preoccupied with something else entirely: Financial Fair Play or FFP for short.

I accept this doesn’t exactly make me come across like a hoot at parties, and some will be adamant I should just sit back, relax, and enjoy the inevitable transfer splurge like those enjoyed by PSG, Chelsea, and Manchester City after they were bought over by their respective oligarchs and petro-states.

After all, PIF ‘ the sovereign wealth fund of Saudi Arabia and Newcastle United’s new majority owners ‘ have a greater net worth than the owners of Chelsea (past and present), PSG and Manchester City combined, and these clubs have had no issues splashing the cash, so why should we?

To answer that question, we need to look at the history of FFP, when it was brought in and what it was designed to do. FFP is a UEFA initiative established by the now disgraced but then UEFA President Michel Platini.

The plan supposedly was to ensure football clubs across Europe were financially sustainable and profitable. FFP sought to achieve this by ensuring a football club’s costs (i.e., what money the club spent on transfer fees, wages, and agents’ fees), did not outdo their revenues (i.e., what money the club brought in through broadcast revenue, match day income and commercial contracts).In other words, they wanted football clubs to break even.

There is some wriggle room within these regulations, as UEFA’s rules allow clubs to make losses of up to ’30m over a 3-year rolling period.

Shortly after UEFA implemented FFP, the Premier League followed suit, bringing forward their own regulations on financial sustainability and profitability which followed the same concept, however the Premier League’s rules allowed for a lot more wriggle room with football clubs allowed to make losses up to ‘105m over the same 3-year timeframe.

The real reason FFP was brought in, however, was not to ensure financial stability across European football, but rather to protect the interests of the elite clubs in European football.

With the high-profile purchases of Chelsea by Roman Abramovich in 2003, Manchester City by Sheikh Mansour in 2008 and PSG by Qatari Sports Investment in 2011, the powers that be wanted to prevent other clubs from buying their way to the top table of European football ‘ essentially, they wanted to prevent another Chelsea, Manchester City or PSG from happening, or in other words they wanted to stifle competition.

Since FFP was not introduced until 2013, Chelsea, Manchester City and PSG were able to spend freely and have their revenues falsely inflated by their egregiously wealthy owners.

Therefore, prior to 2013, these clubs could spend as much as they liked in the transfer market and make hundreds of millions of pounds in losses in the process. Nowadays, football clubs who have been purchased by wealthy owners have to operate within the FFP guidelines as outlined above, and while it may not seem like it, the likes of Manchester City, PSG and Chelsea have dramatically decreased their transfer spending following the introduction of FFP.

Okay, thanks for the history lesson, but what does this mean for Newcastle United?

So, as I mentioned, a club like Newcastle United, despite having an abundance of riches at our disposal, cannot just spend as freely as those aforementioned clubs did in the transfer windows which followed their takeovers. Which then begs the question, how much can we actually spend?

Much brighter minds than my own have pondered over this very question, with the excellent Swiss Ramble producing a detailed Twitter thread in the immediate aftermath of the takeover.

In this thread he outlined Newcastle United could spend as much as ‘200m (possibly rising to ‘600m) given the frugal nature of Mike Ashley’s ownership, coupled with added flexibility regarding financial losses due to COVID-19, as well as the particular manner in which FFP calculations are made i.e., transfers and wages are spread evenly over the course of a player’s contract.

For example a player bought for ’30m, with a ‘5m annual wage on a 5-year contract would result in ‘7m annual FFP calculation (‘6m of the transfer and ‘1m in wages).

Further analysis of the FFP impact on Newcastle United was explored by Football Finance expert Kieran Maguire on the Toon Down Under podcast. When asked about whether Newcastle United fans should be concerned about FFP he said:

‘No, I don’t think so. I know Mike Ashley is sort of the Voldemort of Newcastle but the legacy that he created was that during the period of ownership Newcastle made an overall profit and from an FFP point of view when he left, I’ve estimated they were plus ‘100m whereas the limit is minus ‘105m so certainly there is the ability, there is the scope to spend significant monies’

‘

‘Certainly, Newcastle have got far more flexibility than they had under the Mike Ashley model, but the money has got to be well spent rather than just spent’

While the experts downplay the significance of FFP on Newcastle United’s spending power in the summer transfer window, the noises being made from inside the club paint a very different picture.

On the very day the club was taken over, when asked about her ambitions for the club and the increased spending power of the club to reach those ambitions, Amanda Staveley stressed ”we have to work within Financial Fair Play’.

She also referenced the thorny issue of wages when she said, ‘Salary and wage inflation is a real problem for all of us’We are running at about 65% [of wages to turnover] and that is still probably too high.”, which is a clear reference to the bloated nature of our senior squad with the likes of Clark, Hendrick and Gayle sitting on inflated wages nearing the end of their careers as it was much cheaper for Mike Ashley to renew their contracts than to buy new players.

Moving these players on will be important both for greater flexibility in our wage bill, as well as the impact on our costs which contribute towards Financial Fair Play calculations.

This is in keeping with what the manager, Eddie Howe, had to say when asked at the end of the season about Newcastle United’s summer transfer plans when he said:

‘With Financial Fair Play, we have restraints, and we have things that we have to work within, so we can’t just go out and spend money on players like maybe teams could have done in the past, and totally change their squad within one transfer window. That is not an option for us.

‘The more money you spend in one window, the more it impacts your ability to then spend in windows beyond. The rules are there to govern the game properly and we have to follow suit, so that does impact what we can do this summer.’

So, the experts’ view is Newcastle United, in theory at least, could spend significant sums of money in the current transfer window without falling foul of FFP.

On the other hand, the club are trying hard to downplay such speculation, even suggesting a real need to both increase revenues and trim the current wage bill.

This may all simply just be a clever ploy to ensure the club doesn’t fall foul of the ‘Newcastle tax’ (having their trousers pulled down for more money simply because they have it), and a significant war-chest exists should we need to crack it open.

Perhaps it is just a case of tempering fans’ expectations regarding our summer spending should we struggle to bring in our required targets.

Or perhaps we’re pursuing ‘evolution‘ this summer while waiting until we boost our revenue by signing lucrative new commercial contracts, so we can pursue ‘revolution’ in the near future.

Personally, I like the way the club is conducting itself publicly. If we are in fact sitting on a significant war-chest, you wouldn’t know it. The club has proven it will walk away from deals that don’t make sense financially ‘ with deals for Diego Carlos and Sven Botman stepped away from in January.

We even stubbornly refused to pay the ‘5m release clause in Dan Ashworth’s contract so he could take up his post as Sporting Director before finally coming to an agreement.

This style of managing the football club, with calculated and measured risks taken at the right time and for the right price, bodes well for the future direction of the club off the field.

It may mean we may have to wait a while for the club to spend ’75m on a centre-half, or pay ‘300k-a-week wages to attract the very biggest names in world-football, but it does mean we are unlikely to fall into the mess clubs like Everton currently find themselves in.

‘Evolution, not revolution’, for whatever reason, appears to be the mantra this summer, and I don’t know about you, but evolution sounds like a pretty damn exciting prospect to me.

Ciaran Donaghy – @CiaranD1990