QPR will be a big bump on the Football Leagueâs road to financial prudence THE WEEKEND DOSSIER For the last fortnight the lawyers and accountants of the Football League have been poring over clubsâ financial reports. Every now and again, most likely, one will tut-tut, shake their head, and make a note. When they reach Queenâs Park Rangers there may also be a low whistle and a raising of eyebrows. Next week the League is due to announce some clubs will face sanctions for breaking Financial Fair Play regulations. The headlines are expected to focus on QPR, promoted last summer, being levied a huge fine. Less attention will be paid to the fact that this season, for the first time in decades, possibly ever, all Football League clubs were up to date with payments to the Inland Revenue. Three years ago the 72 clubs collectively owed more than £7m. These facts are connected. They are both landmarks on the Football Leagueâs long and often bumpy ride towards financial prudence, which began in 2002. That was the year ITV Digital went into administration, leading to the cancellation of its £315m broadcast deal with the League. It was also the year 10 clubs went into administration, in most cases because of the loss of expected income from ITV Digital. The King Power Stadium was packed as Leicester City returned to the Premier League for the first time since the 2003-04 season - Leicester came up as Champions with 102 points last season Leicester City wrote off £25030m of debt by going into administration Clubs going into administration was nothing new: 22 had done so in the previous decade. They usually shed staff, wrote off debt, then carried on as before while creditors, from programme printers to pie suppliers, picked up the tab. What was significant this time was the scale of the problem, and the fact Leicester City managed to win promotion to the Premier League despite being in administration. Leicester wrote off £25-30m of debt by going into administration. Disgruntled rivals for promotion felt this had given them an unfair advantage â it was the equivalent of a major cash injection. As a result, in September 2003, the League introduced a 10-point penalty for any club going into administration. The first club to be hit was Wrexham in December 2004. They were relegated to League Two as a result. The 10 years since have seen a steady tightening of regulation, initially to stop clubs finding ways around them, latterly at the clubsâ request. One loophole was closed when Leeds United called in the administrators in the 2006-07 season, so late that relegation was all but certain, effectively rendering the points deduction irrelevant. The League altered the rules so such deductions would in future be carried over to the following season. The next issue was also provoked by Leeds. Unlike the 41 previous Football League clubs that had gone into administration since 1992, they came out of it without agreeing a Company Voluntary Arrangement, by which a company and its creditors agree payment of some of the original debt. Leeds had offered one penny in the pound (if owed £1m, you receive £10,000) but the Inland Revenue, a significant creditor, refused to accept this. The League did not want clubs making a habit of this, as it might spook creditors to other clubs who could call in their debts, prompting more administrations, and felt it unfair on Leedsâ rivals. They docked them 15 points. Lumbered with this handicap Dennis Wiseâs team, despite beginning with seven straight wins, failed to win automatic promotion and lost in the 2008 play-offs. By this point it had become clear that deducting points was only treating the symptoms. The Football League moved towards extending the Financial Fair Play rule which had been introduced, as a guideline, in League Two in 2004-05. This was the snappily-worded Salary Cost Management Protocol (SCMP), a calculation which limited clubs to spending a set percentage of turnover on wages. League One was brought within its compass and for 2012-13 sanctions introduced for any League One club spending more than 65 per cent of turnover on wages, and 60 per cent for League Two. Several clubs have suffered transfer embargoes as a result, notably Paolo Di Canioâs Swindon. This season the limits are 60 per cent and 55 per cent respectively. While SCMP, like most Financial Fair Play methods, does to an extent favour big clubs, which have bigger turnovers, it unusually does permit owner investment as long as the cash is given, not loaned. In other words, a rich Hartlepool United fan could buy the club and pump £20m into it â as long as he does not expect to be repaid. The restraints worked. In 2011 Plymouth was the only club to enter administration, in 2012 Port Vale and Portsmouth, in 2013 Coventry City, this year, none. Of the four, Portsmouth were still dealing with the maladministration of their Premier League days, while Coventry were something of a unique case given the dispute between the club and the owners of Ricoh Arena. Stuart Pearce is unveiled as Forest manager by owner Fawaz al-Hasawi in happier times at the City Ground Nottingham Forest are one of a number of club's facing a transfer ban in January Meanwhile, in the Championship, collective debt reached £1bn as clubs chased the Premier League dream. By 2012-13 wages averaged an unsustainable 106 per cent of turnover, with the collective debt forecast to be £2bn in five years. âThe clubs,â said one witness, âfinally sat down and said âweâre only competing with each other, how do we control the arms race?â â The answer was a version of Financial Fair Play modelled on Uefaâs and initially restricting losses to £8m, with only £5m of that funded by owners. This has since been extended slightly to £13m to enable clubs to compete with the enhanced parachute payments of relegated teams, which total £65m over four years. Clubs breaching it are subject to a transfer embargo until they balance the books. The exception is promoted clubs, who instead have to pay a fine assessed on a sliding scale. Bolton, Blackburn and Nottingham Forest face a transfer ban for at least the January window, with Bournemouth and Leeds also vulnerable, while Leicester could be fined. But it is QPRâs case which will make waves. While they are likely to have cut their losses from the £65.4m red ink of 2012-13, the promotion-winning investment in transfers and wages on the likes of Charlie Austin, Richard Dunne and Karl Henry suggests they will still have significantly exceeded permitted losses. A £30m-plus fine is possible, which QPR have said they will fight. Owner Tony Fernandes may well regard it as a tax on ambition, but the reality is such restraints are required to save clubs from themselves.QPR, having gone bust in 2001, should appreciate that.
Sincerely hope our club is not targeted as being 'made an example of' by the FA. A bad result here and relegation would surely send TF to the exit gate, however, we can hopefully avoid relegation and settle for just a fine.
Granted, it's a lengthy piece, but Glen Moore's article draws on some excellent examples and presents a balanced observation of the current situation. http://www.independent.co.uk/sport/...agues-road-to-financial-prudence-9922119.html QPR will be a big bump on the Football Leagueâs road to financial prudence For the last fortnight the lawyers and accountants of the Football League have been poring over clubsâ financial reports. Every now and again, most likely, one will tut-tut, shake their head, and make a note. When they reach Queenâs Park Rangers there may also be a low whistle and a raising of eyebrows. Next week the League is due to announce some clubs will face sanctions for breaking Financial Fair Play regulations. The headlines are expected to focus on QPR, promoted last summer, being levied a huge fine. Less attention will be paid to the fact that this season, for the first time in decades, possibly ever, all Football League clubs were up to date with payments to the Inland Revenue. Three years ago the 72 clubs collectively owed more than £7m. These facts are connected. They are both landmarks on the Football Leagueâs long and often bumpy ride towards financial prudence, which began in 2002. That was the year ITV Digital went into administration, leading to the cancellation of its £315m broadcast deal with the League. It was also the year 10 clubs went into administration, in most cases because of the loss of expected income from ITV Digital. The King Power Stadium was packed as Leicester City returned to the Premier League for the first time since the 2003-04 season - Leicester came up as Champions with 102 points last season Leicester City wrote off £25-30m of debt by going into administration. Clubs going into administration was nothing new: 22 had done so in the previous decade. They usually shed staff, wrote off debt, then carried on as before while creditors, from programme printers to pie suppliers, picked up the tab. What was significant this time was the scale of the problem, and the fact Leicester City managed to win promotion to the Premier League despite being in administration. Leicester wrote off £25-30m of debt by going into administration. Disgruntled rivals for promotion felt this had given them an unfair advantage â it was the equivalent of a major cash injection. As a result, in September 2003, the League introduced a 10-point penalty for any club going into administration. The first club to be hit was Wrexham in December 2004. They were relegated to League Two as a result. The 10 years since have seen a steady tightening of regulation, initially to stop clubs finding ways around them, latterly at the clubsâ request. One loophole was closed when Leeds United called in the administrators in the 2006-07 season, so late that relegation was all but certain, effectively rendering the points deduction irrelevant. The League altered the rules so such deductions would in future be carried over to the following season. The next issue was also provoked by Leeds. Unlike the 41 previous Football League clubs that had gone into administration since 1992, they came out of it without agreeing a Company Voluntary Arrangement, by which a company and its creditors agree payment of some of the original debt. Leeds had offered one penny in the pound (if owed £1m, you receive £10,000) but the Inland Revenue, a significant creditor, refused to accept this. The League did not want clubs making a habit of this, as it might spook creditors to other clubs who could call in their debts, prompting more administrations, and felt it unfair on Leedsâ rivals. They docked them 15 points. Lumbered with this handicap Dennis Wiseâs team, despite beginning with seven straight wins, failed to win automatic promotion and lost in the 2008 play-offs. By this point it had become clear that deducting points was only treating the symptoms. The Football League moved towards extending the Financial Fair Play rule which had been introduced, as a guideline, in League Two in 2004-05. This was the snappily-worded Salary Cost Management Protocol (SCMP), a calculation which limited clubs to spending a set percentage of turnover on wages. League One was brought within its compass and for 2012-13 sanctions introduced for any League One club spending more than 65 per cent of turnover on wages, and 60 per cent for League Two. Several clubs have suffered transfer embargoes as a result, notably Paolo Di Canioâs Swindon. This season the limits are 60 per cent and 55 per cent respectively. While SCMP, like most Financial Fair Play methods, does to an extent favour big clubs, which have bigger turnovers, it unusually does permit owner investment as long as the cash is given, not loaned. In other words, a rich Hartlepool United fan could buy the club and pump £20m into it â as long as he does not expect to be repaid. The restraints worked. In 2011 Plymouth was the only club to enter administration, in 2012 Port Vale and Portsmouth, in 2013 Coventry City, this year, none. Of the four, Portsmouth were still dealing with the maladministration of their Premier League days, while Coventry were something of a unique case given the dispute between the club and the owners of Ricoh Arena. Stuart Pearce is unveiled as Forest manager by owner Fawaz al-Hasawi in happier times at the City Ground Nottingham Forest are one of a number of club's facing a transfer ban in January Meanwhile, in the Championship, collective debt reached £1bn as clubs chased the Premier League dream. By 2012-13 wages averaged an unsustainable 106 per cent of turnover, with the collective debt forecast to be £2bn in five years. âThe clubs,â said one witness, âfinally sat down and said âweâre only competing with each other, how do we control the arms race?â â The answer was a version of Financial Fair Play modelled on Uefaâs and initially restricting losses to £8m, with only £5m of that funded by owners. This has since been extended slightly to £13m to enable clubs to compete with the enhanced parachute payments of relegated teams, which total £65m over four years. Clubs breaching it are subject to a transfer embargo until they balance the books. The exception is promoted clubs, who instead have to pay a fine assessed on a sliding scale. Bolton, Blackburn and Nottingham Forest face a transfer ban for at least the January window, with Bournemouth and Leeds also vulnerable, while Leicester could be fined. But it is QPRâs case which will make waves. While they are likely to have cut their losses from the £65.4m red ink of 2012-13, the promotion-winning investment in transfers and wages on the likes of Charlie Austin, Richard Dunne and Karl Henry suggests they will still have significantly exceeded permitted losses. A £30m-plus fine is possible, which QPR have said they will fight. Owner Tony Fernandes may well regard it as a tax on ambition, but the reality is such restraints are required to save clubs from themselves.QPR, having gone bust in 2001, should appreciate that.
It is interesting although Kiwi beat you to it (you have to get up pretty early to beat our NZ/Aussie friends. For once it doesn't throw too much speculation about our problems instead, as you say, simply drawing on the examples that have led to the current rules.
Thanks KooPeeArr, I hadn't spotted the duplicate. QPR999 - can you please merge these threads when you have a spare moment.
Sorry, this will sound disloyal, but the owners took a huge gamble and lost. The size of the potential fine is disproportionate and I'm sure some kind of deal will be negotiated, but I'm sick of hearing Fernandes say he supports FFP then acting the victim. He, Mittal, Rueben and the other one made the decisions which were totally reckless. Even without an FFP fine we are a long way up s**t creek financially, and it's nobody's fault but the owners. They bought a debt free club in the premiership(thank you Bernie) they have taken it down and up again and have put £200m on the red side of the balance sheet. The only upside is that the owners are the creditors, so they've shafted themselves as well. I suppose they think they will get their cash back and more by building houses....we'll see. When this year's accounts are revealed I think we, the fans, are owed a full explanation of the financial strategy of the club, how the owners regard the money they have put into it (a loan or a gift?), and how we avoid staying in this position forever. And I'm afraid that 'new stadium' and 'youth policy' are not satisfactory answers. We are in the fourth season of this ownership era and we have no concrete progress on these areas. The last paragraph of the article is 100% spot on.
So in a nut shell here it is for anyone who can't be bothered to read it all like me! We are all doomed! We will be supporting AFC QPR in the blue square premier league! A big asteroid is going to land in W12 and wipe out all intelligent lifeforms in Shepard's Bush, Oh and your wife/Girlfriend or Husband/Boyfriend has been cheating on you. Oh one more thing, if you own a pet dog it will have to be put down next week. Happy Christmas everybody, Ho ho ho!
It's not disloyal to express concerns about the club's ability to survive and not be impeded in its goals by debts and imposed fines and sanctions. I do think that we are the victims of an unjust and impractical FFP system although our inability to comply with it should have been immediately obvious upon our relegation and we have probably cost ourselves some millions in naively burying or heads in the sand (I say us but I really mean the board). You are not being unreasonable in wanting direct answers to the debt ownership (currently ours) and how and when we will reach certain milestones in moving towards being self sufficient although there'll probably be no sign on the people who can give those answers for many months following the results being released. I will admit to not being as angry as you on this (perhaps through my own naivety) and see more prudence in our transfer dealings. With a crucial window coming up (where the possibility of more gambling is very real) I am more hopeful than certain that old mistakes won't be repeated. I also think that Premiership survival is deemed crucial to our ability to cut our debt and fear there'd be no austerity measures to address our debt should another relegation occur. Basically, it looks like there's more financial awareness but, without some underlying structure (the one you demand) it is a guess that it is really the case. I'm now more worried that I was when I started writing this! Thanks Stan
Sorry Matt, didn't mean to get you down! I'm more disappointed in myself than angry, until relatively recently I was a big fan of Fernandes, and I still think he's a basically good bloke. And we can't deny he's put his money where his mouth is, and has been led badly astray by 'football people' on occassion. But his fundamental responsibility (to his own investment) is to give structure and direction, and I don't see these anywhere. The stalled (dead?) training ground development, talk with no substance about the stadium and most of all the Caterham fiasco (he was shafted by the big boys of F1 but also left the employees in the lurch because of poor corporate governance and has been rather surly about it) have got me worried. But all is not lost UTR's! All the owners need to do is to write off what they have given the club, promise to pay any FFP fine out of their own pockets and to run the club in a managed way from now on!
Regarding the Parachute Payments lads. I presume they were brought in because of the amount of Clubs that had previously gotten relegated and ended up in administration because of the gulf in incomes between the two divisions. Are they really fair though? I remember thinking when they came in that it was unfair on the other 21 Clubs who made up the Championship (QPR in particular at the time). Shouldn't it be up to the Clubs to have contingency plans in place for if they go down and not be given such financial assistance to the detriment of the other Clubs already down there?
I think the argument is that promoted clubs have to stretch themselves to try and stay in the prem, if they don't the division becomes (even) less competitive and thats bad for the game. The parachute payments are compensation for taking some risks. The problem is the vast gulf in income between the Prem and the Championship.
There's a gulf in quality between the top two divisions (hence the age old question of "how many of our team are good enough for the Premiership"). Any promoted team would have to redress that gulf by buying players and without the contingency of the parachute payments they'd need to be one year deals (nobody would sign for an 80% wage reduction in the event of relegation unless they were overreaching their actual ability by playing in the top flight so you'd still not have got the right players in). That would effectively punish the promoted teams in terms of trying to be competitive while saddling them with endless agents' and signing on fees. Eventually you'd get to the stage where 17 teams were stable and there'd be three whipping boys every year (ie complete stagnation). It also would mean that the team would potentially have to rebuild every year and who wants that... (bit close to home there). Parachute payments, I'd suspect, are intended to soften the rebuilding of a team (particularly if they can't shift high earners) so reduces implosion rather than giving an expansionistic edge to the demoted. It can miss (eg Wolves, Man City of old who slump down two divisions in succession) or be abused (ie like us - soften the burden of funding another gamble on success). FFP in an efficient working model would counter the latter but the parachute payments are needed to mitigate the former (and a risk of clubs going bust for trying). We created a monster and let it flail around the living room. Everybody is trying to cover the damage on the floor or the ceiling.
Off the top of my head, possibly not although the golden land of the Premiership was probably only 18 carat (a couple of TV deals ago) as opposed to today's 24 carat. They had board room issues I think but a pretty loyal and large following that contributed to the demise and rejuvenation. Perhaps a reasonable analogy to my point but a bad example (Wolves possibly a better fit).
Can you just imagine the riots/punch up's that would be caused by parachutes with cash attached falling from the sky?
Anyway, sorry about that! Back on topic slightly, my local club Reading have just announced they are 65 million £ in the red. Can someone tell me if they will get some sort of fine? Reading Football Club Holdings' debt hit £65 million Story at http://www.getreading.co.uk/sport/football/football-news/reading-football-club-holdings-debt-8260591
Since they're in the Championship, they might get a transfer embargo although, if they've carefully eked out nothing more than an 8million loss in each of the last 8 years then they're considered financially astute!!! :0/
