UEFA have made amendments to close a transfer loophole that had been heavily used by Liverpool’s rivals over the past year.
The UEFA executive committee met in Nyon, Switzerland, on Wednesday where amendments were approved in relation to how clubs could cost transfers in their accounts through amortisation.
Chelsea went on a spending spree in the first two transfer windows under the ownership of Todd Boehly and Clearlake Capital, spending more than £600m on the likes of Raheem Sterling, Enzo Fernandez, Mykhailo Mudryk, Wesley Fofana, Benoit Badiashile, Noni Madueke, Marc Cucurella and others.
The scale of spend had not been seen in English football before, nor had the tactic employed with a number of the transfers where contracts of seven, eight and nine years were being offered to players. It was a tactic designed to drive down the annual cost of those transfers for accounting purposes, with guaranteed transfer fees having been amortised over the length of a contract, regardless of the payment structure of the deal. For instance, a £70m deal over five years would have been amortised as £14m per year in club accounts, while amortising the same fee over nine years would have been £7.8m annually.
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Chelsea’s adoption of such a tactic had caused some concern among rival clubs, with UEFA stepping in to act and capping contracts limits at five years. But that has now been changed with clubs whose governing bodies permit longer contracts able to do so, but the amortisation period of any deal is capped at five years regardless.
The changes will come into effect from July 1 but there will be no retrospective punishment for deals concluded before that time on the previous rules, meaning that Chelsea’s Financial Fair Play situation remains unaffected.
A common tactic used by Liverpool and other clubs to keep amortisation costs down has been through contract renewals. Over time it has become common practice for clubs to extend deals a year or two into players arriving, a move partly motivated by players potentially wanting to be compensated for a good start and an increased contribution, but also to drive down the amortisation cost annual as it spreads the cost of the the fee over a larger period of time after some years have already been paid down. For example, if a player signed on five-year deal for £50m but signed a new five-year contract two seasons later, £20m would have been removed from the transfer cost meaning that the remaining £30m would still be amortised over five years at a cost of £6m instead of £10m.
Liverpool still have considerable work to do in the transfer market this summer. The Reds’ amortisation costs are the fifth highest in the Premier League as per the most recent accounts for the 2021/22 financial year, standing at £103m. Using Chelsea’s transfer approach was never a likely tactic, but in UEFA closing that particular door in terms of how long a period fees can be amortised over it does at least put some guardrails around any similar approaches from clubs in the future.
