FFP Spells Doom for Clubs that are Not Financed By Debt

Supporters of Financial Fair Play believe that the financial restrictions set in place are a great set of measures to prevent soccer clubs from spiraling out of control and deep into debt caused by excessive spending. By putting a stop to excessive contracts that cannot be financed without more debt, UEFA and its supporters (mainly smaller clubs) believe that FFP creates a sustainable financial model. Yes, this is true to a degree, but how true is it? Teams can, and always will, find loopholes that will allow their club to spend excess money and have it not count towards the balance sheet that FFP regulates. These loopholes include money spent towards their youth academy and their facilities. At the end of the day though, FFP’s goal is to make sure teams do not overspend their way into financial failure.

This idea of preventing financial failure is more of a theory than an actuality. Think of these soccer clubs as huge corporations, such as car manufacturers or companies on Wall Street. They are simply too big to fail.  Yes, some of these mega companies have filed for bankruptcy, but ultimately, they are too big not to be bailed out. Soccer clubs are very similar because they are simply too big of entities to fail. Owners know this, and would take advantage of this idea because they knew that they could spend big on players and if their investment does not pay off, they will always have another opportunity to sign another player to a max contract.

But what do the owners think that do not finance their clubs by debt financing? Let’s look at Manchester City chairman, Khaldoon Al Mubarak, and his financial model. Manchester City does not use any debt to finance its expenses. It is strictly financed by ownership wealth. Mubarak takes great offence to FFP because he believes that he was running a sustainable business model because he never owed another outside source a penny. He was spending whatever he wanted because he had the money himself. By enforcing FFP, teams like Manchester City are put at a huge disadvantage because their previous strategy can no longer be used and their greatest advantage has now turned into a disadvantage.

Do you think that a financial model that does not use debt financing from outside sources is a sustainable model for soccer clubs? What would your reaction be if you were an owner that was never affected by debt but now have to comply with regulations that were put into place to help teams get out of massive debt?