Financial fair play, or FFP, has been a key theme of the Premier League this season.
Everton and Nottingham Forest have both been deducted points for breaching Profitability and Sustainability Rules (PSR), while Manchester City have been charged with 115 alleged breaches.
But it these rules, which have been criticised for being unclear and outdated, are now changing.
Here’s everything you need to know about the incoming PSR changes and how they will affect some of the clubs currently closest to breaching the original rules.
The proposed new PSR rules explained
Let’s start with a recap of the current PSR rules. Among a slew of anti-corruption regulations is the key one teams are at the greatest risk of breaching – that clubs can only lose a maximum of £105m across any three-year period.
Now, it’s not quite that simple – you can deduct “healthy” expenditure like academy and women’s team investment from your losses, so teams can technically lose more than £105m.
But this is the rule Everton and Forest have breached, while Manchester City’s 115 charges relate more to the anti-corruption regulations.
The latter rules are unlikely to substantially change, but the £105m limit is set to be scrapped altogether and replaced by a squad cost ratio, more in line with Uefa’s Financial Sustainability Rules (FSR), the successor to FFP.
Squad cost ratio is relatively simply calculated – you divide any club’s first-team wage budget, transfer amortisation costs and agents’ fees by its overall revenue
FSR is currently winding down year-on-year to a squad cost ratio of 70 per cent as the limit, starting with 90 per cent in 2023-24, before decreasing to 80 per cent in 2024-25.
The Premier League are reportedly aiming for a relatively generous 85 per cent squad cost ratio, meaning clubs just need to have their wage budget and amortisation costs below 85 per cent of their revenue.
Yet this will reduce to 70 per cent for clubs competing in European competition, giving clubs lower down the table more leeway to spend
While clubs have voted to change the regulations, they will not be formally passed until the AGM in June and will not fully come into effect until 2025-26, shadowing the current rules next season.
A Premier League statement released in early March read: “At a Premier League shareholders’ meeting, clubs agreed to prioritise the swift development and implementation of a new league-wide financial system.
“This will provide certainty for clubs in relation to their future financial plans and will ensure the Premier League is able to retain its existing world-leading investment to all levels of the game.
“Alongside this, Premier League clubs also reconfirmed their commitment to securing a sustainably-funded financial agreement with the EFL, subject to the new financial system being formally approved by clubs.
“The league and clubs also reaffirmed their ongoing and longstanding commitment to the wider game which includes £1.6 billion distributed to all levels of football across the current three-year cycle.
“The Premier League’s significant funding contributions cover all EFL clubs and National League clubs, as well as women and girls’ football, and the grassroots of the game.”
How the new PSR rules may affect Chelsea
There are probably fans of every Premier League club who want to know how changes to PSR will affect their teams, but none so more than Chelsea.
Mauricio Pochettino’s side could benefit in the long term, but it would not stop them being punished for breaching PSR in the period 2021-2024 or in the first season the new rules are put in place.
As football finance expert Rob Wilson told i last week, Chelsea need to sell over £100m before the end of June to comply with PSR in its current state.
Because Chelsea’s revenue was announced at an all-time high of £512.5m recently, a squad cost ratio would give them a lot more headroom, especially when capped at 85 per cent as they are outside of European competition.
But even though the club have been actively working to reduce their wage budget by buying younger players, who tend to demand lower salaries, their ambitious amortisation plan on the £1.19bn they have spent on players will cause them issues.
Chelsea have not yet filed their individual club accounts for 2022-23, meaning the most recent figures are now two years out of date, but there is every chance the west London side would still be in breach of new PSR rules.
How the new PSR rules may affect Newcastle
This isn’t so positive in the short term but could be hugely beneficial for Newcastle United in the long term, if they continue to grow as hoped.
The Magpies’ revenue increased to £250.3m in 2022-23, a significant rise from £180m the season before, but still less than half the size of Chelsea or other “big six” sides’ turnovers.
This means they can still only spend £212.7m on wages, amortisation and agents’ fees, a figure they would currently breach by around £40m, despite their wage budget only being £187m.
These figures should also be concerning if they qualify for European competition next season, where the squad cost ratio figure decreases to 80 per cent in 2024-25.
It is believed Newcastle would currently comply with PSR in its old state, but they may well be in breach if rules change.
Yet in the long term, if the Saudi-backed club continue to grow their revenue at the rate they have been and follow the model City have, the new PSR should provide much more headroom to expand their playing budget and corps.
Their plan to either expand St James’ Park or move to a new site is crucial here, as it would provide massive potential earnings and new income streams crucial to increasing revenue.
How the new PSR rules may affect Aston Villa
Much like Newcastle, Aston Villa are an upwardly mobile club at risk of breaching the new regulations.
Villa’s revenue this year increased to £217.7m from £178.4m, yet their wage costs are higher than the Magpies’ at £194.2m.
As Villa’s amortisation fees are lower than Newcastle’s over the past few years, they would likely breach a squad cost ratio by lower than their northern rivals, but crucially would still breach it by around £20m.
This could rise to as much as £60m in European competition, something they will have to watch out for next season as the FSR limit drops to 80 per cent.
Which other clubs are at risk of breaching new PSR rules?
According to modelling by football finance expert Kieran Maguire, Newcastle and Villa are not the only teams at risk of breaching the proposed new PSR rules.
Fulham, Forest and Everton would all also be at risk due to their comparatively low revenues and expensive squads.
Leeds United and Leicester City would also be at risk if they were to be promoted, especially given they will need to spend once they reach the Premier League – Leicester’s wage budget is already more than their revenue.
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