Chelsea’s January transfer window came to an end in the early hours of Wednesday, when they confirmed a record England signing for Argentina World Cup winner Enzo Fernandez.
And, after an unprecedented winter window in which they signed seven players for more than £280 million, there is one question that will dominate the sport.
How can Chelsea start such a spending spree while complying with UEFA’s Financial Fair Play (FFP) rules?
The answer, as you might expect, is complicated.
The Athletic explained below.
How does Chelsea plan to do it?
The supporters of Chelsea were given a competitive course in amortization last month, while Todd Boehly and Clearlake put the limits of what is possible with the length of the player’s contract.
By signing Mykhailo Mudryk to a deal that runs until June 2031, for example, they could post his first €70 million (£62m) transfer fee eight years earlier on the books. of four or five common elements, thus greatly reducing his. annual cost in records.
Fernandez, Badiashile, Madueke and summer signing Wesley Fofana are on similar long-term contracts. This amortization trick – which can end up backfiring if the players on these super-sized contracts fall short of expectations on the pitch – is one of the conditions Boehly and Clearlake in order to increase their time to advance the level of rent. Most elite teams are spread over three or four summer windows, but not just one.
Another one that comes from the other side of football clubs reporting changes in their accounts. Transfer fees for traded players may increase over the length of their contracts, but transfer fees for traded players are immediately fixed at one lump sum (minus their residual value recorded in the books).
These different accounting practices can make it easier for teams to spend more or balance some high-profile brands with as little as a small sale in their annual results – even if the player or toys have been sold completely or the school. graduates, showing net worth in books.
Mudryk joined Chelsea in the January transfer window (Photo: Getty Images)
Does this work?
An important example from the history of Chelsea: for the financial year ending in June 2022, despite the signing of Romelu Lukaku in a good loan of £97.5m from Inter Milan, the club actually made a profit much from the sale of players – estimated by the famous football analyst Swiss Ramble to cost £ 160m – due to the departure of Tammy Abraham to Roma, Kurt Zouma to West Ham, Fikayo Tomori to AC Milan and Marc Guehi to Crystal Palace, among others.
Chelsea’s financial results for 2021-22 are not yet public. The company has until March 31 to file their accounts with the company. But in recent years, the huge revenue from player sales has been enough to lift the club into the black overall, although matchday and revenue still lags behind. of their Premier League rivals – especially in the 2019-20 season, when there is a £143m fee from the player. The sale delivered a pre-tax profit of £36m.
What is Chelsea’s current state of play?
Swiss Ramble estimates that Chelsea’s pre-tax profit for 2021-22 will be £19m. Between those two years in the black, there are 156 million losses in the 2020-21 season due to the large amount of spending in the summer 2020 that brought in Kai Havertz, Timo Werner, Ben Chilwell, Hakim Ziyech and Edouard Mendy at Stamford Bridge.
FFP only allows clubs to lose up to €30m (£26.3m) over a three-year period, although some structures have been made to understand the impact of COVID on clubs. income.
In September, UEFA listed Chelsea as one of the 18 clubs “who can effectively meet the suspension requirements due to the request of the emergency measures COVID-19 and / or because they have benefited to the best holiday results in history,” added. More financial information has been requested and relevant companies “will be closely monitored in the future”.
UEFA has reminded Chelsea that those COVID accommodations no longer apply, but FFP is changing ways to make the hiring of Boehly and Clearlake more efficient. From 2023-24, the limit on the amount of losses allowed has been doubled from €30m to €60m, making 2022-23 the third year of review. Clubs deemed to be in good financial health will be given a €30m allowed loss allowance over a three-year period, meaning Chelsea could be allowed to lose the €90m over three years – three years.
Ahead of the deadline, when Chelsea finally agreed to an English contract for Fernandez, Swiss Ramble estimated the cost of 96 million euros for Chelsea in the three years until 2022-23 , less than the limit of 90 million euros. He also estimated the cost of the club at 92 percent of revenue and income from the sale of players; UEFA has decided that all clubs must lower this ratio to 90 per cent for 2023-24, then 80 per cent in 2024-25 and 70 per cent in 2025-26.
Chelsea finally sealed a deal for Fernandez in the early hours of Wednesday (Photo: Getty Images)
Will Chelsea be worried?
The latest news shows that Chelsea have little to fear despite having to break FFP. UEFA’s final punishment, announced in September, included a list of fines – only a small part of which would be paid immediately with the rest based on future performance.
You could argue that this is the equivalent of a speeding ticket for an ambitious team that decides to spend big.
Boehly has insisted on several occasions that Chelsea are considering FFP, but it is clear that he and Clearlake are pushing as close to the limits as possible in an attempt to build a squad that can consistently compete for local and European dishes. Consider that financial and regulatory conditions in the coming years may not be very favorable for this type of investment.
Is this level of spending likely to continue?
UEFA has already moved to close the amortization loophole for the next few windows; even if the player is signed on a seven or eight year contract from the previous summer, their transfer fee will be spread over five years in any FFP number.
The tight control of the club’s price tag will also put pressure on Chelsea and their rivals to be penalized when it comes to handing out wages to players and teacher.
Then there’s the £60m in annual revenue that Chelsea will lose from next season, thanks to the end of a £40m-a-year deal with the big three shirt sponsors and the first completion of a £20m-a-year with Whalefin arm support. Nor has it changed, the football supporter market is less than inviting at the moment, and the clock is ticking before next season’s process begins.
More importantly, Chelsea now face the very real prospect of playing the 2023-24 season without Champions League football, and without European participation at that. this way. It was never in the original Boehly-Clearlake business plan, and it will have a significant impact on the team’s transfer intentions in the next two windows.
Todd Boehly has completed taking over Chelsea in May 2022 (Photo: Getty Images)
This is where it is important to understand the specifics of the players Chelsea have in mind this January window: players aged 23 or under who have, to varying degrees, It is possible to grow into the main elements of the next big company. at Stamford Bridge or to increase their resale value in the coming years.
If enough of them have good properties on or off the pitch, nine transfer splurges will not be required in future windows.
In any case, no one expects this level of spending to continue. Boehly is not an oligarch and Clearlake Capital is not a sovereign wealth fund. The money invested is drawn from personal responsibility, and the hope of a good return – in terms of annual income or, more likely, a significant increase in wealth of Chelsea can be achieved if the club is sold. .
(Photo: Getty Images)
