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Football League To Introduce Financial Fair Play

Wed 25th Apr 2012 | Money & Finance

The Football League will implement its own Financial Fair Play regulations across all three of its divisions, after Championship clubs voted in favour of a breakeven approach based on UEFA's Financial Fair Play regulations.

From the beginning of next season, the Championship will join League 1 and League 2 clubs in applying rules that exert greater control over club expenditure with each division having the flexibility to determine their own specific approach.

The decision follows UEFA’s introduction of Financial Fair Play regulations for clubs in the top divisions across Europe playing in their competitions in an attempt to bring club spending under control. A Club Financial Control Panel was set up to monitor and ensure that clubs adhere to the rules and a three year accounting period which began this season (2011/12) was implemented with the aim that clubs ‘break-even’ by 2013/14 or face sanctions.

The decision to adopt Financial Fair Play regulations follows a strategic review by The Football League Board which identified the state of club finances as the organisation's greatest challenge.

League Chairman, Greg Clarke, said: "On the pitch we have three exciting, competitive divisions with crowds at their highest levels for 50 years. But that success isn't necessarily being reflected on our clubs' balance sheets and we have to remedy that situation or face an uncertain future.

"I'd like to commend the Championship clubs for the courageous decision they have taken today. It means that for the first time, all 72 Football League clubs have agreed to take concerted action towards controlling their financial destiny.

"Whilst we cannot promise that these rules will deliver results overnight, they will begin to lay the foundations for a league of financially self-sustaining football clubs."

Financial Fair Play in the Championship will require clubs to stay within defined limits on losses and shareholder equity investment that will reduce significantly across a five season period.

fcbusiness Editor, Ryan McKnight, said of the decision: “The Football League’s announcement today concerning their version of ‘Financial Fair Play’ demonstrates that football is indeed committed to becoming solvent and self-sustaining.

“What the new structures will compound is the reality that the wealth of one’s owner in being able to fund ‘the dream’ is now less relevant than ever. Clubs will now compete in a fairer manner that recognises both sides of the industry – the commerce and the playing.”

Under the new rules on spending, Championship clubs must reduce losses from an acceptable deviation of £4m for 2011/12 to £2m by 2015/16, with additional investment in certain areas of club infrastructure being excluded (e.g. youth development and community programmes). The permitted level of shareholder equity investment must also be reduced from £8m for the 2011/12 season to £3m by 2015/16.

Daniel Geey of Field Fisher Waterhouse LLP said: "Just like the UEFA Financial Fair Play Rules, the Football League Rules are to ensure a club in the longer term, more or less, has to break even.

“The overall aim for the Football League is for its Championship clubs to balance their books, not spend more than they earn and ultimately be self-sustainable. In the context of the Championship clubs, this is to be achieved through some losses being acceptable in the first years of implementation, sanctions (fines and a transfer ban) only being brought in from the 2014/15 season and clubs being incentivised to comply with the rules by receiving a share of the non-compliant club's fines.”

The new rules require clubs to provide annual accounts to The Football League by December 1, covering the previous playing season. Failure to stay within the defined limits will lead to the imposition of sanctions. The sanctions will vary depending on whether the club was ultimately promoted to the Premier League, remained in the Championship or was relegated to League 1.

Clubs promoted to the Premier League will have to pay a 'Fair Play Tax' on the excess by which they failed to fulfil the Fair Play requirement ranging from 1% on the first £100,000 to 100% on anything over £10m. Any proceeds will be distributed equally amongst those clubs that complied with the FFP regulations for the season in question.

“The incentives for clubs to comply have been intelligently arranged and the Football League should be applauded for the work it has done to date on this,” added McKnight.

“However, similarly to UEFA’s version of FFP the proof will be in the pudding of how it is both regulated, appreciated and actioned upon.”

Visit the Football League’s official website to find out more about Financial Fair Play in the Championship

Posted by: Aaron Gourley

 

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