Connect with us

News

Why are Chelsea signing players to long contracts?

Chelsea co-owners react after defender Trevoh Chalobah signs new contract till 2028

Mykhaylo Mudryk has joined Chelsea from Shakhtar Donetsk for a fee of up to €100m on a eight-and-a-half-year contract. The first reaction to this deal may very well be: How much? Yet, the question of ‘how long?’ is just as important.

The Boehly-Clearlake consortium forked out in excess of £4bn to acquire Chelsea Football Club in May. In the intervening seven months, the money has continued to flow at a frightening pace.

Prior to Mudryk’s arrival, Chelsea had already spent more than £300m on transfer fees across the summer and winter windows of the 2022/23 campaign.

Advertisement

While the top-line cost of these players – who range from a teenage Brazilian starlet to a 33-year-old striker very much on the wane – naturally catches the eye, the unusually long duration of the contracts these players have been handed is a crucial element to Chelsea’s transfer strategy.

Why are Chelsea signing players to long contracts?

Regardless of what the unrelenting influx of highly-priced players might suggest, Chelsea still have to adhere to UEFA Financial Fair Play regulations (FFP). These rules were introduced in 2010 to prevent wealthy owners from injecting their own capital into their clubs without any concern for the overall losses made.

By handing players extra-long contracts, Chelsea are exploiting the accounting technique of annual amortisation to adhere to FFP.

Advertisement

Amortisation is the practice of evenly dividing a player’s transfer fee across the length of their contract. Assuming all targets are hit, Mudryk’s €100m fee split over his seven-and-a-half-year deal would go down in Chelsea’s accounts as a €13.3m expense each year (100 divided by 7.5).

If the 22-year-old had only signed a four-year deal, that it would, on paper, cost the club €25m each year (100 divided by four).

It should be stressed that annual amortisation is purely an accounting strategy and does not relate to how Chelsea will transfer the fee to Shakhtar.

Advertisement

Mudryk is hardly alone in signing a long contract. Benoit Badiashile also agreed on a deal until 2030 when Chelsea bought the centre-back from Monaco for £35m. Wesley Fofana pledged his future to Chelsea for seven years when he joined in the summer for an initial fee of £70m from Leicester. The highly rated Ivory Coast forward David Datro Fofana inked a six-and-a-half-year contract in January with the option for another year included.

By handing out longer deals, Chelsea have been able to significantly reduce the immediate cost of the deals in their accounts, which is crucial to complying with FFP. The downside, of course, it the Chelsea accounts will now carry those costs for longer.

Advertisement

Trending