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BUDDY, YOU'RE SPENDING TOO MANY DIMES

4:00pm Thursday, 17th September 2009

As Europe makes its way through the worst economic recession since the 1930s, a new wind is blowing around the financial governance of football clubs. This week was marked by regulatory announcements from two of the most powerful and influential governing bodies in the world's richest football region: Uefa and the Premier League. It's a hot topic and, with so many of the senior people in football attending Leaders in Football on 7th and 8th October, its one that will be covered in some detail over the 2 days.

The announcements were kicked off on Monday evening by PL CEO, Richard Scudamore, who stated all twenty clubs had signed up to a new regulatory regime which will require them to submit to a more detailed financial scrutiny, and allow the PL to intervene directly in clubs if they're in danger of going bust. Scudamore said:

'The board of the Premier League will be applying a test that is designed to make sure you can keep going as a football club. If the board believes the club is at risk of not being able to meet its fixtures or its obligations to its creditors or to the Premier League's contracts and partners, then it has to step in and agree a budget for the running of that club.'

By way of sanctions to enforce compliance, the PL has also been given the power to forbid any further transfer activity and the renegotiation of current player contracts at offending clubs. The day after the PL announcement, the Executive Committee of Uefa approved without dissent a new, so-called 'financial fair play' regulatory regime which will be implemented over the next three years by a new committee, the 'Club Financial Control Panel', chaired by a former Prime Minister of Belgium, Jean-Luc Dehaene.

He has a challenging task ahead to audit a huge range of clubs across widely differing circumstances and cultures throughout over fifty national associations, in line with the Uefa Club Licensing Scheme which will be gradually introduced over the next three years. But perhaps the most difficult task will involve making sure some of the 'big' European clubs rein in their spending and debt levels. According to Uefa's website, there will now be an 'obligation for clubs whose turnover is over a certain threshold, over a period of time, to balance their books or break even'.

Presumably, this means that clubs like Man Utd, Real Madrid, Liverpool, Chelsea, Man City, Valencia, Arsenal and others will be required to show how they will balance the books, in that vital phrase '...over a period of time..'. Despite having some of largest turnovers in the business, many of these clubs routinely spend more than they earn; some paying tens of millions of euros a year simply to service (or part service) their debts.

If fully implemented, 'financial fair play' will certainly prevent the kind of spending spree incoming owners often indulge in, most recently at Man City. And that will make the clubs considerably less attractive - at least for some investors. As such, it represents a sea-change in European governance and could have a profound impact on the landscape of the Premier League where clubs for a decade have been frequent targets of highly leveraged buy-outs.

Uefa insist that it will benefit clubs in the end and provide a fairer playing field for competition. But the devil will be in the detail of the meaning of those phrases currently employed. Though the final sanction available to Uefa is to exclude non-compliant clubs from European competitions, it's hard to conceive of a situation where they might bar the likes of Real Madrid and Man Utd from taking part. Jean-Luc Dehaene has certainly got an 'interesting' job on his hands. In comparison, it might make running Belgium look easy.

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