Explaining Financial Fair Play: How it works, calculations and punishments | OneFootball

Financial Fair Play (FFP) has often been one of the most controversial topics in football since it was introduced.

It was established by UEFA to make sure that football clubs were not spending more money than they generated to prevent them from falling into financial struggles. We've seen - especially after the COVID-19 pandemic - that clubs had to make major cuts simply to survive; FFP is meant to stop that from happening and help secure clubs' long-term future, whilst making the financial health of European football stronger. Clubs are given a set budget depending on their revenue which they can not go over. If they do, they will be punished.

In simpler terms, in 2011, it was decided clubs were permitted to spend up to £5 million more than they earn per each assessment period (three years). However, they can exceed that level to a limit if it is covered by a direct contribution from the club's owner. The Premier League and Champions League have different rules for Financial Fair Play, but both have similar messages - don't overspend.

In 2022, it was revealed that Barcelona were in over €1.3 billion of debt, whilst Tottenham Hotspur were in over £800 million. Both clubs were involved in stadium construction, but it epitomised the financial concerns across Europe.

This article goes through everything you need to know about Financial Fair Play, including: how and why it was introduced, changes to the system and punishments clubs have received.

How FFP is calculated

Financial Fair Play is spread across three-year cycles, with clubs unable to spend over it by £5m - or £60 million if the rest of the cost is covered by the owners. Wages, transfer fees and the financial running of the club go towards how FFP is calculated. Adding to this, signing first-time players is not considered to be 'healthy' spending, but UEFA does allow investment in other areas of the club. Investments in structural improvements such as women’s football, stadium and training facilities, community initiatives and youth development are excluded from FFP calculations.

With FFP done over a three-year cycle, transfer fees are often amortised across the length of a player's contract. This means they pay less when the player is first signed, allowing clubs to spend more in a shorter period.

Similar rules apply in both the Premier League and the Champions League, but the English League is far more lenient than UEFA. The FA and Premier League allow for three-year losses of £105 million — or an average of £35m a season — compared to UEFA’s £25.4m. Premier League regulations make clear that clubs are expected to file their annual accounts by March 1 each year.

When FFP was introduced

The start of Financial Fair Play dates back to September 2009, when rules were agreed by the UEFA's Financial Control Panel. Implementation of the system started at the beginning of the 2011/2012 season as UEFA began to clamp down on heavy spending.

One of the main reasons it was brought in was because of a review UEFA completed in 2009. The organisation presented evidence that showed more than half of the 665 European clubs suffered financial losses over the past year. This was severely affected by the recent financial crash, but it still showcased the financial plank that clubs would walk to the end of. Wages and transfer signings have continually increased year-on-year, making the threat of financial struggles even higher, yet - on paper - FFP should prevent clubs from going into administration, even if several clubs have over the years. This has been epitomised by several English teams entering administration recently. Bury, Bolton, Wigan, Derby County and Coventry have all gone into a bleak state since 2013.

Christian Müller, CFO of the Bundesliga told the European Commission at the time:

Key changes over time

UEFA's most major changes to FFP came in 2022, with a new system to overhaul the original ideas. They were classed under three 'three pillars' of UEFA's new rules: solvency, stability and cost control. Cost control referred to the 'squad cost rule', stating clubs can not exceed 70% of its revenue on transfers, wages and agent fees. Solvency meant clubs could not have overdue payables, particularly to tax authorities, other clubs or employees. This was brought in to provide more stability to the health of the game.

UEFA used to allow clubs to incur losses of €30m, but now clubs are allowed to suffer losses of £60m over three years. A spending cap on wages, transfers and agents' fees is set to be introduced by the 2025/2026 season. With an increased amount of losses allowed, Financial Fair Play is not as strict and allows Europe's top clubs to continue to spend even if they are in financial struggle.

Clubs Punished for breaking FFP

Several clubs have broken the rules over the years, with Financial Fair Play making a noticeable impact on Europe's biggest teams. Various punishments are available to clubs, often depending on the severity of the issue.

UEFA rules are stricter than the Premier League's. Therefore, more punishments are regularly given. PSG were ordered to pay the biggest fine ever, although only €10m had to be paid in full after they failed to comply with break-even rules in 2022. It came after UEFA announced new sustainability regulations to replace the previous FFP system. The club agreed a three-year settlement with UEFA until the end of the 2025-26 season to comply with the new sustainability rules, failing which they can be held liable for the full amount of the fines.

Italian clubs Roma and Inter Milan were also hit with significant fines in 2022. Roma's Conference League triumph came at a cost with a fine of £35 million, although they only had to beat £5 million of that at first. It was judged that José Mourinho's club overspent in the season, leaving them with a significant fine.

Man City won a court case against UEFA after they were initially banned for breaking the FFP rules, but it was overturned; they paid a £10 million fine instead. However, the treble winners are still under investigation by the Premier League after they were alleged to have broken 115 rules surrounding Financial Fair Play. The Premier League charges spread from issues in 2009 to 2018, stating they did not provide accurate financial information. It is unlikely a decision will be made soon, with the knock-on effect potentially being the most significant thing in the league's history.

The most recent case in the Premier League saw Everton receive a 10-point deduction, the heaviest punishment ever handed to a Premier League team, for breaching financial rules. The independent commission found Everton's losses to 2021/22 amounted to £124.5m, £20m more than they were allowed. However, the club are currently in the process of appealing the decision to an independent board. The original commission found Everton overreached their allowed losses significantly and concluded: “This was a serious breach that requires a significant penalty."