Daniel Geey is a partner in the Sports Group at law firm Sheridans and a frequent commentator on financial fair play. 

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The size of transfer fees in football has been growing steadily for years, but even some of the most seasoned observers of the game were surprised by Neymar’s £198 million move from Barcelona to Paris Saint-Germain.

 

Only 12 months previously, eyebrows were raised when Manchester United broke the world transfer record by paying £89m to Juventus for Paul Pogba. So how did we get to a situation where that number was more than doubled within the space of a year?

 

Neymar’s move to Paris is a deal that breaks new ground for the way transfers can be done in the future – for the players, buying and selling clubs and even the game’s lawmakers when it comes to Financial Fair Play.

 

Barcelona protested, but there was nothing they or La Liga could do. Nor Uefa, because their current FFP rules do not prohibit such a deal be completed. That is because PSG have been clever, very clever.

 

How do buyout clauses such as Neymar's work?

In Spain, the buying club has to pay money to La Liga to activate the buyout clause, which is a contractual stipulation in a player’s contract.

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Can Barcelona or La Liga ask Uefa to block the deal?

There’s nothing prohibiting Barcelona contacting Uefa but if the buy-out figure is met, there is nothing proactively that Uefa can do to stop the transfer for Financial Fair Play (FFP) compliance purposes.

 

Barcelona or La Liga are not the FFP regulator; Uefa is. Therefore it is up to each club when submitting their FFP documentation to demonstrate they are compliant.

 

I don’t believe a club has the power to ask Uefa to start an investigation. Uefa can ask questions of transactions if they wish to which usually happens after the submission of each club’s FFP submissions.

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Is there any precedent for Uefa scrutinising a transfer at the time?

 

When the relevant accounts are submitted to Uefa there’s no reason why Uefa can’t ask questions of transactions, be it a big sponsorship deal or a transfer, to ensure that it has been accounted for properly.

 

Paris Saint-Germain are unlikely to be blocked from signing players by Uefa (Source: Getty)

 

If Paris Saint-Germain are under no substantive transfer restrictions then I can’t see any grounds where Uefa could prohibit a transfer occurring.

 

If Uefa are to take any action it is highly unlikely to be at the time of the transfer, but rather in the period of time after the relevant financial submissions have been made by the clubs.

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How do PSG square such a big one-off fee with FFP?

 

The buying club paying in instalments or one-off payment doesn’t make much difference from an accounting perspective.

 

This is because PSG will account for the transfer in their FFP submissions by way of amortisation of the overall fee divided by the years of Neymar’s contract.

 

Even if it is paid in one lump sum the accounting cost per season will only be, in say a five-year deal, a fifth of the overall number.

 

It’s likely they will have to push through a lot of pretty lucrative commercial deals or maybe even more likely sell a number of players to recoup enough revenues to adhere to the FFP regulations.

 

If say, PSG have made profit in previous years for FFP accounting purposes, then that goes some way to subsidising any subsequent loss from the transfer of Neymar.

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Could Neymar’s wages be topped up by Qatar?

 

Uefa can certainly look into that at the time of the FFP submissions but only costs that the club are incurring – the transfer fee amortisation on a yearly basis, his wages, and any loyalty and signing-on fees – will be submitted to Uefa.

 

An external sponsorship deal wouldn’t be part of that submission, but if there were related-party links between PSG and an entity providing sponsorship that could be looked into in order to understand whether the actual wage deal was undertaken at an undervalue.

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How much did it cost to buy Neymar?

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There were some eye-watering numbers to consider. A world record transfer fee of £198m was required to buy-out his contract at Barcelona by PSG; and a hugely lucrative long-term contract of perhaps £3m – 4m per month. All of this adds up to a possible total outlay of close to £500m.

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Transfer fees for accounting purposes are spread over the length of a players’ contract. As Neymar was sold for £198m and he signed a 5 year contract, £198m over a 5 year contract is amortised by a club in its accounts to the value of £39.6m per season. This is regardless of whether the buy-out amount was paid in one lump sum or not. 

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Practically, the yearly accounting ‘cost’ would include his annual amortised transfer fee (e.g. £39.6m) plus his wages, bonuses and loyalty payments of, for example, another £50m.  As such, a club would possibly have to find an extra £90m per season (from an accounting perspective) to fund such a purchase. There are only a few clubs that have such deep pockets; with PSG buying Neymar and also Kylian Mbappé from Monaco (initially on loan and then for a reported world record £167m for an 18 year old).

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Current State of Play

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UEFA recently announced that they have opened an investigation into PSG’s spending on Neymar and Mbappe. Whilst at face value it looks like they have spent more than the €30m allowable by UEFA, as the FFP accounting period has not yet ended, PSG could still be financing such a deal through profits made, selling existing players or finding additional revenue streams. Watch this space.

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The French club will no doubt come up with other revenue streams to help their books show they have complied with all the FFP rules currently in place.

 

What is just as likely is Uefa, pushed by clubs across Europe, will have to look at their own regulations and bring them up to date with the face of the modern game.

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