Finance Insider Column: Everton FFP scandal – £170m twist revealed as Premier League rule change imminent
The wolf is at the door for Everton – and perhaps soon Chelsea – as the Premier League finally begins to bear its teeth over financial fair play.
Since its introduction in 2013, no club has ever been punished for breaching FFP, the controversial system which stipulates that clubs can lose no more than £105million over a rolling three-year period.
But several clubs have obliterated the loss limit in the last three years, with deficits of two, three or – in Everton and Chelsea’s case – nearly four times that figure.
The pandemic has played a major role and the Premier League has made allowances in this area, permitting clubs to take their average losses across 2019-20 and 2020-21 and roll them into a single financial year for the purposes of FFP.
Costs or lost revenue incurred as a direct result of Covid have also been taken into account. Matchday income was eliminated and clubs suffered commercially as well as from the rebates they were forced to pay to broadcasters.
All in all, Everton – who will post a £50-70m loss when they release their 2021-22 accounts before the end of the week – have chalked up £170m to the pandemic.
What’s more, they say they are being conservative and that they easily could have attributed another £50m to Covid.
Sources have told this site that it is for this reason that Toffees finance director Grant Ingles is genuinely optimistic that the club will receive a positive outcome from their referral to an independent commission over an alleged FFP breach.
But the £170m figure has raised eyebrows in industry circles, especially given that Aston Villa, for example, estimate that Covid cost them a far more modest £56m.
Chelsea have not said how much they believe the pandemic cost them, but they may have to provide that analysis given that they have now posted the heaviest losses in the Premier League for a second successive year.
Our research shows that the West Londoners’ deficit over FFP’s rolling three-year rolling assessment – with the 2019-20 and 2020-21 results averaged in line with the Premier League’s Covid allowances – is £330m.
Todd Boehly’s lavish, scattergun approach to recruitment has seen Chelsea spend another £600m since then, meaning the club – who are unlikely to have lucrative Champions League football next term – will need a fire sale to raise funds.
It is routinely said that Everton and Chelsea are facing financial issues, but this is actually a regulatory problem rather than a monetary one.
The owners of both clubs have the cash to finance their operations, they just don’t have the wiggle room under FFP regulations.
The situation is similar across the board. It is understood that when the six clubs yet to release their accounts have done so, Premier League sides will have lost a combined total in excess of £650m for 2021-22.
And yet English clubs are still a hot commodity for overseas investors, with more clubs than ever targeted for full takeovers or minority investment.
Chelsea were bought less than a year ago for £2.5billion, and it is understood that Farhad Moshiri is still courting interest from MSP Sports Capital about a 20 per cent investment in Everton.
Newcastle United, Bournemouth and Southampton have also changed hands in the last 18 months. Man United will have done before the end of the season. The destinies of West Ham and Leeds United meanwhile are up in the air.
While the losses across the board are unsustainable, turnover is skyrocketing thanks to a world-beating TV deal, and investors believe there is massive scope for commercial growth.
Sources have told this site that new competition for the broadcast rights from OTT platforms Apple TV and DAZN could be set to further inflate Sky, BT Sport and Amazon’s £5billion TV deal.
But it is a time of dramatic change in the sport, with the threat of an independent regulator sparking the Premier League to adopt a more draconian stance in terms of enforcing its own financial rules.
Significantly, sources have repeatedly told this site that a new financial fair play structure, one which mirrors Uefa’s new revenue-based system, will be introduced in the near future.
How the transition from the current to the new model will be managed is not known, but it leaves open the possibility that Everton might be the only team in the history of Premier League FFP to be punished for alleged breaches.
Experts have told this site that a points deduction this season is very unlikely given that an appeal process would be launched by either Everton or the Premier League depending on the independent commission’s verdict.
The Premier League also has the power to strip Everton of points, as well as implement a transfer ban or spending cap.
The general feeling within the football finance industry is that it genuinely could go either way.
Football Insider has also been told that Everton were genuinely blindsided by the Premier League’s announcement, as were Man City when charges against them were presented earlier this year.
In other news, pundit drops “critical” Alex Iwobi verdict after Everton source’s reveal.