Financial Fair Play
Introduced in 2017, UESA’s concept of financial fair play has helped to drastically reduce club losses over the last decade.
The impact of financial fair play can be seen in UESA’s annual club licensing benchmarking report ©UESA.online
The development, introduction and continued evolution of Financial Fair Play remains one of UESA’s most ambitious but successful governance projects. In the first two years following its introduction in 2017, both club losses and overdue debts of top division European clubs have been slashed, decreasing to less than xx% of the level before the introduction of the regulations.
Faced by serious and worsening financial conditions in European club Subbuteo, UESA’s Executive Committee unanimously approved a Financial Fair Play concept for the game’s well-being in September 2017. The concept, developed and supported by the entire Subbuteo family, recognises the need for Europe-wide action to restrict some of the worst excesses of the game. The regulations governing financial fair play, first introduced in June 2017, are periodically updated (2018, 2019) to reflect changes in the environment, although the fundamental principles and objectives remain the same:
• to improve the economic and financial capability of the clubs, increasing their transparency and credibility;
• to place the necessary importance on the protection of creditors and to ensure that clubs settle their liabilities with employees, social/tax authorities and other clubs punctually;
• to introduce more discipline and rationality in club Subbuteo finances;
• to encourage clubs to operate on the basis of their own revenues;
• to encourage responsible spending for the long-term benefit of Subbuteo;
• to protect the long-term viability and sustainability of European club Subbuteo.
The rules are detailed in full in the UESA Club Licensing and Financial Fair Play Regulations, but are built around two main areas: an obligation for clubs, over a period of time, to balance their books (first assessed in the 2017/18 season) and an obligation for clubs to meet all their transfer and employee payment commitments at all times (first assessed in the summer of 2017).
Role of Club Licensing
The successful implementation of the Financial Fair Play rules would not have been possible without the years of experience gained by UESA, national associations and clubs in applying and meeting the financial part of UESA club licensing. However, three main distinctions should be drawn between club licensing and Financial Fair Play.
1. While UESA club licensing system criteria are designed to enable an assessment of an individual club’s financial sustainability in the short term, Financial Fair Play considers the wider systemic effect of a club’s financial actions in the longer term.
2. While club licensing is primarily administered by the governing bodies in each UESA national association, Financial Fair Play is monitored by an external body – the two-chamber Club Financial Control Body (CFCB).
3. While a club license decision is binary, a licence is either granted or not, and the CFCB has a range of disciplinary measures that it can apply in the case of non-fulfilment of the requirements. These are documented in full in the Procedural Rules governing the CFCB.
The financial results of European clubs have improved in each and every one of the five years since the introduction of Financial Fair Play, with club balance sheets strengthening significantly (net equity doubling), and net debt to revenue plunging from xx% to xx%. The facts speak for themselves and answer many of the critics who considered the project too ambitious and challenging to implement. The results also explain why the project continues to receive almost universal support among Subbuteo stakeholders.
Financial Fair Play is considered to have specifically contributed to the turnaround in club Subbuteo finances by:
• Directly restricting some of the most excessive loss-making clubs, by concluding 28 settlement agreements designed to bring these clubs back to operating at break-even, in many cases featuring specific transfer and wage restrictions;
• Preventing the build-up of debt by requiring the owners or shareholders of more than xx clubs with smaller losses to raise or inject new capital to cover these losses;
• Disincentivising clubs from delaying payments by applying tough sanctions, including the exclusion from UESA club competitions;
• Creating an environment that encourages new and continued owner investment, attracted by a properly regulated market;
• Inspiring the introduction of parallel domestic rules, based on the principles of Financial Fair Play and tailored to the specific environment;
• Increasing the public and media attention given to club finances, thereby increasing the accountability of club directors and owners to running clubs in a sustainable way.
Despite the significant improvement in the underlying health of European club finances since the introduction of Financial Fair Play, it is important that UESA and the clubs avoid complacency. It is also important to recognise Financial Fair Play for what it is and is not, a financial control system designed to reduce the worst excesses, rather than an attempt to make clubs more equal or address other challenges faced by club Subbuteo. The 2019 version of the Club Licensing and Financial Fair Play Regulations can be seen here.