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Is this the end of Man City as a super club? Champions League ban could mean rebuilding project

Pep Guardiola was preparing to return from a much-needed winter break when the news, which would have surely undone any of the benefits of his week off, was delivered on Friday afternoon.

Shortly before UEFA’s Club Financial Control Body announced its two-year ban of Manchester City from the Champions League, Guardiola was briefed on the situation by club executives.

As judgments go, this was seismic. The financial model Manchester City has been operating under for 11 years since the takeover by Sheik Mansour and which lured Guardiola here from Bayern Munich, is under threat.

Pep Guardiola was preparing to return from a winter break when the news was delivered

In addition, City and the entire landscape of European football are now heading for a watershed moment this summer when the club contest their ban at the Court of Arbitration for Sport (CAS).

If City lose again, they face the prospect of years of rebuilding and the likelihood that they would need to sell stars such as Kevin De Bruyne and Raheem Sterling to break even and to return to the Champions League one day.

The Abu Dhabi project would have to be completely overhauled. Yet, if City win, the very foundations of Financial Fair Play will be undermined. The stakes couldn’t be much higher. It’s all or nothing now for City.

When Guardiola heard the news, he was said to be supportive. He has always said that he trusted chairman Khaldoon al Mubarak and chief executive Ferran Soriano, a long-term colleague from his Barcelona days, when they told him City hadn’t broken rules and this would be resolved.

In theory, that remains unchanged. City claim they always expected this judgment from UEFA’s Club Financial Control Body. They have complained bitterly about an interview given by the chairman of the investigatory committee, Yves Leterme, in 2018 and they have protested to CAS about leaks of decisions. City’s lawyers have done all they can to present the process as fundamentally flawed.

Manchester City's 11-year financial model under Sheikh Mansour is now under threat

Manchester City’s 11-year financial model under Sheikh Mansour is now under threat

As such, when he speaks this week, Guardiola is likely simply to repeat the club line that all will be well when CAS rule. That is likely to be in the summer. Though a complex case, there seems no reason it couldn’t be completed well before July 23, which is the earliest an English team might need to know the verdict and enter the Europa League.

Guardiola is contracted to City until 2021 and says he will respect his deal. Whether he will remain as supportive if it turns out the assurances given to him by Al Mubarak and Soriano were injudicious is moot.

De Bruyne and Sterling will also be viewing developments closely. Both are contracted until 2023. Yet neither signed up to be part of a club in development, scrabbling to make the top four — in effect what Arsenal and Manchester United have become.

In reality, if they lose at CAS, City may have to consider selling them if they want maximise income and break even going forwards.

Speaking on BT Sport, former England and Tottenham midfielder Jermaine Jenas said: ‘From a player’s point of view… I have gone out there and won you two League titles, qualified for the Champions League… that’s what I’ve done as a player. Now you’re telling me my two trophies might be taken away from me and my ability to play in the Champions League taken away from me for the next two years.

‘I don’t see how the fans could blame them, personally, for walking away. If it’s a [one] year [ban], I can see somebody like Sterling saying, ‘I’ll be fine, I’ll stick it out, I’m 26 years old’. But if it’s De Bruyne, who is 29? I think City will have to accept they are going to lose a few of their stars.’

Kevin De Bruyne and Raheem Sterling will also in particular be viewing developments closely

Kevin De Bruyne and Raheem Sterling will also in particular be viewing developments closely

In terms of recruitment, what was going to be a busy summer, with a right-back, a centre-half, a forward and a midfielder signed, now looks complicated. No one is likely to commit to City until late in the summer, when they know the CAS verdict.

And even if the sanction were reduced to a one-year ban, the nature of the club will change. City have never been a galactico club, splashing £100million on one player. They are proud their record transfer fee paid is the £63m spent on Rodri last summer, which is relatively low given their wealth. Yet they have still always shopped for players in high-end supermarkets.

Elsewhere in these pages is a detailed explanation of why that will end if City are banned. Put simply, they earned about £100m from the Champions League last year when they made a £10m profit. Losing that would turn the £10m profit into a £90m loss. And under UEFA’s rules, a club can only make losses of less than €30m (around £25m) over three seasons. City have no hope of hitting those figures without Champions League money, unless they sell their stars.

It would require a complete recalibration of their current model to thrive under such restrictions. And that assumes their current commercial income stays at £229m. It may be that a defeat in CAS means City will have to downgrade their sponsorship deals.

It was always hard to see Guardiola going beyond 2021 and into a sixth year at Manchester, with his wife, Cristina having returned to Barcelona to attend to family matters. 

If he did choose to stay and the club were banned, it would be an unprecedented challenge, more akin to the one Mikel Arteta faces at Arsenal or Jurgen Klopp did when he arrived at Liverpool in 2015. Guardiola would have to trade smart, buying low and selling high — as Liverpool did with Luis Suarez and Philippe Coutinho — to balance the books. And he’s never had to do that before, not at Barcelona, Bayern nor at City.

Jermaine Jenas says City fans will be unable to blame stars if they choose to walk away

Jermaine Jenas says City fans will be unable to blame stars if they choose to walk away

NICK HARRIS ON CITY’S LOSSES 

Manchester City face large financial losses if CAS uphold UEFA’s two-year European ban and deprive them of Champions League income.

A financial squeeze would restrict their ability to buy and pay players, leading to an almost inevitable decline in the quality of their squad — and results.

This is just one ramification of the ban, with UEFA citing ‘serious breaches’ of Financial Fair Play (FFP) rules up to 2016 and City’s failure to cooperate with an investigation.

City’s most recent financial accounts, for the 2018-19 season, show revenue of £535million and a small profit of £10.1m. But those revenues included about £100m from the Champions League, comprised of £86m in prize cash from UEFA, plus match day and hospitality income from five home CL matches of more than £10m. Other commercial income related to Europe was also included.

Losing out on that £100m would have led to a £90m loss. The impact would be similar if a ban is in force for 2020-21, but intensify if a ban ran to two years.

City have also been handed a €30m (£25m) fine, which they will appeal.

If City post losses from next season, they could fall foul of FFP again – for spending more than they earn. The simplest remedy would be to sell players, which would raise income and cut a wage bill that stood at £315m last season.

A two-year ban would raise the prospect of manager Pep Guardiola leaving, while the club’s best players might also consider their futures.

Whether some of City’s major ‘global partners’, including Puma and Nissan, would seek to renegotiate terms is not known. For a club of their size, City earn an unusually high sum from commercial income: last season it was £229m — much higher than rivals Liverpool (£186m) and Chelsea (£185m), both ‘bigger’ clubs who have won the Champions League and have larger global fanbases.

City’s commercial income is so large because £130m comes from sponsors based in the UAE, where club owner Sheik Mansour has huge influence on City’s partners. Etihad alone is believed to pay £80m a year to sponsor City’s shirts and campus, while telecoms firm Etislat pay about £16.5m and Visit Abu Dhabi £19.75m.

The Korean tyre firm Nexen pay £10m a year to be City’s sleeve sponsor, having entered into a ‘strategic partnership’ with the UAE’s sovereign wealth fund Mubadala.

Documents published by German magazine Der Spiegel last year indicated that in 2015 Etihad was, in fact, only paying £8m towards a then £67.5m annual deal with City, while Mansour was topping up the other £59.5m himself. If confirmed as accurate, that would breach FFP.

Everything depends on whether City can show that UEFA’s process is flawed. Though they sound confident, the reality is that City have significant hurdles to overcome.

Back in May 2014, the club accepted a settlement with UEFA over an initial breach of Financial Fair Play, agreeing to strict restrictions going forward on wages and spending, as well as a squad restriction in Europe. In addition they were fined €60m, though €40m of that was suspended. 

At the time Al Mubarak gave an interview to City’s in-house TV channel, his preferred mode of controlled communication. Given that then, as now, City consistently claimed they had not broken the rules and would be exonerated, he was asked why they accepted this settlement.

‘We have a sustainable project in Manchester and across the world,’ said Al Mubarak. ‘We have zero debt. We don’t pay a penny to service our debt. For me, that is a sustainable model. However, our friends at UEFA seem to believe otherwise…’

Friends now seems an unlikely label, given that club lawyer Simon Cliff wrote in a leaked email that Mubarak had told Gianni Infantino, then UEFA’s general secretary, that ‘he would rather spend £30m on the 50 best lawyers in the world to sue [UEFA] for the next 10 years than accept a financial sanction.’

Al Mubarak, in that 2014 in-house interview, added: ‘They have their view, we have ours. I disagree with their views but we are pragmatic. The one thing our fans need to know we will do, as always, is what is best for this club and the fans. And if it means sometimes to take a pinch, we’ll take a pinch.’

In effect, City didn’t like the punishment, but pragmatically they accepted it and thus the process. Yet the statement the club put out on Friday when hit with the ban referred to the ‘flawed and consistently leaked UEFA process’.

Khaldoon al Mubarak didn't like their 2014 punishment but accepted it and thus the process

Khaldoon al Mubarak didn’t like their 2014 punishment but accepted it and thus the process

Their specific complaints are about Leterme, with the club claiming he was always going to find against them, something the Belgian politician has emphatically denied.

City’s statement added: ‘Simply put, this is a case initiated by UEFA, prosecuted by UEFA and judged by UEFA. With this prejudicial process now over, the Club will pursue an impartial judgment as quickly as possible.’

By suggesting the case had been initiated, prosecuted and judged by UEFA, City indicated that they believed the Club Financial Control Body was never robust or independent enough to deal with the case.

When the Club Financial Control Body and its investigatory and adjudicatory Chamber were set up in 2009, great lengths were gone to to put distance between UEFA and these judicial panels, rather like the executive and judiciary departments of government.

Unlike in 2014, when leaked emails made it clear that UEFA did interfere with the process, current president Aleksander Ceferin has no input this time. But if City had a complaint to make about the process, they needed to make it in 2014 before signing up to a settlement.

In doing so, it could be argued, they were accepting the rules and regulations, including the Club Financial Control Body and its independence from UEFA. In reality, Al Mubarak would have been better to spend his £30m on the best lawyers then, rather than now.

Al Mubarak would have been better to spend his £30m on the best lawyers then, not now

Al Mubarak would have been better to spend his £30m on the best lawyers then, not now

This remains a major challenge for City in their current argument. Particularly troubling is the case Galatasaray tried to present to CAS in 2016. The Turkish club, like City, were one of the clubs fined in 2014 for breaches of the rules and had entered a monitoring period. Unlike City, within a year, the Club Financial Control Body had declared them in breach again and eventually the adjudicatory panel issued a ban from European competition.

Galatasaray took the case to CAS, threatening to bring the rules crashing down. They wanted Financial Fair Play declared illegal under Swiss and European law. But crushingly for Galatasaray, in a detailed and well-argued submission, CAS ruled ‘that no violation of EU competition law has been established’.

Worse still for City was another paragraph which, though written in dry legalese, is dripping with scepticism. ‘The panel [CAS] … notes that the club [Galatasaray] did not challenge the Champions League and Financial Fair Play Regulations until it was sanctioned by the Club Financial Control Board Decision for breaching the Settlement Agreement… after… it had in substance agreed to abide by these rules and benefitted from the regime set forth by the CL & FFP Regulations.’

Particularly troubling for City is the case Galatasaray tried to present to CAS in 2016

Particularly troubling for City is the case Galatasaray tried to present to CAS in 2016

The CAS panel added that the ‘late challenge of the legality of the CL & FFP Regulations, after having agreed to abide (or attempted to abide) by them and benefited from their provisions, represents an inconsistent behaviour’.

In short, the CAS arbitrators were not impressed that, having signed up to rules without raising objections, the club only decided that they were illegal and unfair having been sanctioned.

City’s lawyers will now have do better than Galatasaray’s. Complaining that a process you signed up to in 2014 is unfair won’t cut it.

They will have to demonstrate — and they clearly believe they will — that this specific investigation was flawed in some way. On that depends the future of City as one of Europe’s elite football clubs.

Read more at DailyMail.co.uk