Henley research reveals UEFA’s Financial Fair Play (FFP) regulation significantly improves English Premier League Clubs’ profitability, but not sustainability

Despite rapid and consistent growth in revenue, football clubs in the top five European leagues (English, Spanish, German, Italian and French) reported record financial losses in 2010 along with unprecedented debt levels.

Against this backdrop, The Union of European Football Associations (UEFA) introduced the FFP regulation to curtail the poor financial health of clubs participating in its competitions. Encouraging clubs to operate within their financial means, the cornerstone of the FFP regulation is the break-even requirement that restricts losses to not more than €5m across three years.

To test whether UEFA’s regulation has improved financial performance in the English Premier League (EPL), Henley’s study included a sample size of 37 EPL clubs that participated in the league at least twice between 2005-2019. Financial data was collected from club financial statements from 2005-2019 to cover seven years pre-FFP as well as the full FFP period (2011-2019).

Key findings of the study show that FFP has positively impacted the profitability of the EPL football clubs exposed to the regulation as they have been less loss-making since its introduction. Clubs have been successfully encouraged to adopt more financially responsible management and practices, resulting in increased revenues and enhanced financial performance.

Key post-FFP statistics for the clubs included:

• Average relevant income increased by 91% (the most significant contributor being broadcast revenue).
• Average relevant expenses increased by 75%.
• Wages increased by 88%.
• Break-even result increased by £37.46m more than it increased for the control group.

Profits invested in player transfers above debt reduction

While profitability has seen a positive result, the study did not find strong evidence that FFP regulation has significantly improved the sustainability of clubs, as measured by their indebtedness.

Average debt levels of clubs actually increased by 48% post-FFP. The researchers suggest that the increased profits are being reinvested into player transfers rather than the reduction of debt. The win-maximisation objective of football clubs and the correlation between on-field success and investment in player acquisition encourages clubs to prioritise reinvestment of profit into the playing squad above settling their debt.

Professor Andrew Urquhart, Professor of Finance and Financial Technology and Head of the ICMA Centre, said:

“Our study demonstrates that UEFA’s FFP regulations have positively transformed the financial management of English football clubs. By restricting excessive spending and losses, clubs are now operating on a better footing. However, there is still work to be done. For a more sustainable future, clubs should consider channelling profits into debt reduction rather than transfer activity.”