Are English Football’s Financial Fair Play Rules Capitalist Enough?
Arif Efendi is a successful entrepreneur and enthusiast. Here he answers the question; are English football financial fair play rules capitalist enough.
Author:Alberto ThompsonReviewer:Paolo ReynaMay 19, 20244.7K Shares69.4K Views
Fans of English football clubs in the Premier League and EFL leagues, including the Championship, would traditionally be occupied with their respective club’s performance on the pitch. With the introduction – and enforcement – of financial fair play rules, designed to prevent football clubs from overspending what they earn, supporters are now, at least partially, being preoccupied with financial accounts and the annual spends of their teams.
In the Premier League, for example, clubs currently cannot exceed losses greater than £105m across their combined accounts over a three-season period. This essentially restricts clubs – and particularly those with wealthier owners – from using their own resources to make acquisitions or investments on behalf the club they own. This includes buying players or investing in infrastructure.
The Purpose of Regulation
The purpose of the regulation was to make clubs sustainable without relying on owners to cover losses from their own pockets and instead focussing on the club being able to generate sufficient revenue to cover their ongoing expenditure, including player wages, which is traditionally the biggest cost for any football club.
This is especially important in the event proprietors of clubs refuse to cover excess losses, leading to potential financial ruin and unaffordable debt burdens. Additionally, it should have on paper created a more even playing field, preventing the wealthiest owners from being able to rely on their superior resources and financial firepower to blow rivals out of the water, especially when acquiring players by offering significantly higher transfer fees and bigger wages.
Most recently, the Premier League, and the English Football League, the body in charge of overseeing the Championship and lower tiers of the professional game in England, including League 1 and League 2, have begun to bare their teeth and impose sporting sanctions against their members who have fallen foul of the rules.
Everton FC and Nottingham Forest FC have been on the receiving end of point deductions due to breaches of financial sustainability rules by the Premier League, increasing the likelihood of both being relegated from the top tier of English football. Other clubs, including those in the English Football League’s Championship, could soon follow being punished.
Changing the Rules of the Game
The Premier League and the English Football League will be changing their rules shortly but financial caps on spending, although potentially subject to change as a percentage, will remain in place.
This has sparked the debate about whether the rules are appropriate. A purist capitalist view is that a football club owner, like any business proprietor, should be able to spend whatever they want on their company (a football club is after all an English limited business); whether that is to build a new stadium, invest in the football academy and acquire higher quality, better paid players, or whatever else. However, English football is woven by a communal fabric, with the financial activity of clubs at the top of the pyramid affecting teams lower down.
This is particularly poignant with regards to, for example, pushing wage inflation and, as a result creating huge pressure on smaller teams further down the leagues to pay salaries they may not be able to afford. Therefore, a degree of regulation and governance must remain to prevent the overspend at the top of English football from putting lower league clubs in the way of financial risk, potentially resulting in their going out of business and stopping reckless spending.
However, the regulation as it stands means that the elite clubs in the Premier League can use their existing revenue, generated by the leveraging of their existing brand power and reach, as well as benefiting from bigger match day revenues. They have larger stadia and can charge more for their ticket prices, as well as boasting greater sponsorship opportunities, preventing clubs further down the chain from breaking through the ceiling and offering new competition.
Regulatory constraints
The most recent example of this is Newcastle United, who following the acquisition by Saudi Arabia’s Public Investment Fund, have been unable to spend than what they otherwise could on bettering the club. Not only does the potential investment improve the team’s prospects of success and breaking into the “elite” bracket but it also construes the funding into the local community, which would otherwise create economic opportunities and jobs.
This is the model previously applied by Abu Dhabi United Group, the Gulf-based owners of Manchester City, who as part of their acquisition of the club and prior to the introductions and enforcement of financial fair play rules, had spent hundreds of millions of pounds regenerating the area and building infrastructure. This created tremendous localised economic benefits for Manchester and the surrounding area, which would not have been possible within the current regulatory framework, meaning much needed funding for a local community would have been stopped in its tracks.
Bottom Line
These arguments in favour of a less interventionist regulatory model – or at least, a revised one – resulting in a more even playing field while preventing reckless spending, must be balanced against the need to impose rules which allow clubs to spend more, or at least, provide an initial grace period for new owners, who could make a higher initial investment, following which a tighter cap on spending would be applied. Both the Premier League and the English Football League – and potentially, the incoming newly legislated for English Independent Regulator – must find a harmonised and well thought out middle ground, to ensure English football remains attractive to more investment, whilst encouraging sustainable spending and thoughtful governance across all the leagues for the ultimate benefit of their lifeblood – their communities and their fans.
Alberto Thompson
Author
Alberto Thompson is an acclaimed journalist, sports enthusiast, and economics aficionado renowned for his expertise and trustworthiness. Holding a Bachelor's degree in Journalism and Economics from Columbia University, Alberto brings over 15 years of media experience to his work, delivering insights that are both deep and accurate.
Outside of his professional pursuits, Alberto enjoys exploring the outdoors, indulging in sports, and immersing himself in literature. His dedication to providing informed perspectives and fostering meaningful discourse underscores his passion for journalism, sports, and economics. Alberto Thompson continues to make a significant impact in these fields, leaving an indelible mark through his commitment and expertise.
Paolo Reyna
Reviewer
Paolo Reyna is a writer and storyteller with a wide range of interests. He graduated from New York University with a Bachelor of Arts in Journalism and Media Studies.
Paolo enjoys writing about celebrity culture, gaming, visual arts, and events. He has a keen eye for trends in popular culture and an enthusiasm for exploring new ideas. Paolo's writing aims to inform and entertain while providing fresh perspectives on the topics that interest him most.
In his free time, he loves to travel, watch films, read books, and socialize with friends.
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