Warning over state of football clubs’ finances

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THE introduction of Europe-wide financial fair play rules in football has shone a light on weaknesses in the business dealings of some clubs and “inadequacies” in their financial reports, particularly over issues such as player salaries, according to a new study.

Evidence gathered for the research suggested that the current financial statements produced by clubs were seen as being of little or no use, amounting to a legally-necessary box-ticking exercise which offered “little meaningful disclosure on key performance indicators like salary costs”.

Researchers recorded “considerable support” for Uefa’s financial fair play (FFP) regulations, although a number of specific concerns were highlighted.

Fears were raised over the capacity of Uefa to enforce the rules in the face of wealthy clubs and the irony of using financial penalties for those who break financial rules.

The study was conducted for the Institute of Chartered Accountants of Scotland (Icas) by sports finance expert Stephen Morrow, a senior lecturer on the subject at the University of Stirling. It acknowledges that major European football leagues and clubs have seen “remarkable” revenue growth, fuelled by domestic and overseas media rights in recent years. But too often that growth has not led to profit, with many clubs reporting substantial losses, escalating debts and even insolvency proceedings.

It was against this “seemingly paradoxical” background that Uefa introduced its financial fair play regulations, effective from 2013/14, to encourage clubs to adopt a sustainable approach to their business activities.

One key requirement is that clubs report a break-even position over a rolling three-year period. Put simply, they must match football-related expenditure with football-related income.

The Icas study was based on anonymous interviews carried out with finance directors of clubs in England and Scotland.