How Does European Soccer Operate Without A Salary Cap?
We Americans love a sense of parity and stability in sports. In our leagues, whether it be soccer, basketball or football, we have devised ways to try and make the playing field level for all. Whether it be drafts to give the worst teams from the previous years the best prospects or a salary cap to keep certain teams from gaining an unfair competitive advantage over the rest, American sports at least try and appear like an equal playing field for all.
This seems like a good method, right? Putting a salary cap not only helps keep leagues competitive (at least in theory) but it also helps keep teams and the league as a whole financially stable.
Why, then, does soccer outside of the MLS not have a salary cap? Well, that’s what I am here to explain. Buckle up, ladies and gentlemen. I am about to take you through a crash course on the financial restrictions that exist in the wide world of soccer, particularly in the European game.
Background:
Before I go too much further, no, the world of soccer is not the Wild West. At least, it hasn’t been since the start of the 2011-2012 season. Before that, there were no serious financial restrictions in the European game. While this may seem crazy, remember that this was a different time. Money did not have the same influence back then as it does today.
To put things in perspective, a then 18-year-old Cristiano Ronaldo moved from Sporting Lisbon to Manchester United for only £7.7 million ($9.34m) in 2003. Good luck buying a top prospect like that for anything cheaper than $30 million today.
Times have changed, and money continues to play a bigger part in the game with each passing year. UEFA recognized this, and in 2009, the idea to implement financial restrictions in soccer was born, not necessarily to maintain a competitive playing field, but primarily to help keep clubs from going under.
UEFA found in its 2009 research that more than half of the 665 European clubs looked at during the study had suffered financial losses during the previous year. Not only that, but 20 percent of the 665 were in serious financial peril.
After a few years of development, UEFA finally implemented its system of financial restrictions, called Financial Fair Play (FFP) at the beginning of the 2011-2012 season.
The End Of The FFP Era:
The age of FFP lasted for over a decade, bringing with it a lot of intrigue and controversy (stand up, Manchester City fans). While FFP did its job, the game continued to evolve and clubs were continuing to struggle financially, especially following the COVID-19 pandemic. Realizing the time was right to change yet again, UEFA did away with FFP before the start of the 2022-2023 season and implemented new financial stability regulations.
“UEFA’s first financial regulations, introduced in 2010, served its primary purpose. They helped pull European football finances back from the brink and revolutionized how European football clubs are run,” UEFA president Aleksander Ceferin said . “However, the evolution of the football industry, alongside the inevitable financial effects of the pandemic, has shown the need for wholesale reform and new financial sustainability regulations.”
UEFA Financial Sustainability Regulations
The financial sustainability regulations that UEFA now enforces consist of three pillars: The No Overdue Payment Rule, Football Earnings Rule and Squad Cost Rule.
The No Overdue Payment Rule means that clubs’ accounts will be checked after every quarter to ensure that bills are being paid on time. This rule is meant to ensure that UEFA continues to check in on clubs on a consistent basis to monitor their ability to pay bills on time and not fall too far into debt.
The Football Earnings Rule allows clubs to lose a total of €60 million ($63.51m) over a three-year period. This is double what clubs were allowed to lose during the FFP era. Clubs are also permitted to lose another €10m ($10.59m) a year if they are deemed to be in good financial standing.
The Squad Cost Rule focuses on how clubs spend their wages on both players and coaches. With the rule, clubs’ spending will be capped at 70 percent of their revenue. Spending includes player/coaching wages, transfer expenditures and agent fees. This rule will be phased in during a three-year period, wherein the 2023-2024 season the cap will be at 90 percent, in the 2024-2025 season the cap will be at 80 percent and finally, the cap will be at 70 percent in the 2025-2026 season.
The rule itself is assessed over the calendar year, not the duration of the season, meaning the summer transfer window is included in the assessment.
How Is This Different Than A Salary Cap?
So, now that we’ve gone through the restrictions used in Europe, you are probably wondering, how is this different than a salary cap?
A salary cap is a set limit to the amount of money a team can spend on player/coaching salaries. For example, the MLS has a salary cap of $5,210,000 per team. There are various rules and stipulations involved in the salary cap that you can check out here, but each team has a set limit to what they can spend on salaries.
This does not exist with UEFA’s financial sustainability regulations. UEFA’s rules limit spending based on the revenue that clubs bring in. Clubs that earn more revenue through television revenue and competition winnings, for example, will be able to spend more money than other clubs.
The salary cap helps teams maintain financial stability and the league to maintain a sense of competitive balance. UEFA’s rules are designed to help clubs maintain financial stability, not to help with creating a competitive balance.
Will A Salary Cap Be Added To European Soccer?
Adding a salary cap to European soccer would be difficult. In American sports, such as the MLS, a salary cap is possible because the league and the teams are a single entity. This means that the league itself owns each individual club and every player’s contract. Each team is a “franchise” that falls under the league’s umbrella. This gives the league the power rather than the individual teams.
European soccer, on the other hand, does not operate with the single-entity format. Each club is in charge of its own ownership, and the clubs themselves have more power than the franchises in the single-entity format.
For a salary cap to be implemented, European-wide or in an individual league, the clubs themselves would have to agree to its implementation. It seems incredibly unlikely that the owners of Premier League clubs such as Manchester City and Manchester United would agree to this. While there have been inklings of some clubs wanting a salary cap introduced in leagues such as the Premier League, this seems incredibly far-fetched at the moment.
Would you like to see a salary cap introduced to European leagues such as the Premier League? Let us know in the comments below.
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