Never mind "Auld Lang Syne", for football managers midnight tonight signifies the opening of the transfer window and this January there is a new factor to be taken into account – Financial Fair Play, the instrument by which Uefa president Michel Platini hopes to stabilise the economics of European football.
FFP was supposed to put a squeeze on transfer spending a year ago. Then Chelsea spent £71m on Fernando Torres and David Luiz the same day they revealed financial figures which booked a matching loss. Next it was felt FFP would have an impact in the summer, until Manchester City spent another £60m net on the likes of Sergio Aguero and Samir Nasri.
FFP can no longer be ignored. We are now half a season into the first Monitoring Period, a two-year span during which clubs, in theory, cannot lose more than €45m – and only then if a benefactor is prepared to cover that loss. Manchester City's headline loss in 2010-11 was £197m and Roberto Mancini has already suggested FFP will force him to sell before he can buy. Shifting players on City-sized wages will not be easy but this has not prevented his being linked with Edinson Cavani, Eden Hazard and Daniele De Rossi – before he attempts to prise Robin van Persie from Arsenal this summer.
At Chelsea, Andre Villas-Boas, who spent £50m in the summer, yesterday gave the impression that FFP does not come into his thinking when he said, "we're given this opportunity before [FFP] comes into play, in this window". The Chelsea manager is either misinformed or being disingenuous. This window counts in the sums. The impending arrival of Gary Cahill for a cut-price £7m suggests someone at the club has FFP on their minds but while Villas-Boas said he would not buy as many players as the media have suggested, he added he will be looking for "talent" rather than "value". Looking further ahead Villas-Boas, who has been linked with players such as Cavani, Hulk, Neymar and Kaka, added: "I don't know how much FFP will limit investments, funds have never been a problem here, so hopefully we can get the correct balance for what we need in the future."
As Villas-Boas intimated, Roman Abramovich – like Sheikh Mansour – can spend £50m-plus in this window if so desired, but that would suggest FFP was not being taken seriously. Earlier this year "The Swiss Ramble", a blog on football finance, and the similarly thorough website "Sportingintelligence", detailed how Chelsea and City may conceivably be able to pass Uefa's financial tests despite their losses. However, those assumptions were based on City progressing further in the Champions League and Chelsea being more restrained in the transfer market last summer.
As things stands it looks nigh on impossible for either club to pass FFP if they spend heavily this year. The only way they could do so is by slashing the wages bill and amortisation costs (the annual write-down of transfer fees), which in effect means selling big names. Thus City's desire to sell, not loan, Carlos Tevez, the departure from Chelsea of Nicolas Anelka, and imminent exits of Alex and Florent Malouda. There is, though, no great value in shifting Frank Lampard or Didier Drogba. Their wages (agreed before June 2010) can be written off and their amortisation is minimal after so long at the club. Fernando Torres is another matter – but who is going to pay even £25m for him?
Other Premier League clubs with Champions League ambitions have no great problems with FFP but it is likely to lead to more restrained spending this window than is usual. There is a view that FFP cements the status quo by allowing rich clubs to spend, but not clubs whose ambitions outstrip their revenue-generation, such as Paris St-Germain, Malaga and Anzhi Makhachkala.
However, FFP does reduce the chances of clubs plunging themselves into debt and is likely to have the effect of driving down transfer fees and slowing, maybe even halting the spiralling cost of wages. It should also push investment into infrastructure and youth development. As such it deserves a chance, but it must be enforced. How? Fines are, in the circumstances, self-defeatingly ironic. Transfer bans may not be legally enforceable. Champions League points deductions have been suggested, but the biggest stick of all is a European ban. While sceptics suggest Uefa would never shut the door on clubs like Manchester City and Chelsea they would simply be replaced in European competition by another English club, probably of similar attractiveness to sponsors and viewers. Denying entry to Barcelona or Real Madrid would be another matter entirely, but they have huge incomes. Carefully managed clubs such as Arsenal and Bayern Munich – whose chairman Karl-Heinz Rummenigge is also president of the European Clubs' Association – will be watching FFP's imposition closely, and making a fuss if clubs appear to escape penalty for evading it.
Financial Fair Play: A bluffer's guide
Eventually, to qualify for a licence to play in European football clubs must break even (within €5m leeway) over a Monitoring Period (MP) of three previous seasons. To allow clubs time to adjust, in the first two MPs they are permitted to lose a total of €45, in the following three €30m.
The first MP covers two seasons (2011-2013) and relates to licences for the 2014-15 season. All losses must be covered (in equity, not loans) by owners.
Loss is measured by subtracting expenses (primarily wages, transfers and amortisation), from earnings (TV income, merchandising, sponsorship and match receipts). Expenditure on infrastructure and youth development does not count.
