By the time the 2025/26 season gets underway the revamped financial regulations from UEFA to replace Financial Fair Play will be in full effect.
Revealed last year, European football’s governing body reacted to calls to overhaul the FFP system, no longer deemed fit for purpose after its launch in 2010. The new regulations will focus on limiting spending by clubs on transfer fees, player wages and agents fees to 70% of revenue through what is known as a squad cost rule.
That 70% figure, however, won’t be in effect for another two years, with this season and the 2024/25 season to see clubs allowed to have squad cost ratios of 90% and then 80% before falling into line by 2025/26. Clubs will also see their allowed losses jump from €30m (£25.7m) to €60m (£51.5m) over a three-year period.
When the measures were introduced by UEFA president Aleksander Ceferin last summer, said: “UEFA’s first financial regulations, introduced in 2010, served its primary purpose.
“They helped pull European football finances back from the brink and revolutionised how European football clubs are run.
“However, the evolution of the football industry, alongside the inevitable financial effects of the pandemic, has shown the need for wholesale reform and new financial sustainability regulations.
“These [new] regulations will help us protect the game and prepare it for any potential future shock, while encouraging rational investments and building a more sustainable future for the game.”
When Liverpool owners Fenway Sports Group acquired the Reds back in 2010 they did so at a time when FFP was coming in, the hope being that they would be able to implement the data-driven, scientific approach to success through finding marginal gains that had worked with the Boston Red Sox.
For some time the creation and then delivery of that model has allowed them to flourish and win all the honours that the club game can bestow under Jurgen Klopp. But FFP didn’t have the teeth that some, including FSG, thought it would have, and the need to have the regulations overhauled was glaringly obvious.
This past week has seen Liverpool forced to go toe to toe in the market on two occasions with a club who have the same competitive goals as the Reds but very different ideas around how to reach them from a business perspective.
In the matter of a few days, Liverpool have twice had their noses bloodied by Chelsea, first losing out on Moises Caicedo and then on Romeo Lavia. It has been an embarrassing episode for the Reds and their owners, who down the years have cultivated something of a reputation for doing their deals away from the spotlight until the very last.
Liverpool were willing to break the British transfer record for Caicedo and had a £111m bid accepted by his former club Brighton & Hove Albion, but the player and his advisors ultimately decided that London was to be the destination, with Southampton’s Lavia making a similar choice hours after Caicedo.
Much focus has been placed upon Saudi Arabia making waves this summer with a throng of top names heading to the Gulf nations biggest five clubs, four of them being owned by the Saudi Arabian Public Investment Fund tasked with making investments to grow the nation globally and diversify revenues away from oil and gas. But the biggest disruptors to football over the past year, and even this summer, have been Chelsea under the ownership of Todd Boehly and the Clearlake Capital private equity firm.
The Stamford Bridge club adopted the tactic of offering seven, eight and nine year deals to players in a bid to lower the annual amortisation figures on the balance sheet (how transfer fees are accounted for through spreading the guaranteed sum over the life of a contract). It was a tactic that saw them land a host of talented young stars from Europe and beyond, but one that was eventually snuffed out by new UEFA regulations introduced this summer that limited the period for amortisation over five years.
But, so bad were Chelsea last season, a 12th placed finish meant that they won’t be involved in European competition this season, meaning the UEFA regulations don’t apply, only the Premier League’s profit and sustainability rules, which still allow for transfer fees to be amortised over any contract length, although that could change moving forward.
There is a window of opportunity for Chelsea right now to get their business done. By hoovering up the pick of the young talent emerging in world football there is a view from the owners that this is a strategy that offers them a great chance of returning to the summit and challenging for titles and Champions Leagues once more, gaining access to the money that comes with success and the leverage that on-pitch success brings when seeking to raise revenues off it.
It isn’t without risk, though. To use a baseball parlance, not every swing is a home run, and Chelsea will have a lot of young talent expected to deliver quickly, with many of them likely to not get the game time and the chance to develop as they might in different surroundings. But this is the plan and Chelsea have gone all in.
It may be telling that this particular way of doing business has been available to clubs for some time but no big club has really sought to press ahead with it as a strategy until now. Boehly’s background lies in North American sports with the Los Angeles Dodgers baseball team, where he is a part owner. Long contracts are commonplace but the transfer market operates entirely differently to how the player trading model and free agency does in the United States.
FSG, too, have a baseball background through their 21-year ownership of the Boston Red Sox. But the way that both clubs have sought to operate in search of the same competitive goal is wildly different. FSG have focused on sustainable success, raising revenues and then strategically reinvesting in infrastructure such as Anfield’s redevelopment to further increase revenues to invest into the team, which in turn can raise further revenue by succeeding on the pitch and providing the club lucrative access to the prize money that comes with it.
Speaking at the SportsPro Media APAC Conference in Singapore earlier this month, before the Reds were engaged in a transfer battle with Chelsea, Liverpool CEO Billy Hogan was asked on his views around sustainability, highlighting the “dangerous” mortgaging of the future for short-term gains.
Hogan told the audience at SportsPro: “What we’re trying to do is generate as much revenue as we possibly can.
“Sometimes that’s difficult to say, but that’s the truth. We’re trying to supply that to Jurgen [Klopp] and the team to do what they need to do on the pitch. That sort of virtuous circle is how we operate.
“There are new financial regulations coming in the 24/25 season from UEFA, kind of FFP 2.0 if you will. I think the idea that you would potentially mortgage the future of a club for short-term gain is a really dangerous one.
“We’ve seen it in the UK with teams going into administration. The idea that clubs should be run sustainably and within their means is an important one.”
Hogan, here, was not addressing any specific club, but his comments do reiterate the challenge that Liverpool face in continuing to invest in what they see as a sustainable way to achieve sustained success. Whether or not the new UEFA regulations carry more clout than the previous set remains to be seen, although there is still a window of opportunity for clubs to try and position themselves before 2025/26 arrives. Liverpool will have far less to do than others to get themselves on the same page as UEFA’s regulations, almost nothing, in fact. For some of their rivals a far greater challenge in driving costs down after this season will have to be aggressively pursued.