Behind Boehly’s bonanza: Chelsea’s winter splurge and FFP explained

With the Blues’ expenditure being at the centre of another dramatic January transfer window, Rachel Roberts dives into Financial Fair Play legislation to explore their efficacy, and how the London club’s business model – including long contracts and a profitable academy – fits into it all.

Financial Fair Play (FFP) regulations were first introduced by Uefa for the 2011/12 season, to, amongst other stated reasons, ‘introduce more discipline and rationality in club football finances’ and ‘encourage responsible spending for the long-term benefit of football.’ This winter, Chelsea have carried out an extraordinary amount of business with an extraordinary amount of money, leaving many to question how such ‘fair play’ legislation can allow for this.

And those are fair questions; it’s hard to look at Chelsea’s January splurge of around £323 million under owner Todd Boehly and feel it is disciplined or responsible spending in one short month.

The signings

Eight players arrived in wintry London, including new English-record signing Enzo Fernandez for £106m, and Ukrainian forward Mykhailo Mudryk for £62m. Both aged 22, they are the oldest of Chelsea’s signings this window. The pair were joined by 21-year-old Benoit Badiashile for £33m, and two 20-year-olds: Noni Madueke, poached from PSV Eindhoven for £29m, and £11m signing David Datro Fofana from Molde.

Furthermore, two teenagers made the move: Malo Gusto for £26m, loaned back to his previous club Lyon, and 18-year-old Andrey Santos from Brazilian club Vasco da Gama for £13m. Add to this Joao Felix’s loan move from Atletico Madrid, who at £11m picked up an expensive red card in his first game, and that equates to substantial financial flexing in the middle of a season.

Rewind to last summer and it’s a similar story: 22-year-old Wesley Fofana from Leicester for £75m, former Brighton left-back, 24-year-old Marc Cucurella, for £60m, and the 19-year-old Carney Chukwuemeka for £20m from Aston Villa.

The 2022/23 season has seen Chelsea’s highest gross spend, totalling £374m – more than any during the Roman Abramovich era and the highest ever in the Premier League. The next highest gross transfer spends come from before the pandemic, but Chelsea again sit in third and fourth place with spending in the 2017/18 and 2018/19 seasons respectively.

In comparison to other clubs, the next to record a highest ever gross transfer spend in 2022/23 is Manchester United, who come in ninth overall, with £211m. Chelsea’s spend cruises a whole £161m above their nearest contemporary. It is clear that their spending, particularly post-pandemic, sets them far apart from their rivals.

However, the Blues carry the burden of their business operating at the largest loss — their £159m loss in 2020/21 is the worst figure in the league. So how do all these draining numbers fit in with the legislation?

What does FFP legislation state?

Bought in with the intention of protecting the long-term success of football clubs by ensuring they spend within their means, the FFP rulebook sets out how much money a club is allowed to lose in a set time. Post-Covid, that figure stands at €60m (£53.3m) over a three-year period (increased from €30m or £26.6m pre-Covid).

Such profitability and sustainability (P&S) regulations also exist in the Premier League. Domestically, conditions are more generous: clubs are granted losses of £5m a year, but this can be boosted by an equity injection of up to £30m, making the total allowed losses for one year £35m. Over a three-year monitoring period, this comes to a substantially higher £105m.

The boundaries are clear, but can be narrow margins to hit. When analysing how Chelsea’s significant dealings in the transfer window have been allowed, there are two clear factors – the selling of academy players, and the lengths of contracts signed. Firstly, the selling. To offset their expenditure, Chelsea have sold players for £209m in the last two years, producing £192m in profit. Outgoings have included the likes of Kurt Zouma for £30m and Timo Werner for £25m, but a significant number of former signings have actually left the club at a loss. Despite this, the Blues are the leading Premier League club for profit on player sales, generating £413m between 2017-2021, which is over £130m more than the second-placed club, Liverpool. This has been achieved through their saving grace: their academy.

Of the 23 players sold across the 2021/22 and 2022/23 seasons, over 50 per cent came from the Chelsea academy. These include Tammy Abraham to Roma for £36m, Fikayo Tomori to Milan for £27m, £21m from Marc Guehi’s move to Crystal Palace, and Brighton paying £9m for Billy Gilmour. The fact that these players were all academy products means that their transfer fees become pure profit for the club and can work straight towards offsetting the expenditure.

It is difficult to overstate the influence that selling academy players has on Chelsea’s finances. It goes to show the benefits of having a substantial youth development factory at your disposal.

Secondly, the overwhelming majority of all new, recent signings have signed contracts of six years or more. The biggest winter arrivals Fernandez and Mudryk gave their signatures to eight-year deals. Now, it feels almost impossible in football that a player would stay at one club that long, but the length serves the key purpose of allowing for the cost of the player to be spread throughout the duration of the contract.

The business’s break-even

Chelsea’s sum total from the two latest transfer windows equates to a spending commitment of £1.5 billion. Across eight years, this becomes a touch more manageable. And following FFP legislation, this has been entirely acceptable, as such player amortisation reduces the annual expenses on the club’s profit/loss account, which is what FFP concerns itself with. In short, a longer contract means expenditure can be spread out, meaning Chelsea technically won’t breach FFP rules.

To their further advantage, Covid has forced the Premier League to relax their regulations, combining the 2019/20 and 2020/21 seasons into a single period for 2022’s monitoring. A mixture of timeframes helps to blend annual profits and losses for assessment, and this, along with the pure profit injection of selling academy talent, helps the club remain within the necessary boundaries.

For Uefa to be appeased, they calculate the break-even point of a club by considering its whole entity as a business. All operational costs come into play, but there are deductions for ‘healthy’ expenditure. Spending on youth development, community development and women’s football are deducted from calculations, and these are all areas of funding that Chelsea can proudly boast. These deductions can take a significant amount out to make for comfortable totals at the end of an investigation.

In terms of potential downsides, Chelsea’s luxury of choice from all these additions is hindered for their Champions League squad, where only three new players can be registered. Manager Graham Potter decided on his most expensive signings: Fernandez and Mudryk, who are joined by experienced loanee Felix. This is sure however to leave several players dejected.

The larger issue may take time to present itself, and that is the gamble of investing in young prospects. Of course, this is a risk for any club, but the manner of the Blues’ business exacerbates this in their case. Committing to several young players who are not guaranteed to succeed, for an average of seven years, is a high-risk business strategy. If they don’t work out, Chelsea may have a hard time selling early and risk being stuck with a large wage bill if other clubs are wary of the financial burden.

Looking to the future

Going forward, spreading costs over such long contracts will no longer be an option. Uefa have updated their regulations to introduce a five-year limit commencing this summer, and have introduced a cap on the spending on wages, transfers, and agents’ fees to 70 per cent of the club’s total revenue. This, however, will be introduced gradually, so the 70 per cent limit will not come into effect until the 2025/26 season.

This season there remains lots to be decided on the pitch. In 2021 and 2022, Chelsea were ranked as the club with the fourth best revenue in the league, but a major boost to this revenue can come from prize money. Winning the Champions League in 2021 earned the Blues a significant cash prize and prolonged involvement in the competition has been a key part of balancing the books. However, with the club currently sitting in 10th, nothing is guaranteed in the future.

As Uefa bring in these changes, it seems likely a mid-season transfer window like this will not be replicated – unless, of course, clubs are willing to risk punishment. More than just introducing their legislation, Uefa will need to adjust their disciplinary measures to suit, where clubs such as PSG have only been handed fines for rule breaches as recently as last September. In the grand scheme of things, a financial penalty may be deemed a worthy trade-off for the advantages overspending can bring. Perhaps harsher punishments are in order for Uefa to actually deter clubs from buying big.

For whilst it may bring benefits for the on-field team in the short term, this business model is unsustainable in the long term, and this is why Uefa have acted. Chelsea have got away with their business these last few transfer windows, and will have to hope their transactions have been smart, because the books will become far tighter in the future.

Follow Rachel on Twitter @rachellrobertts