Dan Jones looks at the FFP and the implication it could have on Wolves
What a year it’s been.
Not since Harry Enfield and Chums have people from the Black Country taken more enjoyment, or been more likely, to tell neighbours and strangers alike that “we’m considerably richer than yow”.
Although unlike Enfield’s nouveau-riche braggart, after Fosun’s £30 million takeover in 2016, Wolves are the richest bloke in the room.
Sadly however, the days of splashing the cash without consequence are long gone. The jealous, creeping shadow of Financial Fair Play seemingly follows us at every turn.
But what does it actually mean? Should we be worried?
While there will be plenty of FFP aficionados out there, if you’re still confused by the system’s inner workings as I was, and arguably still might be, this blog will attempt to break it down as much as possible and shed some light on what it all actually means for Wolves.
So, bear with me, because for a Fancast article this is about to get pop culture light and accountancy heavy.
What are the basic rules?
Simply put, Wolves can lose on average £13m a season.
The club’s accounts are scrutinised on a three-year rolling basis.
Over that three year period, Wolves are able to make a maximum loss of £39m.
There is a lower threshold if an owner isn’t prepared to pump in cash, but as we know Fosun have loads-a-money, I’m only referencing the highest amount allowed.
What does Fosun’s recent spending mean for Wolves?
Well, if you work for a London based newspaper, AFC Wolves will be kicking off the first game of their 2020/21 season in the West Midlands Regional League away at Darlaston Town.
For the rest of us, not a lot.
Predominantly as a result of the sale of Benik Afobe, as well as receiving our final parachute payment, Wolves registered a profit of £5.8m for the 2015/16 season.
We were the only Championship club to do so.
Added to the £700k profit made during the 2014/15 season, and with exemptions applying to academy spending, even with a net spend of £27.7m over the two transfer windows prior to this summer, it’s highly unlikely we were anywhere near the FFP threshold when it was assessed in March.
Despite this, there is still a certain nervousness surrounding FFP and its implications – particularly with some of the transfer fees currently being bandied around.
We have, after all, smashed our transfer record twice in 2017.
To wiggle around this, football club accountants have a trick up their sleeves.
What a club can do
For the purposes of FFP, a transfer fee is not taken into account in its entirety. Instead the fee is spread across the length of the player’s contract (if you really want to impress or bore your friends, this is apparently called ‘amortisation’).
As an example, take the purchase of Ruben Neves this summer.
He arrived for a reported £15.8 million and signed a five year contract. Divide the £15.8m fee by the years of his contract and you get £3.16m per year.
This is the amount that will count towards FFP for the 2017/18 season, and the same again for the next five years (in the admittedly unlikely event that he’s still here), until it is written down to zero.
In summary then, taking this season in isolation, Ruben Neves cost us £3.16m.
If his wages are roughly £40,000 a week, that brings his transfer cost to a grand total of £5.24m for FFP purposes.
What a bargain.
I should point out that all of the above goes out the window if Wolves are promoted. For one thing the maximum loss threshold increases drastically.
For that reason, looking too far ahead is ultimately pointless.
But to answer my initial question, there’s no reason to be unduly worried for the foreseeable future.
Regarding this summer then, whilst clearing out the deadwood is long overdue, any assertion that we need to sell to buy a striker is ludicrous.
Of course, there still has to be a degree of caution, but the risk of the club being landed with a huge fine or having receivers knocking on the door any time soon is as likely as Fosun’s private plane touching down at Bobbington airport with Anderson Talisca on board.
In truth, the main downside to not balancing the books now is that Wolves will have to sell quicker, and in bulk, if it doesn’t work out.
If the worst does come to the worst and we don’t achieve promotion, clearly certain players will have to leave.
Thankfully, Fosun have that covered.
After purchasing saleable assets like Helder Costa and the aforementioned Neves, who are only ever likely to appreciate in value, we would be able to sell for sizeable profits, before rebuilding by bringing in the next young, exciting talents from Uncle Jorge’s stable.
It’s a transfer strategy that quench the fans’ thirst for exciting transfers, reignites the fans’ interest and increases quality for a promotion push, whilst acting as its own failsafe if it all goes south (literally, if Fulham and Reading get promoted and we don’t).
And whatever happens this season, we look set to remain considerably richer than our rivals for quite some time.