Paris Saint Germain’s summer transfer activity came to an end in (Seine)sational style!
The facts speak for themselves:
- The two largest football transfer fees in history – £366M combined spending on Neymar da Silva Santos Junior and Kylian Mbappe;
- Combined wages of a reported £700k/week (both on 5 year contracts).
The signings of Neymar and Mbappe are an extraordinary statement for a club competing in Ligue 1; a league not considered to be the wealthiest of leagues comparative to its leading European competitors (Premier League, Bundesliga, La Liga, and Serie A).
This highlights the resources available to PSG’s Qatari owners and the expenditure that they are prepared to incur to put PSG at the head of European club football’s top table. PSG are owned by Oryx Qatar Sports Investments, an arm of Qatar’s sovereign wealth fund with access to £194 billion. And the financial juggernaut shows no signs of easing up as recent reports suggest that PSG are lining up a £135M bid for Philippe Coutinho in the January transfer window.
But this has given some within football’s family reason for concern, particularly European football’s regulatory body, UEFA, who launched a formal investigation on 1 September 2017 into PSG over their compliance with UEFA’s break-even requirements.
UEFA’s Financial Fair Play Regulations (“FFP”)
Football has historically as a sector struggled to balance its finances, despite ever increasing levels of revenue.
Of those clubs currently competing in the Premier League, the richest football league by revenue in the world, 20% have been in administration at some point in time. That percentage rises to 29% in the Championship. In Spain, the EU had to intervene over huge unpaid tax liabilities of some clubs at a time when the Spanish government was seeking financial support from the EU. Italy has been no stranger to high profile football insolvencies with Parma and Fiorentina both going under, and the stories go on and on across Europe. In addition to the financial woes seen in football, there have also been concerns over the relatively recent dawn of the super-rich acquiring clubs and those clubs becoming dependent upon the finances of their owners to cover future commitments.
As a result, football’s regulatory bodies have in recent years introduced financial control regulations aimed at ensuring a sustainable financial footing for clubs operating within their competitions.
UEFA introduced the FFP Regulations in 2011 to improve the overall health of European club football. Since 2013, clubs that have qualified for UEFA competitions have been assessed against break-even requirements which require clubs to balance their spending with their revenues and restrict clubs from accumulating unsustainable debt. Each season an independent body assesses three years’ worth of club financial figures for all clubs in UEFA competitions. Clubs can spend up to €5M more than they earn per three year assessment. However, the acceptable deviation can exceed this by as much as €30M if this extra amount is entirely covered by a direct contribution/payment from the club’s owner or a related party. This is designed to prevent the build-up of unsustainable debt, although interestingly there is no bar on an owner injecting the excess amount into the club as debt. In PSG’s case, there are few suggesting that their spending is unsustainable given the resources of their owners. But the level of spending has asked questions as to whether PSG are complying with rules designed to apply to all clubs to preserve a stable financial environment for UEFA competitions.
UEFA have confirmed that “the investigation [into PSG] will focus on the compliance of the club with the break-even requirement, particularly in light of its recent transfer activity.” In response, PSG said they were “very confident in its ability to demonstrate that it will fully comply with Financial Fair Play rules for the fiscal year 2017/2018.”
As you would expect from a club of PSG’s stature, all appears to be in order. So why have UEFA launched an investigation?