Are Manchester City Spent?

Manchester City Owner Sheikh MansourIt is a truth universally acknowledged, that a single man (ok, or one with two wives) in possession of a good fortune, must be in want of a Premier league football club. In Manchester City, Sheikh Mansour bin Zayed bin Sultan Al Nahyan had found just such a club when he purchased the blue half of Manchester in 2008. Since then the money he has invested has propelled City from Premier League also-rans to serious Champions League, or even title, contenders. However, with the new UEFA ‘financial fair-play’ regulations coming into effect in the 2011-12 season stating that no club can make an aggregate loss of over €45m (about £39m) or they will face expulsion from European competition, the Blues may have to do more than just curb their enthusiastic spending to meet the guidelines.

Speaking to The Guardian, Manchester City chief executive Garry Cook stated;

“Clearly our intention is to comply… Our two-year plan was to take a budget and build a competency to compete at the highest level, not forgetting the need for succession planning in every position. We are pleased with how that worked, and will not be signing players to the same level of intensity in the next transfer windows. Financial fair play is on our conscience, we talk about it at every board meeting, and it’s part of our long-term plan.”

In relative terms, Mansour and his Abu Dhabi conglomerate may feel that this changing of the goalposts by UEFA is slightly unfair on them, especially considering their contemporary, Roman Abramovich, has had seven years to fashion his Chelsea side into a club capable of mounting a sustained challenge on all fronts. But it seems, even though their hands have been somewhat forced by these new UEFA regulations, Manchester City will go down a route that has already been trodden by Abramovich and Chelsea, with an era of outlandish and exorbitant spending swiftly followed by a period of relative austerity, ultimately culminating in the promised land of self-sufficiency for the clubs.

If what Cook states is true, then City’s spending over the last couple of seasons would have been fairly sensible considering the golden goose they had been given in the guise of the bottomless pockets of Mansour. I realise I stretch the word ‘sensible’ to its limits when used in conjunction with Manchester City’s spending, but with Cook’s confidence that City can comply with UEFA regulations, perhaps those behind the scenes at Eastlands have spent hard and fast at the right time.

However, as The Guardian’s Matt Scott notes, this may be very far from the truth. This is because of the way football club’s finances, and especially those concerning transfer fees work. Scott gives the example;

“When David Silva joined City for £26m on a four-year contract in June, it added £6.5m a year to City’s amortisation charge. By the end of last season the total charge had already reached £71m”

Amortisation, the process of paying off a debt gradually, is applicable to all football clubs. So, in essence, there will be a lagging effect in terms of City’s financial expenditure. Although superficially money may well seem to cease leaving the club in terms of transfer costs, in reality the level of expenditure on transfers will remain the same, and with the additions of Jérôme Boateng, Yaya Touré, Mario Balotelli and James Milner, Manchester City’s amortisation charge will be around £90m per year. This, combined with an annual wage bill thought to be around £150m, shows you the level of loss City are dealing with.

This loss is of course offset by the clubs turnover of £125m annually, and through a lucrative place in the Champions League and the potential earnings from prize money this season, City could offset the loss even further. However, with the club’s successes comes wage bonuses and Scott’s conservative estimates are that City could be looking at “a £100m-a-year deficit come 2011-12”, a far cry from UEFA’s £39m aggregate loss regulations.

Of course the players City have bought over the past couple of seasons, as well as being a financial drain on the club, are fiscal assets, and the Eastlands club can make a dent in both their amortisation charges and their substantial wage bill by offloading some of these players. Considering also that UEFA have placed limitations on what “related companies” can offer financially in terms of sponsorship, Sheikh Mansour’s hands are somewhat tied and the sale of players at Manchester City seems the only quick way to toe UEFA’s new financial line.

So although these new UEFA regulations have signalled the dawn of an age of austerity in the blue half of Manchester, making their previously lavish spending seem warranted, the club’s accounts are still very much feeling the effects. Meaning by the 2011-12 season Eastlands could well be a litmus-test for UEFA’s resolve to stick by their new financial guidelines.

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