Newcastle United’s planned summer squad overhaul will be hugely influenced by their pressing need to comply with Uefa’s suffocating financial rules.
The i Paper understands that Newcastle are at risk of breaching Uefa’s squad cost ratio rules (SCR), which are stricter than the Premier League’s financial fair play system, only allowing for spending 70 per cent of club revenue on agents fees, wages and transfers.
Football finance expert Stefan Borson believes a fine of between £4m-£8.7m is the most likely outcome, with Newcastle in discussions with Uefa regarding their finances for the period up to June 2025.
But if they continue to breach the rules they face much higher fines and even the prospect of being barred from European competition.
That is why despite the financial backing of majority owners Saudi Arabia’s Public Investment Fund and minority shareholders the Reuben brothers, the club cannot just spend, spend, spend.
Player sales expected
The Magpies are contemplating sales of some of their big players to allow them to buy the goalkeeper, right-back, midfielder and striker viewed as essential to freshening up the squad.
There is money at hand, insiders stress. But they have to finally develop a trading strategy to move out of a cycle of big spends and then fallow transfer windows.
“We have to move from a model of just acquiring players,” chief executive David Hopkinson admitted on Monday. “Buy well and sell well” was his more succinct summary, hinting at a significant pivot from the strategy of buying experienced Premier League performers for big prices.
Uefa’s rules come into force if you are playing in Europe, as the Magpies have been this season.
Given that they are not allowed to count the £172.1m profit from the sale of St James’ Park and land adjacent to the stadium to a company owner by the club’s shareholders, they could also fall foul of Uefa’s rule that only allows losses over a three-year period of €60m (£52m). The club will hope that the sale of Alexander Isak to Liverpool for a British record £125m helps on that front.
Aston Villa and Chelsea reached settlements with Uefa last summer which, in Villa’s case, included them agreeing to maintain a positive transfer balance. That meant banking more in sales than they spent – which, ironically, helped Newcastle to sign midfielder Jacob Ramsey.
What it means for the summer
Remember the days when a manager would be backed by a transfer “war chest”? That era is long gone. Putting a hard and fast number on a recruitment budget is much more difficult these days. Instead it is about creating enough headroom in their finances to allow spending on players.
Newcastle will need to do two things to mount a decent recruitment drive this summer; manage the cost of the squad they have got and comply with a patchwork of Premier League and Uefa rules.
Each Newcastle player has a cost attached to them, which comprises of their salary plus the value of their contract amortised over the length of the deal. So Nick Woltemade – signed for £69m on a contract of £120,000-per-week for six years – has a cost of roughly £11.6m a year.
If you sell him it creates £11.6m of headroom as well as whatever profit you might make on the deal. With that breathing space you could sign a player for £45m on £160,000-a-week.
“This is the point of trading,” explains Simon Capper, Newcastle’s chief finance officer. He was not, it must be stressed, talking about Woltemade.
“You can’t just stack salaries forever. If you have 50 players and they’re all costing you £20m a year, that’s £1bn in squad cost. That’s never going to work so you have to have a one in, one out almost to try and balance that squad cost to the number you can afford.”
So how much could they spend?
Newcastle have some leeway thanks to Isak’s £125m sale, but they have to be cautious and strategic.
“Buying well does not necessarily mean spending the most money,” Hopkinson said. “It means working in the market place for the players that generate the most value for this club rather than the fee paid for them.”
Newcastle want to lower the average age of the squad and seem set to dig into the European market more extensively than before.
Transfer targets
The signing of highly-rated 16-year-old Ecuadorian forward Johan Martinez, who will join from Independiente del Valle when he turns 18, is a sign of things to come.
Lens goalkeeper Robin Risser, 21 and a France youth international, is an option to challenge Nick Pope next season.
Football finance expert Kieran Maguire told The i Paper a net spend of around £100m is “realistic”. He noted this was the first time Newcastle had an average wage of £100,000 across the board and felt “in general” the finances were moving in the right direction.
But Newcastle’s stadium sale will not help them and they cannot sell to PIF-owned Saudi clubs either. Those transfers do not count in Uefa rules.
Will it affect Howe’s future?
Given the latest finances, last summer’s spending feels even stranger – spending £55m on Yoane Wissa was almost incomprehensible given how long he will be part of squad costs. They cannot continue in that vein.
Hopkinson’s equivocal backing of Eddie Howe opens up the possibility there may be a change in the dugout, too.
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It is unthinkable in some ways – he has overseen a period of huge success – but does he have the desire to absorb more star players leaving and a pivot to a different type of incoming? Might Howe himself take a look at the next part of the project and the growing sense of unease in the fanbase and decide to look elsewhere?
Sources insist he is seen as part of the solution. But the reality is Newcastle – and Howe – do not have any choice but to change course.
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