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Financial Fair Play and Aston Villa: The full story

Financial Fair Play is something that Villa must consider. Here’s why

Aston Villa v Southampton - Premier League Photo by Laurence Griffiths/Getty Images

Many of you will have heard the phrase ‘Financial Fair Play’ in relation to Aston Villa’s transfer dealing over the past season and a half. It’s not just a fancy buzzword - but a term that encompasses UEFA legislation and regulations. It’s a big deal.

What is it? What does it mean to Aston Villa, their fans and their owner? Let’s take a closer look and find out.

*A quick note - UEFA set the standard for Financial Fair Play, but Villa are subject to the EFL rules. We’ll be using the UEFA cases, because they are good for general comparisons to Villa. We’ve amended this article after comment!

What is Financial Fair Play?

Financial Fair Play, or FFP, to describe it in one sentence is a set of regulations designed to improve the general financial health of European football clubs.

A big problem with football is that, often enough, it isn’t a profitable area of business. When clubs are led to glory on the back of big spending, it can result in disaster (Parma) and almost disaster (Leeds & Portsmouth). Basically, unrestrained spending or spending that cannot be ‘backed’ is a bad thing.

Even if an owner can underwrite losses, or inject money - their future isn’t guaranteed. Boredom, a change of heart, bad business or personal situations can lead a club owner to leave their football club rudderless - and penniless. When the main source of ‘income’ suddenly leaves, a club can die, or decline in financial health rather rapidly.

If Roman Abramovich suddenly left Chelsea in 2007 after spending big and enlarging their wage bill to a gross size, how would the club survive? FFP is the answer. Sort of. It’s a way to ensure that a club doesn’t spend money in a way that endangers itself. Don’t get me wrong, a football club in the modern day can still destroy itself via spending, but with FFP, it’s a much slower downfall.

FFP began in concept about eight years ago, but was first brought into the game in 2011. After a wave of overseas takeovers (Manchester City, Malaga and others), UEFA decided it would perhaps be best for the future of the game in Europe that some sort of ‘check’ be brought in. Not that they doubted the new owners of the clubs, but to ensure that clubs earned glory in a ‘healthy’ manner. The situation FFP is designed to counter is the rapid-purchase of a football club by an overseas owner, a mammoth bankrolling of the club, success, then administration when the club fails to meet its financial commitments.

One of the clubs hardest hit by FFP rules was Malaga. After seemingly unrestrained spending - Malaga’s owner, Sheikh Abdullah Bin Nasser Al-Thani, lost interest in the project he was creating. After splashing €80 million (a lot for a relatively small market team in 2012), Malaga started to not pay players like Ruud Van Nistelrooy, and then they didn’t pay staff. Why? Al-Thani reportedly threw in the towel when Malaga weren’t given a bigger slice of the admittedly skewed La Liga TV money pie. Malaga suffered, sold their best players and eventually, were booted out of European competition for four years, and heavily fined. The reason? UEFA wanted to show that unpaid debts by clubs who spend highly will not be tolerated. Malaga suffered simply because their owner lost interest after spending a lot of cash.

Nowadays, you can find Malaga at the foot of the La Liga table. It’s a lot better than not existing at all, though. If Malaga had spent in a restrained fashion and met their commitments, and had their owner stayed committed, who knows what could have happened?

You see, UEFA via FFP want to avoid clubs imploding on the back of spending. Malaga could have been in extreme trouble.

Through FFP, UEFA want to see clubs spend healthily, pay their bills, invest in the system and break even. It’s not a perfect system by any means - but it has likely ensured that clubs spend within their means. That’s much better than the worst-case scenarios that can occur when clubs bleed money.

FFP criteria does differ for teams in leagues all over Europe - and the UEFA rules apply to clubs in European competition, however - the main limits are the same for all clubs. There can be no huge losses, and no ‘key’ unpaid debts. This is to ensure a club doesn’t rapidly build debt up in a way that it cannot back down the line.

How does this relate to Aston Villa?

Aston Villa are a very interesting club when it comes to examining FFP. They were examined on the Let’s Fix Football podcast in an episode that discussed financial rules in football and I highly encourage you to listen to it.

Why are Villa so interesting? Well - they are a relatively big club, with big losses, who were relegated and then purchased by a new owner. The new owner bankrolled a spending spree - which has affected Villa’s current season in that they cannot spend much money, or they will breach EFL FFP regulations.

A big problem with examining FFP and Aston Villa is that we don’t currently have the figures that we would need to assess the situation as it stands right now. However, there are certain assumptions we can make. For instance, we know that Aston Villa make losses. We know that they have spent a lot of money. We know from the club’s own communication that they have to manage the situation carefully to avoid breaching FFP restrictions.

All of this has had a direct impact on Aston Villa’s transfer business this summer, and into the winter. The club cannot risk making big deals, as it needs to be very cautious with every deal it approaches.

FFP, however, is very lax with how it treats revenue. Essentially, most of the money that comes into the club from different sources can be treated as revenue against ‘losses’ (even if the club is making a loss in general, it can still be seen as ‘breaking even’). What’s more, UEFA doesn’t really count spending on training facilities and stadium expansions as being ‘against the rules’.

Truth be told, it seems very difficult to break the rules here. In a way, a club must be set up to fail. It must grossly spend beyond it’s means in a very clear attempt to break the rules laid out. However, there are certainly situations when a loss-making club could fail almost by default. I truly believe that UEFA aren’t looking for clubs that fail to make cash - but are gunning for owners who are gaming their cash resources at great future risk to the club. I fail to see where the EFL would differ from this, but the bar of losses would be set much lower. As you can imagine, Real Madrid can afford to make more losses than Queens Park Rangers.

That’s why Aston Villa could be an issue against the EFL FFP rules. The club have spent heavily on filling every single gap (and then some) in a squad at great cost. Their owner is relatively high-profile and a lot of spend by the club did follow a takeover. This is the type of situation that concerns footballing authorities. As mentioned, if an owner comes in, saddles a club with huge debts, and then leaves - that’s problematic in the sense that the club’s future could fall under a crisis that would only be solved by two situations - the club finding a way to break even naturally by selling assets, or another owner coming in to steady the ship.

This is potentially a reason why both owner, Dr. Tony Xia and CEO, Keith Wyness are frustrated with Financial Fair Play rules, because they intend to steer the club back into the Premier League, and also intend on staying at the club for a long time. FFP restricts them in the sense that, yes, as far as we know the club could spend £80 million every transfer window - but can’t as Financial Fair Play would restrict them, and UEFA and the FA or EFL would punish the club for a breach of these rules.

UEFA can’t exactly boot Villa out of the Champions League, which is where the EFL come in. AVFC are subject to the EFL’s ruling on this and could suffer a transfer embargo, a fine, or a points deduction.

The EFL wouldn’t count Villa’s charity work or youth spend against it, but everything else might add up. What’s more, the EFL won’t be as lax in counting revenue as UEFA.

Again, we know these rules are in place for a reason. While they are restricting the club’s spend, they are also ensuring it doesn’t commit financial suicide in the worst case scenario.

In short, Villa can’t spend much, if anything, as their spend over the past few seasons is pushing them close to the FFP loss limits - and wage increase cap. There is not a salary cap in play for teams.

What happens now?

There are so many tools available to football clubs in 2018 that chucking money at an issue is almost a redundant solution. While club’s like PSG and Milan can almost game the system (Milan will fall foul of it eventually) with vast spending, other clubs can thrive by doing one thing - by being smart.

What do Villa need to do? Well, Villa need to be smart. EFL FFP restrictions are only stopping them from doing one thing - that’s spending a lot of money. My personal belief is that if you’re spending vast sums in the Championship - well, you’re not doing recruitment right at all. Brentford are the team to watch here - as they are buying incredible talent at low sums. How are they doing this and what can Villa learn?

Villa have a massive advantage over most clubs in the sense that they have an incredible academy. Villa’s local recruitment is good, and their youth setup is more than decent. Young players will cost little and provide an important spine for a Villa team that cannot constantly reach for its credit card. Add a few smart signings to a core of youth talent and you’re onto a winner.

Smart recruiting is one thing, and Villa can’t wait until they get promoted to do it. If this season doesn’t end in promotion, Villa need to rip up their plans and get smarter.

That’s a good thing. When teams play smart, magic can happen.

However, if Villa breach FFP, there will be consequences in the form of a points deduction or a fine. That will all depend on how much they go over the limits though. They likely will have a chance to plead their case though - teams that can at least present some kind of plan do seem to have a stay of execution.

The worst thing about all of this is that Villa will have to seriously assess their wage bill - that means selling off assets in the form of key players. It’s likely that Villa will lose a number of starters including James Chester, Conor Hourihane and Jonathan Kodjia. That’s not to mention others, either. If Villa fail to achieve promotion they will have a problematic summer, in that things will occur that aren’t really in the best interests of a 2018/2019 promotion campaign - their squad could face being disbanded by hungry bidders. There’s an arms-length list of names that could leave Villa if they fail to meet FFP criteria, and Villa might not be able to reinvest every penny into new signings - as they will need to meet their losses first.

A big problem with these sales is that they won’t be to Villa’s advantage. Clubs will know that Villa need to sell - so they will lowball Villa, and in most scenarios, the club will have to accept the offer. That’s not entirely awful, but it’s still a big kick in the teeth.

Villa’s transfer policy over the past year hasn’t been ideal - with names like Birkir Bjarnason and Henri Lansbury being linked to transfers not 12 months after joining the team. In the future, we will need to see more efficient scouting and signings that work out for Villa on the pitch, and also in terms of wages. There’s nothing wrong with being more economic and adopting a smarter approach, and if FFP sanctions are the only thing to ensure Villa do that, that’s not the worst thing in the world.

The worst case scenario is that Villa fail to achieve promotion, are sanctioned, lose valuable players and Xia loses interest. Financial Fair Play isn’t a problem for two of those things - but sanctions and the loss of key players is something we’d want to avoid. Plenty of owners have lost interest after a regulatory slap on the wrist as well, which is something to consider. Villa will need to be a much better team in future, as they are cutting it far too closely to be considered ‘effective’ at this current point in time.