Over the last couple of years I’ve occasionally read references to something called Financial Fair Play. The feeling is that it will change the way that football clubs do business. Since the way we do business is a sore point with Rams fans, I thought it would be an idea to take a look at FFP and try to work out how much impact it will have on the club.

First of all, I’ll acknowledge that this is a somewhat arcane subject area, touching as it does on accounting. But if we take the time to try and follow the financial implications, it may help give us answers to questions such as “Where did the Brayford money go?”

The Championship has adopted different rules to Leagues 1 and 2; whereas the lower leagues have attempted to put a lid on player wages, the Championship is limiting losses a club can sustain, and the level of investment by owners.

Each December 1, clubs must provide annual accounts covering the previous season to the Football League. For the Rams, I believe that means that by December 1 of this year, they will submit accounts to June 30 of this year; namely, the 2012/13 season.

Clubs are permitted losses of £4m for 2012/13; £3m for 2013/14; £3m for 2014/15 and £2m for 2015/16 onwards. There are higher limits on investment by ownership which I won’t go into for now.

For clubs exceeding the permitted losses, there are sanctions, including transfer embargoes, but these will not apply for seasons 2012/13 and 2013/14 to permit an orderly transition.

So, the Rams have no real problem for the time being; but it may only be a matter of time before we do.

For the year ending June, 2012 the Rams lost £7.9m on turnover of £17.3m. For the year ending June, 2011 the loss was £7.7m on turnover of £18.1m. Debts are about £34m, including the £15m mortgage on Pride Park.

The message here is stark: the Rams’ efforts to trim player wages are not having much impact on losses; suggesting that much of the loss is interest cost as well as the cost of maintaining Pride Park and the academy. This means that for the 2014/15 season — less than two years away — the Rams have to cut losses by about £5m to get down to a loss of £3m required by the FFP rules.

I don’t pretend to be an expert on this subject; in fact, I would welcome comments by those who may know more than me. But my research leads to some obvious conclusions:

The current level of player spending — seen as puny by many Rams fans may be unsustainable;

When we sell a player — think John Brayford or Will Hughes — we may not be able to spend the money received;

The club cannot afford to jog along in the Championship; we have to get back to the Prem and those 30,000 plus crowds.

The other option is to just cut costs to a level that may see us drop to League One.

Now that would really give Rams fans something to complain about.

For further reading on this subject, here is the Football League pronouncement on FFP. Here is a link to an article on the Rams’ recent losses.

Brighton have made great efforts to cut costs, and are hoping others do the same; the article is here.

Photo: Action Images

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