Financial Fair Play - Brighton will struggle to fall in line

In April 2012, Championship clubs voted to introduce Financial Fair Play regulations that will regulate all clubs from the 2014/15 season. The purpose of the new regulations is to curb total spending and prevent owners from funding football clubs through directorship loans.

Brighton & Hove Albion, now competing in the Championship and who finished 4th last season narrowly missing out on promotion on the Premier League, are one of the few Championship clubs who will struggle to fall in line with the new FFP regulations.

The FFP regulations stipulate a number of restrictions on clubs but mainly target the bottom-line figure. Starting this season, clubs losing more than £8 million will be subject to sanctions. This figure will reduce to £5 million next year, effectively giving clubs an 'adjustment' period in which they must consolidate their spending.

Upon inspection of their accounts, over the last 4 years, Brighton have accrued staggering losses of £24,934,031 - a huge figure no matter the size of the club. Despite their Chief Executive Paul Barber's ambition to "build and build", the management will need to clamp down, and quick.

In recent years, Brighton have heavily relied upon their owner, Tony Bloom, to fund their activities. According to their latest accounts the club owe him £120m, with £40m already converted in to share capital raising his ownership to 91%. It is crystal clear that Bloom continues to support the club's losses, exactly what the FFP regulations are trying to stop.

The majority of Bloom's investment has been used to fund the development of the club's new stadium, the Amex. Ticket revenues have soared from £2.3m to £7.9m after the club sold 22,000 season tickets and retail & media has jumped to £2.6m (mainly thanks to selling the naming rights to American Express). In 2011-12, Brighton had the 5th highest match day revenue at £7.3m - only West Ham, Soton, Leeds and Birmingham beat them.

In the 2012 statements, it is noted by the auditors that the club rely on his "ability to generate further funding" and highlight the club's liabilities are currently exceeding its assets by £13.3m.

Despite their worrying losses, the general consensus around the club is positive. It appears that fans are happy to ignore the financial state of the club and only focus on team's league performance. Admittedly I am a little shocked by the Official Supporters Club's opinion on the whole issue. Stefan Swift, editor of the fanzine 'The Seagul Review", was quoted as saying "the stadium is so good and the fans have never had it this good"

Going forward, the success of the team will be relient upon the board's control of costs. Assuming they want to attract players which will allow them to challenge for the EPL (meaning their wage bill will remain at the current level ~ £13.2m) then they will need to employ some major cost cutting measures.

It is only fair to highlight that, being the year they finally moved into their Amex Stadium, the club have incured exceptional costs of £9.4m (£7.5m in 2011 to £16.9m) credited to the cost of furnishing their new digs. If I were to set this to one side then the club would have been in the black, just.

The benefactor model (where a club is substantially financed through a director) is being stamped out by league. Brighton are going to be hit hard and will need to seek & generate new sources of revenues, and cut costs substantially.