Chelsea’s historic January transfer window came to an end in the early hours of Wednesday morning when they confirmed a British record deal for Argentina’s World Cup winner Enzo Fernandez.
And, after an unprecedented winter window in which they signed seven senior players for over £280m, there is one question dominating the sport.
As they are chelsea able to embark on such a spending spree while respecting Uefathe financial fair play (FFP) rules of ?
The answer, unsurprisingly, is complicated.
the athletic explain below.
How does Chelsea plan to make it work?
Chelsea fans have been given a crash course in payback over the past month as Todd Boehly and Clearlake have pushed the boundaries of what is possible with the length of players’ contracts.
signing Mykhailo Mudryk to a deal that runs until June 2031, for example, allow their initial transfer fee of €70m (£62m) to be spread over eight years on the books rather than a more conventional four or five, reducing largely its annual cost in the accounts
Fernández, Badiashile, Madueke and the summer signing Wesley Fofana they are in equally long deals. This write-off gimmick, which could end up backfiring if the players on these big contracts don’t live up to expectations on the field, is one of the conditions that Boehly and Clearlake have exploited to maximize their opportunity to anticipate the level of spending. that most elite clubs would span three or four summer windows, but not the only one.
Another arises from the other half of how football clubs report transfers in their accounts. Transfer fees for purchased players may be amortized over the duration of their contracts, but transfer fees for sold players are recorded immediately in a lump sum (less any amortized cost remaining on the books).
These differing accounting practices can make it surprisingly easy for clubs to significantly offset or even fully balance several high-profile signings with just one reasonably-sized sale in their annual results, especially if the player or players sold are already fully written off. or the academy. graduates, who represent pure profit on the books.
Mudryk joined Chelsea in the January window (Photo: Getty Images)
This works?
An important example from Chelsea’s recent history: for the financial year ending June 2022, despite signing Romelu Lukaku in a disastrous £97.5m deal from Inter Milan, the club made a huge profit from player sales, estimated by respected football finance analyst Swiss Ramble at £160m, due to the departure of Tammy Abraham scent, kurt zouma a west hamFikayo Tomori to AC Milan Y Marc Guehi a crystal Palaceamong others.
Chelsea’s overall financial results for 2021-22 are not yet public. The club has until March 31 to present its accounts at Companies House. But in recent years, large gains from player sales have been enough to lead the club to an overall positive result, despite match days and commercial revenue consistently lagging behind its earnings. Premier league Rivals: Most recently in 2019-20, when a £143m profit from player sales contributed to an overall pre-tax profit of £36m.
What is Chelsea’s current situation?
Swiss Ramble estimates Chelsea’s pre-tax earnings for 2021-22 to be £19m. Between those two years in the black is a whopping £156m loss in 2020-21 as a result, in part, of the huge spending spree of summer 2020 which brought Kai HavertzTimo Werner ben chilwell, Hakim Ziech Y edward mendy to the Stamford Bridge.
FFP has traditionally only allowed clubs to lose up to €30m (£26.3m) over a three-year follow-up period, although various adaptations were made in recognition of the impact of COVID on club revenue.
In September, UEFA listed Chelsea as one of 18 clubs that were “technically able to meet the break-even requirement thanks to the application of the COVID-19 emergency measures and/or because they benefited from positive break-even results.” historical,” he added. that more financial information had been requested and that the relevant clubs “will be closely monitored in the coming period.”
UEFA also reminded Chelsea that those particular COVID accommodations no longer apply, but FFP is changing in ways that make Boehly and Clearlake’s current spending more viable. Starting in 2023-24, the allowable loss limit will double from €30 million to €60 million, which would include the 2022-23 season as the third year of the tracking period. Clubs deemed to be in good financial health will also be given an additional €30m in allowed losses over a three-year monitoring period, meaning Chelsea could be allowed to lose up to €90m in three years, triple the previous limit.
Before the deadline, when Chelsea finally agreed a UK record deal for Fernández, Swiss Ramble estimated a loss of €96m for Chelsea over the three years to 2022-23, just slightly above the allowed loss limit of €90m. millions of euros. He also estimated the cost of the club’s squad at 92 percent of revenue and profit from player sales; UEFA has ruled that all clubs must reduce this ratio to 90 percent for 2023-24, then to 80 percent in 2024-25 and 70 percent in 2025-26.
Chelsea finally secured a deal for Fernández in the early hours of Wednesday morning (Photo: Getty Images)
Should Chelsea have any concerns?
Recent history suggests that Chelsea have relatively little to fear, even from being found in default of the FFP. UEFA’s latest round of sanctions, announced in September, amounted to a list of fines, only a small percentage of which would be paid immediately and the rest conditional on future compliance.
It could be argued that it is the equivalent of a speeding ticket for an ambitious club determined to spend big.
Boehly has publicly insisted on numerous occasions that Chelsea have FFP on their minds, but it’s clear that he and Clearlake are pushing as close to the limits as possible to try and build a team capable of constantly competing for the biggest domestic and European trophies. important. perhaps taking into account that financial and regulatory conditions in the coming years may not be so favorable for this scale of investment.
Is this level of spending likely to continue?
UEFA has already moved to close the redemption loophole for future transfer windows; even if a player signs a seven- or eight-year contract starting in the summer, his transfer fee will be spread over no more than five years in any FFP calculation.
The team’s increasingly strict cost control rule will also put pressure on Chelsea and their rivals to be more disciplined in handing out lucrative salaries to players and managers.
Then there is also the £60m in annual business income that Chelsea will lose from next season, as a result of the completion of a £40m a year deal with the title sponsor of the Three shirt and the early termination of a £20 million a year deal. one-year deal with title sponsor Whalefin. Neither has been replaced yet, the soccer sponsorship market is less attractive at the moment, and time is ticking before the manufacturing process for next season’s kit begins.
Most important of all, Chelsea are currently facing the very real prospect of playing the 2023-24 season without Champions League football, and perhaps without European involvement of any kind. That was not at all in Boehly-Clearlake’s initial business plan, and it would have a significant impact on the club’s transfer ambitions over the next two windows.
Todd Boehly completed a takeover from Chelsea in May 2022 (Photo: Getty Images)
This is where it is important to take into account the very defined profile of the player Chelsea have targeted in this January window: players aged 23 and under who have, to varying degrees, elite ability and can become key players. of the next great team. at Stamford Bridge or increase its resale value in the coming years.
If enough of them prove to be positive assets on or off the pitch, nine-figure transfer splurges will not be required in future windows.
In any case, no one should expect this level of transfer spending to continue indefinitely. Boehly is not an oligarch and Clearlake Capital is not a sovereign wealth fund. The money being invested comes from private capital, and with it comes the expectation of an eventual positive return, either in the form of annual profits or, more likely, a significant increase in Chelsea’s value that can be realized if the club folds. sells. .
(Photo: Getty Images)
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