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UEFA Change Financial Fair Play Rules to Close ‘Chelsea Loophole’ on Long Player Contracts

30 January, 2023

Red Card Held Against Blue Stadium SeatsChelsea’s descent into mid-table mediocrity in the Premier League during the 2022/23 has been made even more surprising given that they have spent £430 million – yes, you read that correctly – on new players in the summer and winter transfer windows.

New owner Todd Boehly’s ambition, and bank balance, knows no bounds as he bids to reinvigorate the Blues. In the space of six months, he has sanctioned the signing of seven players priced £30 million or higher, with Raheem Sterling, Wesley Fofana, Marc Cucurella and Mykhaylo Mudryk all costing the top-side of £50 million alone.

All told, Chelsea have made 13 permanent signings and brought two players in on loan since the summer.

All of which makes you wonder what on earth the number bods at UEFA have been up to as Boehly splashes the cash, given that the governing body has previously claimed they are toughening up on Financial Fair Play breaches as football’s spending threatens to spiral out of control.

Well, maybe their alarm has finally gone off. UEFA have now revealed they will be closing the loophole that Chelsea, and others, have used to spend ludicrous sums of money without breaking FFP rules.

What are the Financial Fair Play Rules?

Accounting Charts, Magnifying Glass and Pen

It’s important to note that there are two sets of Financial Fair Play (FFP) rules that a club must adhere to: the Premier League’s and, for those competing in the Champions League and other European competitions, UEFA’s.

Premier League clubs are allowed to ‘lose’ £105 million over a three-year period, which takes into account transfer spending compared to commercial revenue. The Premier League can sanction those that breach these rules with fines and stiffer penalties, although points deductions are rare because the EPL doesn’t take their own rules seriously – hence why many of their clubs are in extraordinary amounts of debt.

Premier League clubs posted collective debts of €4.2bn in 2021 (excluding the €1.7bn Chelsea owed to now former owner).

Those figures would doubtless cause some eyes to water, but the full tale of borrowing is rather more nuanced.

Read analysishttps://t.co/G9S5rWrYD2 pic.twitter.com/iaRUrSBOMT

— Off The Pitch (@OffThePitch_com) June 22, 2022

As for UEFA, their updated FFP regulations are convoluted and confusing: a club is allowed to spend 90% of their revenue on transfers, wages and the like (reducing to 70% by the 2025/26 season), although they can lose €60 million (£52 million) over three seasons if the club’s owner foots the bill personally. Go figure.

How Have Chelsea Worked Around FFP?

Contract Signature Section

The calculations that determine who is satisfying fair play requirements and who is in breach are performed on a season-by-season basis.

So Chelsea aren’t being judged on that £430 million spend right now – instead, a player’s contribution to FFP is spread evenly across the course of their contract. So, if you signed a player for £60 million on a three-year deal, the contribution to FFP calculations would be £20 million per season.

And this is where Chelsea got smart….

They started offering extensively long-term deals to their new signings. Mudryk was given an eight-year contract, while the likes of Wesley Fofana and Noni Madueke have been handed seven-year contracts. Benoit Badiashile and David Datro Fofana settled for six-and-a-half year agreements, while 28-year-old Sterling will be at Stamford Bridge for five years.

This quirk, allied to the fact that transfer fees for sold players are added in full to a club’s accounts for that season, has given Chelsea an edge in the market.

But UEFA have cottoned on to their scheme, imposing a five-year limit over which a transfer fee can be spread for FFP calculations.

And there may be further complications for Chelsea. By locking players into such long-term deals, that makes it very difficult to sell the individual if things don’t work out for them in London – few clubs are going to match such contractual terms.

The implication is that they may be forced to sell under-performing players in cut price deals – or risk them rotting in the reserves while being paid a handsome weekly sum.

Where Do Football Clubs Get Their Money From for Transfers?

Businessman with Football and Laptop

So where does Todd Boehly get his money from? Did he have £430 million sat in his bank balance?

Of course not. Most of it will come from Chelsea’s own coffers, with the perks of being a global brand meaning you make rather a lot of cash from sponsorships, commercial partners and merchandise sales.

There’s also the handsome TV rights deals that the Premier League signs – the cash for those gets dished out equally to each club, plus prize money. Given Chelsea’s consistent top-four finishes, that also pays a pretty penny.

There’s future funding and debt financing too. That basically allows football clubs to borrow money based on future revenues, with the funds then splashed out on transfer fees and player wages. It doesn’t affect Chelsea so much, but explains why teams relegated from the Premier League have such a financial black hole to fight against when losing the riches of top-flight action.

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