Last week UEFA announced a series of emergency changes to their Financial Fair Play (FFP) regulations to “neutralise the adverse impact of the COVID-19 pandemic by allowing clubs to adjust the break-even calculation for revenue shortfalls reported in 2020 and 2021.”
Current FFP rules limit club losses to a maximum €30m over a 3-year monitoring period, so long as €25m of that loss is covered by the owner via an equity purchase. Otherwise, the maximum loss (“break-even deficit”) is just €5m. So 2021 monitoring period is 2018, 2019 & 2020. 
The changes mean that the 2021 monitoring period will now only cover 2 years (2018 and 2019), thus excluding the COVID-19 impacted 2020. In addition, the 2022 monitoring period will cover 4 years, though 2020 and 2021 will be assessed as a single period.
In the highly likely case that the break-even result for the 2020-2021 combined period is a loss, this will be halved for the FFP assessment. This will then be further adjusted for any revenue shortfall caused by the pandemic (compared to the 2019 revenue base).
The 2019 revenue base can be increased if a club had signed a new broadcasting or sponsorship deal before COVID-19. However, it is worth noting that the revenue adjustment is only for operating revenue. i.e. excludes any impact on profit from player sales.
As a reminder, losses for FFP are not the same as those published in a club’s accounts. UEFA do not want to discourage “healthy” expenditure, so many expenses are excluded from break-even calculation, though some “revenue” items are also deducted. Let’s use Big 6 as an example.
Expenses excluded from FFP calculation include depreciation, amortisation (except on players), youth development, community, women’s football and interest incurred on loans for stadium/training ground construction (until the asset is completed and ready for use).
On the other hand, dividends, which are not an item in the profit and loss account, are considered as relevant expenses for UEFA’s FFP, so are added into the calculation. This is currently only an issue for #MUFC in the Premier League.
Other occasional items also excluded from the calculation include non-football operations (unless “related to the activities, locations or brand of the football club”), asset revaluation, profit on sale of stadium or training facility, loan write-offs and FFP settlements/fines.
Finally, there are adjustments for deals with “related parties” not done at “fair value”, i.e. deducting any excess (not the entire agreement) from income. These might be sponsorships, hospitality or corporate boxes/seats. Also includes provision of services and player transfers.
In fact, Big 6 total reported pre-tax profit of £33m is boosted by £163m adjustments to give an FFP break-even surplus of £196m. These include depreciation/amortisation £92m, youth £60m, community £12m, women’s football £16m and interest £13m, offset by £23m dividends.
As a technical aside, all these figures have been taken from club accounts with the exception of youth development and community, which I have estimated as £10m and £2m a year respectively for all the Big 6, based on various media reports and previous discussions with the clubs.
#CFC had a huge £263m operating loss in last 3 years, but largely offset this with £243m profit on player sales to give £19m loss before tax (2017 £16m profit, 2018 £67m profit, 2019 £102m loss). £81m of FFP adjustments (annual average £27m) meant £63m break-even surplus.
Notwithstanding £32m loss in 2019, #AFC had £83m profit over FFP 3-year monitoring period, thanks to previous profits (2017 £45m and 2018 £70m, the latter thanks to £120m profit on player sales). £91m FFP adjustments, including £46m depreciation, gave £168m break-even surplus.
#MUFC have no FFP issues, given that they have generated £134m profits in last 3 years (though best result of £81m was back in 2017). Their £142m break-even surplus is much the same as profit, as their £76m favourable FFP adjustments are largely offset by £69m dividend payments.
#MCFC look fine on paper for FFP, as £21m profit is boosted by £85m FFP adjustments to give £106m break-even surplus, but UEFA have challenged the validity of some sponsorship deals, arguing they are with related parties and above fair value. The case is being reviewed by CAS.
Helped by Champions league success, #LFC have reported an impressive £207m profit over the last 3 years, though that is also exactly the amount they have made from player sales. £69m of FFP allowable expense deductions gave £275m break-even surplus for last monitoring period.
#THFC profit in last 3 years was an extraordinary £278m, of which £205m was operating profit. FFP adjustments included £20m interest on funding for the construction of the new stadium, which will not be included going forward, as stadium now in use. Break-even surplus is £390m.
“That was then, this is now”, as ABC once sang. Hence, the need for UEFA to relax FFP targets over the next couple of years.
However, they emphasised that these measures were to address revenue shortfall due to COVID-19 and not financial mismanagement.
However, they emphasised that these measures were to address revenue shortfall due to COVID-19 and not financial mismanagement.
In addition, clubs have been given an extra month during 2020/21 season (31 July instead of 30 June) to pay wages, transfer fees and taxes.
Even after the changes, UEFA want the emergency measures to still “retain the spirit and intent of FFP for football’s long-term viability”.
Even after the changes, UEFA want the emergency measures to still “retain the spirit and intent of FFP for football’s long-term viability”.
