Leicester, Everton and Financial Fair Play: The context and likely outcome

Leicester City's King Power Stadium (Photo by Catherine Ivill/Getty Images)
Leicester City's King Power Stadium (Photo by Catherine Ivill/Getty Images) /
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Leicester City
LEICESTER – JULY 23: Gary Lineker (left) and Leicester City Vice-Chairman John Elsom officially open the Walkers Stadium in Leicester, Great Britain on July 23, 2002. (Photo by Mike Finn-Kelcey/Getty Images) /

The end result was inevitable. A massive financial gap opened up between the top tier of English football and the rest. A large number of clubs went bust, partly because they lost the money dripping down from the top table, partly because owners took financial risks in the hope of gaining promotion to the promised land, and partly because clubs relegated from the Premier League suddenly lost a large portion of their income. Leicester City was one of those who, at the turn of the present century, spent well beyond their means in an, ultimately futile, attempt to stay in the top-flight and, as a result, went into administration in 2002. The same happened to Portsmouth in 2010.

It was in this context that the Premier League and the Football League began to take more interest in financial regulations. Following UEAFA’s decision in 2010 to introduce spending limits affecting clubs involved in European competitions, the English authorities followed suit. This became popularly known as FFP although its concern is not primarily to minimise financial inequality between clubs but to try to prevent them from spending more than they earn and getting into financial difficulties. Profitability and sustainability rules, to use the current jargon, is a more accurate description of the regulations.

Currently, Premier League clubs are allowed to incur losses of £105 million over a three-year period.  Only football related income – from broadcasters, transfer fees, commercial activities and so on – is counted. Any additional money put in by billionaire owners is not regarded by the regulations as income. What is counted as expenditure is also restricted. It includes spending on transfers and wages but infrastructure spending – on, for instance, improving stadia – is excluded.

Whether intended or not, one of the main consequences of FFP regulations is to advantage those big clubs with the highest football revenues. Because their football income far exceeds other clubs, the current so-called ‘big six’ (Arsenal, Tottenham, Manchester United, Manchester City, Liverpool and Chelsea) can spend more – on transfers and wages – without breaching financial fair play rules. Not surprisingly, the clubs who can buy the best players are likely to be the most successful. The vast majority of the top four spots in the top-flight have gone to the clubs with the biggest football revenues. What the regulations do is to prevent – in what is described as ‘financial doping’ – billionaires from immediately ploughing an unlimited amount of money into clubs to buy the best players and coaches.

Two clubs – Blackburn and Leicester City – have bucked this trend by winning the Premier League. The Ewood Park outfit did so, in the 1994-5 season, because their owner – the steel magnate Jack Walker – ploughed huge amounts of money into the club. This would not now be allowed under financial fair play rules. The Foxes triumph in 2015-16 was all the more remarkable because it was done on a relative shoestring. The football revenue generated by the Foxes was tiny compared to that possessed by the big six.