Uefa getting serious with big spenders

At half-past five this afternoon, Manchester City take on Everton knowing that three points will carry them to the brink of Premier League glory.

Uefa getting serious with big spenders

Over the next 48 hours, Chelsea and Liverpool will battle on to take the contest to the final day.

Yet at the climax of one of the most enthralling of Premier League competitions, City are also on the brink of becoming the first English club to be punished for breaking European financial regulations. And while their two title rivals are in the clear for the time being, there are questions hanging over them as well.

Early next week, Uefa will announce the sanctions imposed on clubs that have been found in breach of the Financial Fair Play (FFP) regulations introduced four years ago. Initially 76 clubs were under scrutiny — one third of those who qualified for Europe — but less than 20 will face sanctions, the most prominent being City and Paris Saint-Germain.

It is no surprise that PSG are in the firing line. The club is indirectly owned by the government of Qatar. It has a €200 million sponsorship from the Qatar Tourism Authority, which is a government department. The sponsorship was agreed midway through last season and was even backdated to the season before. PSG met with Uefa representatives last November to argue that the QTA deal was independent and legitimate but to no avail.

Some sort of sanction against PSG is necessary for the regulations to have any credibility, and there has been pressure from other clubs to make the sanction meaningful — ie more than just a large fine. PSG have been engaged in efforts to reach a settlement over the past two weeks, hoping to avoid measures affecting the size or composition of its Champions League squad next season.

City too have a questionable sponsorship arrangement with a related business, although rather less blatant than the PSG one. They have adopted a far more sophisticated approach than the French club. To start with, they employed the same accountants — Deloitte — that drew up the rules. They produced a lot of convincing devices designed to skirt the regulations. These Related Party Transactions, or RTPs as they are known in the trade, add up to around €42 million and include large payments from City’s women’s team — a separate limited company — and their franchise in New York.

Ingenious. And if Uefa’s independent adjudicatory panel, the Club Financial Control Body, had accepted the argument these payments are commercially justifiable, City might have come in under the FFP limit. How much of a breach is involved we ought to find out next week: it is possible their arguments about branding and the market value of the Etihad deal may prove more persuasive than PSG’s plea-bargaining.

How bothered are City’s owners about all this? Not a lot, judging by their behaviour up till now.

When they signed Sergio Aguero from Atletico Madrid for €46m in July 2011, it sent a signal that they were prepared to break the bank on wages as well as transfers. They had to more than match the player’s income in Spain, where he benefited from a 25% tax rate (now abolished) and tax-free earnings from image rights and sponsorship deals.

Aguero’s salary at City has been quoted at €240,000 a week. Who knows whether that’s accurate, but the signing had an immediate impact on the club’s wage bill, with other players seeking pay adjustments.

They now have the highest-paid team in global sport — average €125,000 a week, according to last month’s wage bill survey, published by Sporting Intelligence — ahead of the Yankees and the Dodgers, as well as Real Madrid and Barcelona.

Another, smaller, example was the decision to sack Roberto Mancini 12 months ago. Mancini was dismissed less than three weeks before the end of City’s accounting period, which was also the cut-off for their first test under FFP regulations. They might have waited but evidently opted not to worry about his pay-off counting against the break-even limit.

City’s title rivals are differently placed, for now at any rate.

Chelsea made a hefty loss in their last accounting period, but they don’t submit these figures until the end of next month. They made a small profit in their previous financial years — 2011/12 — so were not even among the 76 clubs originally under review. Their strategy has been to limit the wage bill but also to set up a trading operation which will allow them to cash in on their on-loan players if required.

The club is already planning to shed some of these players anyway, for football reasons, but this arrangement gives them a nice financial cushion should they need it. The Transfermarkt website estimates the total value of these on-loan players at around €140m. That may be an overstatement, but it provides a lot of room for manoeuvre.

Liverpool will have a loss to account for, but their failure to qualify for Europe last season meant the club automatically escaped scrutiny. Any potential sanctions can only apply from the end of next season, and they will of course benefit from Champions League income before then. Liverpool also benefit from the FFP rule that excludes wages paid in 2011/12 to players on contracts agreed before the regulations were introduced (May 2010).

So despite losses over three years that may total more than €100m, there can be no punishment until June 2015. They will probably have to put their house in order by the end of this year, but that can be readily achieved if the owners inject capital by swapping debt for equity.

Nevertheless it looks as though Financial Fair Play is not the paper tiger a lot of people anticipated. Uefa is concerned to make it bite because of the free-for-all that would ensue if sanctions are too feeble. Whether it’s fair for all clubs outside the privileged few is another question.

More in this section

Sport Newsletter

Latest news from the world of sport, along with the best in opinion from our outstanding team of sports writers

Sign up

Select your favourite newsletters and get the best of Irish Examiner delivered to your inbox