Reigning English Premier League champions Manchester City have made no secret of their staggering spending power in recent years. However, The Citizens' ability to buy up big may just come back to bite them in the next few years if they are unable to tame their losses.
Despite triumphing in England, City have announced losses of €120 million in the last financial period, losses which—unless correctly accounted for—could see them punished under UEFA's new Financial Fair Play guidelines (via the club's website).
City's losses come after the club also posted a loss in the financial year previous to the most recent. Although consecutive financial losses have been comfortably dealt with by club owners and sponsors, they effectively render the club nonviable should such entities pull out.
Under UEFA's new Financial Fair Play guidelines, any club during the course of the 2011-12 season faces repercussions if losses from transfers and wages are in excess of €45 million. Whilst City''s losses more than double this amount, a saving grace may exist.
Contained within the annual statement released by the club is the suggestion that nearly €100 million of their losses are those from contracts established prior to 2010. What is more is that €18.4 million of the losses was money spent on youth and infrastructure—facets which UEFA doesn't rule against when tallying debt.
As such, provided that City can prove that most losses incurred during 2011-12 predate the existence of the new guidelines, they will avoid punishment from UEFA.
Whilst the news of the financial losses may come as bad news to the club, the future does indeed, however, look bright after the club also announced a record turnover of €283 million. Additionally, the Annual Report said:
"The capital base of the club has also been strengthened through the issuing of £169m [€207m] in new equity during the year, avoiding debt-based funding and continuing to ensure that the club is virtually debt free.”
City travel to face Newcastle this weekend and are looking to close the gap extended by Manchester United at the head of the EPL.