Chelsea face spending clampdown
Chelsea Football Club is facing legal curbs on its vast spending power. New rules which could be brought in next season would end the club's ability to buy the biggest stars with ease.
There is growing anger at the unfairness of Chelsea's wealth among football bosses, the game's governing body in Europe Uefa and EU sports ministers.
Their main objection is that Chelsea FC is allowed to run up massive losses as a business while spending hundreds of millions on players because the club is bankrolled by Roman Abramovich.
Sports minister Richard Caborn attended a Brussels meeting which discussed reining in Chelsea. He said: 'There is support for the idea of introducing a better relationship between income earned by clubs and the amounts spent.'
Since Mr Abramovich took over the club has spent £276m on players and made losses of £228m.
Ministers believe they can act against clubs because the massive losses run up by the biggest spenders - especially Chelsea - are effectively subsidies which are subject to normal company laws.
They say any other industry handed the same kind of subsidies as some football clubs would face investigations from the European bodies which regulate competition.
There is growing support across Europe for a new licensing system which would limit how much a club could spend on players and salaries. The exact spending limits have yet to be finalised but they are likely to be a ratio of a club's turnover or profit.
The spending limits are being drawn up by Uefa and the governments of Europe's leading football nations - Britain, Germany, Italy, Spain, France and Portugal.
In almost any other line of business, Chelsea Football Club plc would have long since gone bust or been wound up by its owners.
But in football, where billionaires revel in the reflected glory of the beautiful game, normal rules do not apply. Since Roman Abramovich's takeover in 2003, Chelsea has reported two sets of financial results. In 2004 it made an £87.9m loss and last year it was £140m in the red.
Chief executive Peter Kenyon - busy trying to increase revenues from merchandise and from new sources of income such as financial services - claims the club will break even by 2009/2010, although he said he would not be 'overly surprised' if this failed to happen.
Few in the game seriously believe the turnaround can be achieved that quickly. Although the wage bill was slightly down and revenues up last season, this summer's signing spree - with the Champions League in mind - wiped out all the gains.
In a smaller scale, but still telling detail, last night's Panorama showed director of youth football Frank Arnesen offering to spend £150,000 on 15-year-old Middlesbrough youth player Nathan Porritt.
Meanwhile discarded players are sold at a thumping loss. Damien Duff joined Newcastle United for £5m this summer, just three years after Chelsea paid Blackburn Rovers £17m for him.
Such profligacy suggests that the club's stated target of turning an old fashioned profit within four years is still well down its list of priorities.
• The latest football share prices can be found in the Tourism & leisure section of This is Money's comprehensive Market data channel:
- Aston Villa
- Birmingham City
- Celtic
- Charlton Athletic
- Manchester City
- Millwall
- Newcastle United
- Preston North End
- Rangers
- Sheffield United
- Tottenham Hotspur
- Watford Leisure
The licensing rules, which would have legal status in Europe and be policed by Uefa, also include new regulations on agents and the financial structures of clubs as well as a "fit and properî persons test for club owners.
The regulations are expected to be discussed by European prime ministers at a meeting in Finland and could be introduced in time for the start of next season.
Chelsea FC's spending on players dwarfs its turnover. Its signings this summer alone included Andriy Shevchenko at £30m and Michael Ballack who came on a free transfer but is paid a record £130,000 a week.
Since the Abramovich takeover Chelsea has bought, among others, Claude Makelele for £16.6m, Michael Essien for £24.4m, Ricardo Carvalho for £19.8m and Didier Drogba for £24m.
Mr Abramovich, 39, is Britain's second richest man and 11th richest in the world. He made his fortune, estimated at £10.2bn, when he became majority shareholder in oil company Sibneft after the collapse of the Soviet Union.
Chelsea refused to comment today. But it is understood that the club is frustrated that they are regarded as Europe's big spenders when other clubs such as Real Madrid and Inter Milan are also very active in the transfer market.
Mr Caborn said he hoped an agreement on the new EU licensing system would be reached by the end of the year. He said the new system would bring in 'quality governance and quality regulations' to stop the sport being tarnished.
Mr Caborn said it was for the Football Association and the Premiership to investigate allegations of widespread corruption in the English game made in last night's Panorama.
Most watched Money videos
- BMW meets Swarovski and releases BMW i7 Crystal Headlights Iconic Glow
- Mail Online takes a tour of Gatwick's modern EV charging station
- MailOnline asks Lexie Limitless 5 quick fire EV road trip questions
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- How to invest for income and growth: SAINTS' James Dow
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- Mercedes has finally unveiled its new electric G-Class
- Mini celebrates the release of brand new all-electric car Mini Aceman
- 2025 Aston Martin DBX707: More luxury but comes with a higher price
- Land Rover unveil newest all-electric Range Rover SUV
- Tesla unveils new Model 3 Performance - it's the fastest ever!
- Cerillion boosted by $11.1m contract with provider of...
- MARKET REPORT: FTSE falters despite UBS call to buy...
- Anglo strikes out alone - but can it survive a bid...
- Anglo American rejects rival BHP's £34bn second takeover bid
- Police not interested in shoplifting, says M&S as thefts...
- London's 'Mr Super Prime' to take centre stage in...
- Phoenix Group finance chief to step down from insurer
- A MILLION more people have taken on mortgages they will...
- Used car marketplace Cazoo looking for buyers as it nears...
- UK Government sells another chunk of NatWest shares
- US owner of Boots steps up efforts to find a buyer for...
- Diploma shares top FTSE 100 risers after firm raises...
- How reliable are the most popular used cars? Here's how...
- Former Chancellor Nadhim Zahawi to chair Very Group
- Taxpayer stake in NatWest falls below 27% as Treasury...
- I repeatedly bail out my partner from his financial...
- BUSINESS LIVE: Nadhim Zahawi to chair The Very Group;...
- Evri issues warning over huge rise in smishing scams -...