The Astonishing Truth Behind Chelsea's Transfers: Unlocking the Secrets of Financial Fair Play Regulations

Chelsea's massive spending of £601.7m last season and an additional £345.9m on new signings this summer has left football fans questioning how they manage to comply with Financial Fair Play regulations. Breaking the British transfer record twice within six months, with the arrival of Moises Caicedo for a staggering £115m, has pushed Chelsea's expenditure under co-owner Todd Boehly close to £900m. This figure has now further increased following the confirmation of Romeo Lavia's £58m transfer.

With the possibility of more signings at Stamford Bridge before the summer transfer window closes, We News interviewed football finance expert Kieran Maguire to shed light on how Chelsea have seemingly adhered to financial regulations in the Premier League.

Due to your consent preferences, you’re not able to view this.

Open Privacy Options

How are Chelsea squaring this incredible outlay of money since Boehly took over?

Chelsea have decided to spread the cost of the players by signing them on long contracts.

By signing Mykhailo Mudryk to an eight-and-a-half year contract, the £88.5m cost is spread out over that period for accounting and FFP purposes. This results in an annual cost of slightly over £10m, thanks to a process called amortisation that reduces the yearly expense by spreading out the transfer fees.

That appears to be the strategy that Chelsea have employed over the last couple of windows.

So, that would be the same for players such as Romeo Lavia, who has signed a seven-year deal at Stamford Bridge?

Image:

Romeo Lavia scored for Southampton against new club Chelsea last season

Absolutely. It can work both ways for Chelsea.

The club can safeguard itself from other clubs attempting to recruit the players by ensuring their development and tremendous achievements, as this would mean the players have several years remaining on their existing contracts.

However, the drawback arises if the player fails to deliver, resulting in the challenge of dealing with the substantial wages they are earning, which the club is obligated to pay for the next six, seven, or eight years.

Therefore, if it works it is fantastic but if not, it is weighing the club down a bit like an anchor slowing things down.

How far can this strategy stretch? Could Chelsea keep doing this, keep giving long contracts and therefore still be okay in terms of FFP?

Image:

Chelsea signings under Todd Boehly (excluding Romeo Lavia)

The issues will be that you are restricted to a 25-man squad as far as both the Premier League and UEFA are concerned.

Continuously expanding the player roster without considering that each player is likely to be on a contract valued at £7m, £8m, or £9m per year poses a problem.

Suddenly, you will find yourself with a greater number of players under these substantial contracts, resulting in a significant increase in your wage bill by £50m or £60m. Additionally, the new UEFA financial and sustainability regulations, which will take effect next summer, will limit your spending on wages, agents fees, and net transfer costs to 90 percent, then 80 percent, and ultimately 70 percent of your income.

Now Chelsea haven't qualified for the Champions League this season, will that affect their spending in future transfer windows?

It would be restrictive if Chelsea are not in the Champions League next season. It could catch up with them sooner rather than later.

When Chelsea emerged victorious in the 2021 Champions League, they earned approximately €120m (£106m) in prize money. In addition to this substantial amount, each home game held at Stamford Bridge typically brings in a revenue of £3m to £4m, with further bonuses received from sponsors.

Now, if you then compare that to the Europa League, for every £1 you make in the Europa League you are making around about £4.50 in the Champions League.

Has the spending since Boehly took over surprised you?

It is somewhat surprising that Boehly, coming from a private equity background where the primary objective is typically to reduce costs and enhance the appeal of a business for potential buyers, is now dedicating itself to a significant financial commitment, involving both transfer expenditures and salaries.

Chelsea's recent developments have surely caught many off guard, especially when compared to the vast spending we witnessed during Roman Abramovich's tenure. It's worth recalling that Abramovich's ownership resulted in a staggering loss of £900,000 per week over a span of 19 years.

Datawrapper

Due to your consent preferences, you’re not able to view this.

How relevant is FFP? Can clubs always find ways to skirt around FFP rules?

When it comes to new rules being introduced, the accountants and lawyers tend to approach them with a forensic perspective, meticulously analyzing and uncovering the potential flaws and vulnerabilities present in these regulations. This process often resembles a game of whack-a-mole, where one problem is resolved only to have another one pop up.

The regulators often attempt to address this situation. Upon examining these regulations, it appears that clubs may have the chance to be more innovative in how they account for their expenses. Consequently, this could result in clashes between game administrators and individual clubs who take a more relaxed stance on the moral and ethical aspects related to financial and sustainability rules.

UEFA's rule change in response | Does this not apply to Chelsea?

Chelsea's rivals won't be able to replicate their strategy in the coming years due to UEFA's new regulations. The loophole that allowed clubs to extend transfer fees over lengthy contracts will be closed, starting this summer. As a result, clubs will only be permitted to distribute transfer fees over a maximum of five years.

However, these rules will not have a retroactive effect, providing an advantage to Chelsea. The alterations will not affect the club's calculations for Financial Fair Play after their exceptional January transfer window.

Why has Chelsea managed to secure deals longer than five years this summer, despite UEFA closing this loophole by implementing a five-year maximum contract length? The Premier League, however, has not yet adopted similar regulations.

Player sales offsetting huge outlay

In addition, Chelsea is capitalizing on their failure to qualify for this season's UEFA competitions. Due to their 12th place finish last season, the Blues are not obliged to comply with the new UEFA regulations.

Chelsea's expenditure last season amounted to approximately £600m, resulting in an average of £75m per year when dividing the total by eight.

Chelsea have been actively getting rid of high-earning players this summer, including Pierre-Emerick Aubameyang and Kalidou Koulibaly, which has allowed them to recover more than £200m from player sales. In particular, the transfer of Kai Havertz to Arsenal for £65m has resulted in a significant accounting profit.

Additionally, Mason Mount and Ruben Loftus-Cheek, both graduates from Chelsea's academy, were sold for a total of £75m. The proceeds from their sales contribute directly to the overall profit shown in the financial records.

Follow the summer transfer window with Sky Sports

Which players will be switching clubs this summer during the transfer window, which starts on June 14 and concludes at 11pm on September 1 in England and midnight in Scotland?

Stay informed about the most recent transfer news and rumors on our exclusive Transfer Centre blog available on We' digital platforms. Additionally, you can stay updated on all the arrivals, departures, and insightful analysis on We News.