YORK CITY SOUTH
Financial Fair Play Policy
Financial Fair Play Policy
2012/3 is the first season that The Football League has implemented a financial fair play policy (FFPP). In the case of The Championship, it will take at least 3 seasons until it is fully implemented.
The Football League's web site provides a detailed explanation. It is summarised below along with some of the implications.
The general idea is to limit club’s expenditure to prevent financial ruin whilst trying to ensure all clubs operate from a level playing field.
A word (or two) of warning. Given its implementation has just started, it remains to be seen how FFPP will be fully implemented, how its rules will be interpreted and how rigorously the proposed sanctions will be applied.
A final word of caution. This is based on one lay man’s understanding and interpretation of FFPP.
The Championship - Losses
The Championship FFPP works on a similar model to UEFA’s model whereby a club needs to demonstrate that they stay within pre-defined limits on their losses (and shareholder equity investment).
Sanctions are applicable only from the start of the 2014/5 season and not on any losses from seasons prior to this season.
Division 1 & 2 - Salary Cap
Here, a different model, a player salary cap has been initiated. However a voluntary, sanction free system has operated in Division 2 since 2004/5.
Clubs are permitted to spend a percentage of their turnover on player salaries.
The bigger a club’s forecast turnover they more in real terms they can spend on salaries, although each club is capped to the same level in percentage terms.
In Division 2 the salary cap is 55% of turnover.
In Division 1 the cap is 65% and reduces to 60% in the 2013/4 season.
In monetary terms, a club with twice the turnover of another can spend twice as much money on salaries although in percentage terms, they both spend the same percentage.
In the summer, prior to the start of the season, each club needs to provide a turnover forecast to The Football League for that season and this is what the club must use to plan their salary cap.
After the season has finished, each club needs to provide a balance sheet to The Football League by December 1st of the same year.
Given Football League funding, a promoted club will gain greater funding and so will probably have capacity to increase its total wage bill whereas a relegated club may have to shed payers to remain within the cap.
In The Championship, sanctions include a transfer embargo and / or fines for teams promoted to The Premiership. The fines are expressed as a percentage of the breach but are fairly small in comparison to the extra income arising from a place in The Premiership.
It will be interesting to see how QPR cope back in The Championship with their bloated squad.
In Divisions 1 and 2, the sanctions are a transfer embargo.
There is talk that sanctions could be extended to include points deduction and even relegation, but at this stage, nothing seems set in stone.
Turnover / One Off & Exceptional Items
"Exceptional" items (e.g. loss of major sponsorship, footballing bad debts and youth / community investment) are excluded from permitted turnover.
The system seems to make no allowance for one off items (e.g. City’s 2 Wembley appearances in 2011/2 or a good cup tie or a big money transfer). I wouldn’t expect a club’s turnover forecast would ever include such one off items as these. I would expect such items to hit the balance sheet in the season in which the event happens meaning a club could see a spike in that season’s turnover / salary cap limit, but it would drop out in the following year meaning there is very limited room to splash out.
Implementation - Now
Given 2012/3 is the first season, I wouldn’t expect any non-compliance to be confirmed until after December 1st 2013 at the earliest.
Additionally, I’m not aware of The Football League rejecting any forecasts provided for the 2012/3 season, although I could see many clubs saying they’re providing confidential information which shouldn’t be in the public domain, which itself makes a bit of a mockery of any transparency around the process.
Implementation - Sanctions
It remains to be seen how rigorous The Football League is in both challenging the turnover forecasts provided and then applying sanctions to any club that doesn’t meet the criteria.
Indeed, a team promoted from The Championship with a loss of five million pounds can still be promoted and incur a three million pound penalty fine. Given the one hundred million pounds or so for a season in The Premiership, I don’t think any club would care about such a paltry fine.
Even in Division 1 and 2, clubs might be tempted to flout the rules in the hope of greater success on the field.
Whilst I’m not an expert in the field, I believe both Rugby League and Rugby Union operate salary caps, in neither sport do you hear of the caps being breached regularly. When they are, penalties are usually minimal.
Impact On York City - Now
To my mind, City’s 2011/2 successes are what they say, 2011/2 successes and so should have no impact on forecasted 2012/3 turnover.
I would expect our forecasted 2012/3 turnover to include 23 home league games, sponsorship / funding arising from our Football League status and all other commercial revenue we can generate.
Indeed, its maybe already having an impact as Gary Mills has stated that in the January 2013 transfer window, he needs to free a space in the playing squad before he can bring in a new player.
Impact On York City - The Future
Given our small ground capacity and therefore small home attendances (see link showing average attendances)then City will never be able to provide a high forecast (unless miraculous off the field revenue streams are unearthed).
For example, this season (2012/3), Bradford City’s home crowd averages over 9,900 against our 3,800. This gives The Bantams scope for a much higher turnover and therefore much higher salary cap limit.
Whilst mid table in terms of attendance in 2012/3, any promotion or drop in form would probably see us with a lower position in our division’s average attendance table with the subsequent knock on effect on turnover / salary cap when compared to our rivals.
As above, any promotion should lead to more funds being available for player salaries but equally any future relegation from Division 1 back into Division 2 might mean we’d have to release players to remain within the cap. One drawback might be that the club is reluctant to enter into lengthy contracts on promotion for fear of breaching the cap if relegated.
The Football League
In 2011/2 we spent 96 percent of our income on football costs, the vast bulk being player wages. In Division 2, we are limited to 55 per cent.
If our income stays the same, we are talking about almost halving our player budget.
OK in D2, we will have a bit more income. Definitely additional sponsorship and Football League funding and hopefully bigger gate receipts. We'll be short of a quarter of a million from our cup runs to Wembley.
That means to fit the salary cap, we will probably have to reduce our total wage bill. Note Gary Mills and his statements in the January 2013 transfer window. Expect some shocks in the retained list in April.
It all starts to help to explain our recruitment policy for our return to league football.
Add to that our 2011/2 financial results and we are stuffed. We lost nearly half a million despite 2 Wembley successes. Even with Football League funding of £665k (compared to well less than £100k from Blue Square plus £5k (home) / £1k (away) TV money per televised game), when you take away the 2 Wembley trips we are set fair for a lose in 2012/3, get out those scissors and trim the squad. Drastically. Either in terms of quality or quantity, take yuor pick.
Happy days ahead.
Hope that all makes sense.
To achieve a bigger playing budget (and hopefully make it easier to succeed on the pitch), a club needs either a big home average attendance or good off the field revenue streams.
However, I’m struggling to understand how Fleetwood can pay Jon Parkin a reported eight grand a week, run a large squad and then sign 3 players on the first day of the January 2013 transfer window and stay within the salary cap.
Without inferring anything, in the same way that big clubs have tried to use image rights as a means reducing a player’s tax liability, I’m sure clubs are looking into ways of reducing the amount of spend which is deemed to be player’s salary. Anyone want seven grand a week for impersonating a tub of lard?
What FFPP does do, is to give clubs a framework in which to control their spend on player wages and to operate in a diligent fashion whilst the weak sanctions will permit unscrupulous clubs to continue as they are.
Make your own mind up where York City operate.
Further reading (1): BBC - Battle to stay in Division 2
Further reading (2): Sophie Hicks - The price of relegation
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