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Football League says ‘yes’ to Financial Fair Play

This is a story from the FSF archive – the FSF and SD merged to become the FSA in 2019.

The Football League is to implement Financial Fair Play (FFP) regulations in all three of its divisions, after Championship clubs voted in favour of a breakeven approach based on UEFA’s Financial Fair Play regulations.

From the beginning of next season, the Championship will join League 1 and League 2 clubs in applying rules that exert greater control over club expenditure. The decision to adopt FFP regulations follows a strategic review by The Football League Board which identified the state of club finances as the organisation’s greatest challenge. 

League Chairman, Greg Clarke, said: “On the pitch we have three exciting, competitive divisions with crowds at their highest levels for 50 years.  But that success isn’t necessarily being reflected on our clubs’ balance sheets and we have to remedy that situation or face an uncertain future.

“I’d like to commend the Championship clubs for the courageous decision they have taken today.  It means that for the first time, all 72 Football League clubs have agreed to take concerted action towards controlling their financial destiny. Whilst we cannot promise that these rules will deliver results overnight, they will begin to lay the foundations for a league of financially self-sustaining clubs.”

The FSF’s lead on football governance Rick Duniec, said: “We congratulate the Football League and its clubs for choosing this path. It’s an important step in the right direction to protect our clubs, improve financial responsibility, and hopefully prevent financial wreckages littering football’s landscape in future.”

Financial Fair Play in the Championship:

  • FFP in the Championship will require clubs to stay within defined limits on losses and shareholder equity investment that will reduce significantly across a five-season period. 
  • Permitted losses will reduce from an acceptable deviation of £4m for 2011/12 to £2m by 2015/16, with additional investment in certain areas of club infrastructure being excluded (e.g. youth development and community programmes).
  • The permitted level of shareholder equity investment will reduce from £8m for the 2011/12 season to £3m by 2015/16.
  • Clubs will be required to provide annual accounts to The Football League by 1st December, covering the previous playing season.

Failure to stay within the defined limits will lead to the imposition of sanctions. The sanctions will vary depending on whether the club was ultimately promoted to the Premier League, remained in the Championship, or was relegated to League 1.
   
Clubs promoted to the Premier League will have to pay a ‘Fair Play Tax’ on the excess by which they failed to fulfil the Fair Play requirement ranging from 1% on the first £100,000 to 100% on anything over £10m. This money will be distributed equally among clubs that complied with the FFP regulations for the season in question. 

Clubs remaining in the Championship will be subject to a transfer embargo until they are able to lodge financial information to demonstrate they comply with the FFP regulations (either for the previous reporting period or a future reporting period). Clubs relegated to League 1 will not be entitled to any payout derived from the Fair Play Tax and will be required to comply with the FFP rules in operation in that division.

Those relegated from the Premier League will not be subject to sanctions in their first season in the Championship, as long as they have met their financial obligations under Premier League regulations. They would, however, be subject to the potential of a Fair Play Tax if they achieved promotion in the first season in the Championship whilst not complying with the FFP regulations.

The first reporting period will be for the current playing season (2011/12), however sanctions will not be applied until the 2013/14 reporting period in order to give clubs a sensible period of transition.

Financial Fair Play in League 1 and League 2:

  • League 1 and League 2, clubs have chosen to implement the Salary Cost Management Protocol (SCMP) first used in League 2 in 2004/05, although it will operate at different thresholds in each division.
  • The SCMP broadly limits spending on total player wages to a proportion of each club’s turnover, with clubs providing budgetary information to The League at the beginning of the season that is updated as the campaign progresses.
  • Any club that is deemed to have breached the permitted spending threshold will be subject to a transfer embargo. Wherever possible, The League will seek to tackle the issue ‘at source’ by refusing player registrations that take clubs beyond the threshold.
  • At the beginning of the current season, League 2 clubs reduced the permitted spending threshold to 55% from 60% and this figure will continue to be operated next season. 
  • League 1 clubs are currently operating a ‘pilot’ of the SCMP with clubs complying with a 75% threshold but with no sanctions being applicable this season. This threshold will reduce to 65% in 2012/13 and 60% in 2013/14 with sanctions (transfer embargoes) being applicable in both seasons.

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