UEFA just released the fifth ‘Club Licensing Benchmarking Report’, which entails detailed analytical points and comments connected to the governance and financial development of European club football. UEFA’s ‘financial fair play’ (FFP) idea is all about ‘financial sustainability’ in the sense that clubs must strive to balance revenues with expenses and try to do their best to relate their investments to the ‘long-term health’ of football. One of the findings in this year’s report stated that several football clubs, including some prominent ones, have experienced brutal financial difficulties, leading to top division clubs’ combined losses escalating again.
Covering the financial year 2011 (FY2011) illustrated that 63% of top-division clubs had an operating loss and 55% a net loss. Collectively, European top-division clubs revealed a record net loss of €1.7bn (€0.6bn in 2007), half of which relates to only 10 clubs. Still, player wages is European club football’s biggest challenge! Wages increased by 38% (€2.4bn) in the last 5 years, which sucks up the whole revenue increase of 24% for the same period. Collective employee and net transfer costs now account for 71% of club revenues, a significant increase from 62% in 2007.
In terms of responsibility, domestic governing bodies also have to play a vital role, cf. the following UEFA statement: “Their vision, overall strategy and guidelines help to promote the implementation of good management practices by clubs. In the absence of a coordinated approach, clubs will see their opportunities reduced and struggle to remain competitive in a market that has become more and more global.”
In the future, it will be even more important to employ forceful business strategies for clubs to be able to comply with FFP regulations and in particular with the break-even rule that will be assessed for the first time from July 2013. Though, collective revenues increased in the most prominent European clubs according to Deloitte’s ‘football money list’ but European football as a whole still faces intense problem areas given the fact that not all clubs face positive opportunities on the ‘revenue side’. Generally, the economic crisis has made it tougher to access liquidity in many European countries. Thus, more clubs are currently facing restricted funding opportunities. Without changes in behaviour, the risk of clubs going bankrupt will increase and so will the risk of reducing the overall quality and standards of facilities for future generations due to continuing low strategic investment levels. FFP motivates clubs to apply a shift in the utilization of funding from short-term spending to medium and long-term investments in all member associations, to prevent football becoming a competition among a small sphere of clubs. UEFA states the following in the newly released report: “The whole football family has unanimously approved the financial fair play concept that provides such a long-term vision. It has now to prove that it is acting together to achieve the set objectives.”
UEFA’s benchmarking report