On Friday, UEFA announced that seventy-six clubs are under investigation for potential financial fair play violations, and said clubs have been asked to submit additional financial information. While the list of clubs has not been made public yet, as first reported by Martyn Ziegler (and subsequently confirmed elsewhere), Chelsea is not on the list. As such, Chelsea has successfully complied with the financial fair play regulations and will not be facing any sanctions next season.
For those who have been following our FFP coverage over the past several months, the fact that Chelsea has complied with financial fair play should come as no surprise. As I wrote back in September, it is unlikely that Chelsea will ever have a problem complying with FFP. In fact, all the regulations do is cement Chelsea's place as one of the handful of clubs that are able to challenge for both domestic and European laurels year in and year out.
It is important to note that the January transfer window, and specifically the sales of Kevin de Bruyne and Juan Mata, had no bearing whatsoever on Chelsea's FFP compliance during this first monitoring period. The first monitoring period covers the 2011-12 and 2012-13 financial accounts. The January transfer activity falls under the 2013-14 accounts.
While Chelsea did lose nearly £50m during the 2012-2013 financial year, FFP accounting is much different than the accounting submitted to Companies House. There are a number of write-offs that Chelsea will be able to utilise that will reduce their losses significantly for the purposes of FFP accounting (I will likely calculate an estimate of what Chelsea's 2012-13 FFP losses will be in the coming months).
While it is mandatory for Chelsea to reduce losses in 2013-14 to ensure that it remains compliant with FFP during the second monitoring period, the club will still be allowed around £38m in total losses over the 2011-12, 2012-13, and 2013-14 books. The additional revenue stemming from the new Premier League broadcasting deal (~£25m annual increase) and the new adidas deal (£10m annual increase) will bring in an additional £35m annually. When we also take into account the increased broadcasting revenue from the club's participation in the Champions League and the club's ability to consistently increase its commercial revenue, it becomes clear that Chelsea will generate significantly more revenue in 2013-14 than it has in any previous year.
Unfortunately, there have been several inaccurate reports in the media that mistakenly assume Chelsea sold Mata and de Bruyne out of financial necessity. Of course, when one takes a look at the numbers, it becomes clear that Chelsea's finances are in order. Further, it becomes easier to understand that the decision to sell De Bruyne and Mata was more about recognising the market value of these players, selling high on players that were surplus to requirements, and earning a considerable return on its initial investment as opposed to the misguided notion that the club had to sell assets in order to avoid FFP sanctions.
Now that we know Chelsea has nothing to worry about with regards to FFP, what does this mean for the other seventy-six clubs, some of which are in direct competition with Chelsea both domestically (Manchester City) and in Europe (PSG)?
