What is FFP? How Financial Fair Play is affecting Man Utd and Arsenal in January transfer window
THE January transfer window is in full swing, with many Premier League clubs looking to strengthen ahead of the business end of the season.
But some clubs may have to be more careful than others due to FFP restrictions – and SunSport has all the details why.
What is FFP and how will it affect Premier League sides during the January transfer window?
Mikel Arteta admitted that signing a new striker in the January transfer window was unlikely, many Arsenal fans blamed three things – F, F, P.
FFP – or Financial Fair Play – is a concept originally introduced by Uefa in 2009, officially to prevent clubs from spending money they could not afford.
Yet many critics have rounded on the system, accusing it of being a protective instrument, drafted by the so-called “legacy clubs” to prevent insurgent and wealthier clubs from buying their way onto the top table.
The Premier League introduced its own FFP regulations which came into effect for the 2013-14 season and which, while less stringent than Uefa regulations, they do impact on club spending.
Under the current Prem “Profitability and Sustainability” regulations, clubs who are constant members of the top flight for a three-year period are allowed total losses of £105m over those three campaigns.
But it is not as simple as totting up outlay and income.
The biggest outlay, of course, is transfer fees. The 20 Prem clubs spent a total of around £2.4bn in last summer’s transfer window.
Yet that does not mean they “spent” that money as far as the Prem rules are concerned.
Transfer fees are “amortised” over the length of the contract, so, for example, a £100m fee for a player who signs a five-year deal is amortised at a cost of £20m per season for each of those five campaigns.
Chelsea’s splurge in the summer once again saw them offering deals of up to eight years, spreading the P&S “cost” of the deals even further, although club chiefs agreed to close that loophole and amortise all deals across a maximum of five years going forward.
Of course, that is storing up trouble if the players do not work out, as the “loss” each does not reduce as quickly.
On the other side, all transfer fees received can be accounted for in full – minus what is left on the initial amortised cost.
Using Chelsea as an example, they could bank the full combined £82m received for the home-grown Mason Mount, Ruben Loftus-Cheek, Callum Hudson-Odoi and Kwame Ampadu.
But while Arsenal paid £65m for Kai Havertz, the “profit” was around £40m as he still had two years on his initial Blues contract, while they would have made a small loss on the £17m sale of defender Kalidou Koulibaly.
Wages to the first team squad and managerial staff also have to be factored in, as well as agents’ fees and any compensation payments to sacked bosses.
But clubs can deduct cash spent on stadium infrastructure, academy costs, their women’s teams and, until last season, the impact of the pandemic.
After Everton received a 10-point penalty for breaching the regulations – the Toffees are appealing the sentence but admitted guilt – other clubs are aware of the potential repercussions.
It is those concerns that appear to be an issue for Arsenal and Newcastle in particular this month.
The Gunners, who had a net spend of around £140m in 2022-23, lashed out nearly £200m this summer to land Declan Rice, Jurrien Timber and Havertz, although they recouped £70m from sales.
Newcastle, under their new Saudi owners, had a net spend of around £170m last season and a further £95m in the summer.
In simple terms, a number of clubs are worried they might break the spending limits – and do not want to suffer the consequences, forcing a degree of constraint in this window.
Both Newcastle and Arsenal also have to contend with new Uefa spending rules, which not only limit losses to £77.7m over three years but also restrict the total outlay on transfers and wages to 90 per cent of a club’s total income this season, reducing to 70 per cent by 2025-26.
Meanwhile, Prem lawyers and accountants are combing their way through the books presented by all 20 clubs before the end of last year to discover if any teams breached the spending limits for last season.
Under new League rules agreed by the 20 clubs in the summer, any charges must be brought by next week with commission hearings that would be completed by the start of April.