Man United wants to follow the Premier League and UEFA’s Financial Fair Play rules, but they must be strictly enforced.
Manchester United’s top executives addressed investors on Thursday, as the club announced its latest set of financial results, with an unmistakable note of financial caution.
The headline figures were a record-breaking wage bill and a sharp increase in operating losses, with net debt, also rising and another £33 million leaving the coffers in dividends in the fiscal year ending June 2022. Those results come as United embark on an unprecedented summer spending spree, splashing out around £225 million on new players for Erik ten Hag’s squad.
The £384 million wage bill will benefit from the slew of departures over the summer, but this was also a recruitment drive like United had never experienced before. Football director John Murtough stated that such a window would not be repeated, while chief financial officer Cliff Baty stated that wages would return to a “more normalized level” and emphasized the importance of Champions League football in terms of revenue.
Both Baty and CEO Richard Arnold discussed the current financial situation. Arnold mentioned “macroeconomic pressures” and the “inflationary environment,” and Baty mentioned the impact on costs like travel, flights, and wages.
The message was clear: this summer’s spending spree is likely to be a one-time occurrence. United is preaching a sustainable model under Glazer ownership, which is difficult for supporters to swallow when dividends totaling £155 million have now been paid in seven years and interest payments under Glazer ownership now total an eye-watering £886 million.
During the call’s question and answer session, Arnold discussed the balance of sustainability and investment and brought up Financial Fair Play rules, insisting that United is determined to follow them.
“If you look at our activity in this space historically, we have to strike a balance between investing in the talent required to perform at the levels expected of Manchester United and ensuring long-term sustainability.” “We believe FFP contributes to both of these goals,” he said.
In theory, given the revenues it can generate, United should benefit from a strict interpretation of FFP rules, but the mismanagement that has allowed that wage bill to spiral would clearly be an issue in the long run.
However, for United’s strategy to be effective, FFP rules must be strictly enforced. The Premier League rules allow clubs to make a loss of £105 million over three years, which must be made up by the owners.
United would be on the verge of doing so, but offsetting expenditure on infrastructure or football development projects can help, and United has invested in their women’s team and academy. There is also additional leeway as a result of losses sustained during the Covid-19 pandemic.
These methods of avoiding potential violations may allow clubs to push the boundaries. Chelsea’s recent massive transfer window should have pushed them over the edge, but no club has yet broken Premier League rules.
There have been cases for UEFA, but their FFP guidelines are also on the verge of collapse. They fined eight clubs three weeks ago for failing to meet the break-even requirement for UEFA club competitions in 2021/22.
However, PSG, Inter Milan, Juventus, Roma, AC Milan, Marseille, Monaco, and Besiktas were fined a total of €26 million, with a further €146 million contingent on the clubs’ compliance with respective settlement agreements.
UEFA is keeping an eye on another 19 clubs, including Manchester City, but it appears that their FFP regime is weakening rather than strengthening.
There’s a valid argument that financial controls are targeting the wrong owners when it can punish clubs that invest but don’t blink an eye at United, which has a net debt of more than £500 million.
United, on the other hand, is working within the rules, and their desire to follow FFP suggests that another transfer window like the one we’ve just seen is a long way off. For that strategy to succeed, Arnold and the company will need the governing bodies to ensure that their financial rules have teeth.
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