Man City could be banned from Europe under fair play rules.

ANALYSIS: Why Manchester City face a struggle to avoid European ban




By Nick Harris

8 October 2010

Manchester City will struggle to avoid being banned from Europe by
Uefa from 2013 onwards because of £250m already spent on transfers that
still needs to be “processed” in their accounts in the next five years.

Uefa has confirmed that City will not able to accelerate the “writing
off” of this massive sum in next year’s accounts to improve their
chances of meeting the incoming Financial Fair Play regulations. The
club acknowledges privately that “a huge challenge” lies ahead to meet
Uefa’s break-even targets.

Q&A on FFP and the mountain that City face is here

Uefa’s head of club licensing, Andrea Traverso, the man in charge of monitoring, has told sportingintelligence (and The Independent) that any “wipe out” of historic spending “could be seen as a way to circumvent the rules, and that is not allowed.”

The FFP rules dictate that clubs must break effectively break even
from 2011-12 onwards, when FFP monitoring begins. Two seasons of
finances will be considered for entry into the Champions League or
Europa League in the 2013-14 season.

Initial losses averaging £19.6m per year will be allowed, but from
2012-13, losses will be capped at £13m per year (averaged over a
three-year period), and from 2013-14, be capped at £8.7m per year. (See
table below).

The size of City’s task is illustrated by the fact they made a loss
of £121.3m in 2009-10, and expect losses of £130m-plus in 2010-11. The
trend is hugely problematic and the transfer “backlog” is a damaging
part.

Because City won’t be allowed to clear that in one go, the £250m will
have to be amortised (spread out) over five years. In simple terms,
City will start every season between now and 2014-15 with a red hole in
the accounts averaging £50m per season – for players they already own –
before a ball is kicked. If they sign anyone else from now on, the
deficit will only get bigger.

Amortisation of transfer spending is a necessary requirement under
FFP regulations relating to British clubs. It makes no difference if
City have actually already physically handed over all the money to the
selling clubs for the players in. For accounting purposes, the fees need
to be amortised over the length of the players’ contract.

The £250m is an estimate calculated by The Independent from data
within City’s 2009-10 financial accounts, released last week, and has
been corroborated by sources with insight into City’s financial
situation. City’s net spending on players on players including Wayne
Bridge, Gareth Barry, Carlos Tevez and Yaya Toure among others since
June 2008 has been £332.6m. (Nb: gross spending much higher).

City hope to meet the FFP requirements by achieving giant leaps in
income, especially from Middle East firms; by playing Champions League
football for the next two years (a sizeable earner); and by producing
its own young stars for the first team and for sale in the near future.

But there are no guarantees of success – and other challenges on top.
The biggest of those is a wage bill that grew to £133.3m in 2009-10,
which alone was greater than City’s entire income of £125m. That wage
bill is expected to rise to around £160m in 2010-11; again that bill is
expected to be close to the club’s total income.

In 2009-10, the club’s operating losses – income minus operating
expenses, of which wages are the biggest single part – were £55.1m, and
will rise. The operating loss plus the amortisation value leads to the
overall loss (give or take a few other bits and pieces).

City argue, with some justification, that owner Sheikh Mansour’s
investment of hundreds of millions is rebuilding not just a club but a
community, with spending on everything from facilities to improved pies,
a better website and an academy aimed at nurturing home-grown players.
(No other club can better City’s figure of fielding seven full England
internationals in league games alone this season, albeit not all raised
in Manchester).

And if City exceed Uefa’s FFP limits solely because of spending
before the rules were published this Spring, punishment may be reduced
if not avoided.

But even City insiders acknowledge they have actively chosen to keep
on spending in 2010 – on players and wages – on the “if you don’t spend,
you don’t grow” principle.

But as one Uefa source said: “While many clubs have been moving
actively towards compliance, it is clear others are still deciding to go
the other way . . . the rules are clear, and when they apply, they will apply.”

As recently as last weekend, Uefa’s president Michel Platini, the
driving force behind FPP, said in an interview with the Italian
equivalent of the FT, Il Sole 24 Ore, that the FFP rules would be tightly monitored and enforced.

• 
  
• 
  
• 
  
• 
  

posted
on : Friday, October 8th, 2010 at 8:11 am

You can follow any responses to this entry through the RSS 2.0 feed.

You can leave a response, or trackback from your own site.



.