Soccer’s richest clubs sidestep salary caps in new cost controls
By Tariq Panja
The biggest reforms of European soccer’s financial controls in a generation will stop short of creating U.S.-style salary caps to restrain teams’ spending, and instead will enact rules that are unlikely to stop the continent’s richest clubs from buying up the best talent and winning the most coveted trophies.
UEFA, European soccer’s governing body, has spent more than a year in talks with a representative group for elite clubs about a new model to replace its so-called financial fair play rules, the cost-control mechanism that has for a decade sought to limit team expenditures as part of an effort to promote competition.
UEFA has finally alighted on a replacement. Teams’ soccer-related spending, according to people briefed on the regulations, will not be able to surpass 70% of their income, a regulation that appears watered down from the strict salary cap that had long been championed by UEFA’s president, Aleksander Ceferin.
Ceferin had for at least five years discussed imposing salary caps as a way to address European soccer’s growing wealth gap. But faced with the complexities of European employment law and deep-pocketed opposition, UEFA has abandoned the concept of a hard cap and, according to three people familiar with the proposals, settled on a proposal that — after a three-year implementation period — will require teams to keep their spending within a strict ratio.
The rules will be added to UEFA’s rule book after a vote of its executive board on April 7. They will also be renamed, with UEFA looking to move away from FFP, or financial fair play, a term coined under Ceferin’s predecessor, and instead adopt a more prosaic title: financial sustainability regulations.
In more than a decade of use, the current financial fair play system has proved more adept at producing critics than fairness. Smaller teams complained that they were punished for rule breaches while bigger, wealthier teams were often able to avoid the most severe penalties. The biggest and richest clubs, meanwhile, objected to the financial controls as an unfair curb on their ambitions.
Talks about changing the regulations accelerated during the coronavirus pandemic, when shuttered stadiums and rebates to television broadcasters caused financial unease for teams big and small. UEFA reported in February that an estimated 7 billion euros (about $7.7 billion) had been collectively wiped off clubs’ balance sheets during the pandemic.
Despite their lofty nod to sustainability, the rules changes may in fact entrench the growing hegemony of wealthy English teams, which benefit not only from the highest domestic television revenues in global soccer but also access to the wealth of some of the richest owners in sports. In last season’s Champions League, two English teams met in the final for the second time in three years.
The move to bring soccer-related costs like wages and transfer fees into a tight ratio will be a challenge for many major teams outside England, the vast majority of which have struggled to maintain fiscal discipline as they have tried to keep up with rivals who play in the Premier League.
In Italy, for example, wage costs alone often exceed the ratios being proposed by UEFA. In Spain, which has some of the strictest financial rules in soccer, the powerhouse team Barcelona was unable to retain star player Lionel Messi last year because doing so would have breached a cap imposed on the team by the league.
Discussions about the ratio UEFA should impose on clubs were complicated by conflicting interests. Some teams, particularly those backed by wealthy owners used to pumping their own cash into buying success for their teams, had wanted the limit to be as high as 85%. Others, including several German clubs, whose balance sheets are typically kept under control by a system in which members retain a majority stake in ownership, argued for an even lower limit.
To allow the teams to adjust to the new regulations, the new rules will be imposed over time: Clubs will be able to spend up to 90% of their revenues before that figure will be brought to its permanent 70% level within three seasons. According to the proposed rules, teams may under certain circumstances be allowed the flexibility to spend up to about $10 million above the ratio, provided they have healthy balance sheets and have not breached regulations before.
UEFA’s critics have long complained that while they have had cost-control rules in place, they have often failed to punish the biggest teams. In recent years, Manchester City and Paris St.-Germain — teams bankrolled by wealthy Gulf states — have been able to avoid severe penalties on technical grounds.
There has also been little clarity around the current punishment mechanism, and concerns about UEFA’s appetite to take on the hardest cases. Several long-standing members of the panels overseeing the financial rules have either been replaced or walked out in recent years. Sunil Gulati, the former U.S. Soccer president, last year was named chairman of UEFA’s revamped financial control panel.
Under the new system, UEFA will have the right to impose both sporting and financial penalties for rule breakers, including fines, threat of expulsion and, for the first time, an option for demoting teams between the three competitions it currently operates. A team in the Champions League, for example, could be relegated to the second-tier Europa League for a financial rules breach.
Another measure may also include point deductions under the revised format of the Champions League and the Europa League: Starting in 2024 all participants will be placed in a single league table during the first phase of the competition. And the regulations also will require greater scrutiny of sponsorship deals amid claims that some teams have benefited from inflated agreements with companies linked to their ownership groups.
UEFA is talking about the proposals with several clubs that are already on performance plans because of their poor financial records. Those teams, as many as 40, made so-called settlement agreements with the governing body in order to keep participating in their tournaments.