UEFA's new financial regulations and its implication on Premier League clubs
Arsene Wenger’s model of football may not be one loaded with trophies, but it is certainly getting global recognition. The model was recently held up as an example by UEFA, as it tries to implement the new financial regulations on European clubs.
The new regulations, which will come into effect from next season, stipulate that clubs’ must break even on a three-year rolling period or they face a ban from participating in continental competitions.
Arsene Wenger’s approach may be meticulous but it surely is a sensible one, as it has helped the London club strengthen their finances and build a solid platform for financial growth. Arsenal moved to the Emirates Stadium in 2006, and within four years their turnover has reached 300 million pounds with reported pre-tax profits of 35 million pounds in the last fiscal year.
Ten years ago Arsenal were reporting less income than rivals Chelsea and Newcastle, but last year their reported profits were better than Chelsea’s and more than double Newcastle’s. In the last few years the English Premier League has seen an influx of wealthy businessmen acquiring football clubs, and embarking on never-seen-before spending sprees on players in the transfer market. That will leave some of the top Premier League clubs at a risk of failing to qualify under the new UEFA regulations.
With operational losses of 12 million pounds in the last year, Manchester City appear to be worst effected. City embarked on an unprecedented spending spree, since the club was taken over by Sheikh Mansour in 2009, and now appear to be in dire straits in the wake of the new regulations.
Although City’s manager Roberto Mancini admitted last week that his spending spree has ended with the signing of Edin Dzeko, but the damage has already been done, and drastic measures need to be taken over the coming years if they are to break-even in the future.
There will however, be some leeway in the UEFA regulations, as clubs will be allowed to overspend by 37 million pounds. This amount will be reduced on a sliding basis for each of the following three-year reporting period. The regulations however, put no restrictions on spending on youth teams and stadium infrastructure.
As things stand at the moment, Chelsea and both the Manchester clubs will be placed under monitoring as they are the worst hit financially. However, Manchester United have insisted that they would be able to reach a balance in their spending in the coming years.
Manchester United was taken over by the Glazers in 2005, and since then the Americans have put the club under a debt of over 700 million pounds, with interest payments on loans worth more than 50 million a year. United were able to report an operating profit of 90 million pounds last year, but a large part of that was due to the sale of Cristiano Ronaldo to Real Madrid for 80 million pounds.
Chelsea also appear to be in some trouble, as their spending spree has been out of control over the past couple of years, but some sort of order has been restored over the last two years. Also a number of high profile departures like Joe Cole, Michael Ballack and Juliano Belletti have brought the Blues wage bill down considerably.
There are a total of 655 clubs operating in the continent, and more than half of those clubs reported an operating loss in the last fiscal year. The combined deficit of Europe’s 53 nations stood at over one billion pounds.
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