Manchester City finances: what do new charges mean?

The Premier League has charged Manchester City with breaking rules around club finances. The statement from the league describes over 100 breaches of the league’s financial rules. What could this mean for Manchester City and for the Premier League?

Which rules have Manchester City allegedly broken?

The charges relate to Premier League rules which require clubs to provide accurate financial information to the league.

Charges relate to various areas of Manchester City club finances:

• Not fully declaring compensation being given to the club manager;
• Not fully declaring compensation being given to players;
• Breaching UEFA regulations on Financial Fair Play;
• Breaching Premier League rules on profitability and sustainability;

What will happen next?

The Premier League has referred the charges to an independent commission. Murray Rosen KC will lead the review, which will be confidential and held in private.

UEFA charged Manchester City in 2020 with breaching their Financial Fair Play rules. City appealed to the Court of Arbitration for Sport, which cleared them of any wrongdoing. It is likely they will pursue a similar path here. There could be a protracted legal process as the commission reviews and recommends penalties. Then City could very well appeal against any punishment. Therefore, no one expects a quick outcome in this case.

What are the potential punishments?

Premier League rules allow for a wide array of potential punishments for breaching these rules. When the commission concludes, it could recommend fines, point deductions, or even relegation from the league entirely. There is no previous case to set precedent or let us know what to expect.

Are Financial Fair Play rules really fair?

Manchester City are likely to focus on proving they haven’t broken the financial rules that are in place. However, the investigation will also shine light on the rules more widely. Some may ask questions about the effectiveness of the rules as written.

UEFA and the Premier League say that their financial rules exist to promote the overall financial health of European football. They often focus on the potential for clubs to go bankrupt and for fans to lose their historic football club.

However, it’s quite clear that Manchester City are not in any danger of going bankrupt and ceasing to exist. City’s spending in the period of these charges was effectively investment to grow their club. The club has grown with this investment and established itself as a force in the Premier League. As a result, they are now financially sustainable. Even if the owners were to sell, it’s likely Man City will remain a successful club.

The Spanish football league, La Liga, banned Barcelona from registering new players in recent transfer windows because of excessive debt. However, Barcelona then activated so-called “economic levers” in order to make signings ahead of this season. One such “economic lever” saw the club sell a portion of future TV broadcast revenues to a third party, effectively limiting the club’s future income in exchange for making signings right now. This seems much more risky to the club’s future than Manchester City’s spending.

Manchester City’s Spending

Man City’s spending on infrastructure and players, whether or not it broke financial rules in place, created one of the greatest teams English football has ever had. Without this, the league would have been less competitive than it is, and the existing “big clubs” would have been the likely beneficiaries.

However, if Man City successfully avoid these charges, then some may conclude that the rules are unenforceable. If this happens, clubs could take more financial risks, gambling the future of important pillars of the community. This would be especially dangerous in lower leagues where the sustainability aspect is much more of a present danger to clubs’ very existence.

Bigger questions for the game

This is a difficult balancing act. The problem is that the rules aren’t really engaging with some of the bigger problems around finances in the game.

Many Premier League clubs are stuck in a limbo where they are richer than most teams in Europe but have only a remote chance of breaking into the top few places in the league. Historic clubs like Aston Villa (former European Cup winners) and Everton (once themselves part of the so-called “Big Five”) have a realistic ceiling of 6th-7th at present and it’s difficult to imagine this changing. The situation is even worse in many European leagues, as Champions League prize money has distorted competition in many small leagues.

Effectively, fans of these clubs must either resign themselves to being also-rans, or dream of a Man City-style takeover to elevate them to the top of the game. For all the problematic concerns that come with rich foreign investors in football, it’s difficult to criticise Newcastle fans for celebrating their takeover last year when this effectively represented the rebirth of hope at a football club that had lost it over the previous decade. At the moment clubs are seemingly waiting for “their turn” to be taken over by a new billionaire willing to pump money into their club. This doesn’t seem a sustainable model of ensuring a league remains competitive over a long period.

Big solutions for big problems

Existing financial rules are playing around the edges of these bigger problems. More radical solutions could be explored to bring about better sustainability and competitiveness in English and European football. Salary and transfer fee caps which are equal and affordable for all clubs would create a more level playing field. With working-class fans struggling through a cost-of-living crisis, a level of financial restraint would feel more in touch with reality in the country.

This would also help the competitiveness of the league, enfranchising more fanbases and allowing for more Leicester City moments – vastly popular and used to argue the Premier League is a great league, and yet enforced by its structure to be essentially a once-a-century event.

Unfortunately, it’s also unlikely the Premier League would implement something like this. Many English football fans are traditionalists and would likely see elements such as a salary cap as alarmingly American in nature given their use in the NFL and NBA. Detractors would argue that a salary cap could make English clubs less competitive in Europe, which may not be a sacrifice everyone is willing to pay.

We will see in due course where this Man City investigation goes. Lawyers will determine whether rules were broken and what punishments will be. But it’s hard to argue that any of this will make English or European football more sustainable, less dominated by crazy sums of money, or a more competitive spectacle.