Arsenal get PSR green light to strengthen

Yesterday at 04:11 AM

The Premier League's PSR rules may constrain activity by clubs in the January transfer window, although it is never easy to get value for money.   The calculations involved are very complex, reinforcing the view that success in football increasingly requires good accountants and lawyers. There is a wide divergence between individual clubs in the Premier League.

Half of them have plenty of headroom, especially Brighton, Manchester City, West Ham, Liverpool and Tottenham, while Brentford and Arsenal are also pretty comfortable.

Arsenal

Despite making £111m pre-tax losses over the PSR 3-year monitoring period, Arsenal should still be fine, as they can make £125m allowable deductions (mainly depreciation, academy and women's football), leading to a PSR profit of £14m, which is £119m better than the maximum £105m loss.

Assuming the same level of allowable deductions in 2024/25 would suggest that Arsenal could post a massive £164m loss this season and still be compliant with PSR.  In other words, the Gunners have plenty of headroom to invest in the transfer market.   That will be welcome news after the home defeat to Newcastle which suggested that investment in the squad is needed.

Newcastle United

Newcastle United posted losses of around £73m in each of the 2021/22 and 2022/23 seasons , which has given the Geordies some PSR headaches. In fact, both chief executive Darren Eales and manager Eddie Howe have frequently mentioned that the club will have to sell players to stay within the PSR targets    As a result of the PSR restrictions, Newcastle really cut back on transfer spending this summer, having averaged around £150m in each of the previous three seasons.

The good news is that the Swiss Ramble is forecasting a significant improvement in 2023/24 with a £7m pre-tax profit, partly thanks to profit from player sales surging from £3m to £84m.   As the £73m loss in 2021/22 drops out of the monitoring period this season, Newcastle should have a little more flexibility going forward. In fact, the authoritative Zurich resident think that they could afford to lose £84m in 2024/25 and still meet the PSR target.

Given that Newcastle's hierarchy has underlined the importance of player trading to the business model, it would not be a major surprise if they sold one or more of their players before the end of the accounting year.   [Shurely not Izak to Arsenal in January, editor].

In contrast, the other half of the league faces some PSR challenges.   The authoritative Swiss Ramble reckons that the club most at risk is Leicester City, which is no great surprise, as they only avoided a sanction in 2022/23 thanks to their lawyers.

In addition, he has five clubs only just meeting the target, namely Nottingham Forest, Bournemouth, Ipswich Town, Manchester United and Newcastle United.

They will all have to box clever in the transfer market to stay on the safe side. This doesn't necessarily mean that they are unable to buy players, but it might be a case of "one in, one out".

There is little doubt that some clubs have been restricted by PSR, as can be seen by their behaviour in recent transfer windows, though it looks like a few others are protesting too much, as they have a lot of scope even under these rules.

That said, just because a club is not limited by the regulations does not mean that it will automatically spend big in the transfer market.  Leaving aside the hit and miss nature of player purchases, it has to be remembered that in the real world, clubs are constrained by their own financial budgets, just as much as the rule book.

As an illustration, the Swiss Ramble's model suggests that Bournemouth will just about be OK for the PSR target in 2023/24, though it will be a bit of a struggle. It is worth noting that there are a few of big assumptions here (and big assumptions have to be made for other clubs as well):

• I have assumed that they will not be able to include the £71m shareholder loan write-off in the PSR calculation.
• The club was not allowed to exclude the £20m promotion bonus paid in 2021/22, based on the comments in the Nottingham Forest ruling.
• Bournemouth appear to uniquely book implied interest on shareholder loans in a forerunner of the recent APT ruling. However, for the 2023/24 assessment I think this could be excluded.

We know that Bournemouth were not charged for a PSR breach in 2022/23, so we can conclude that they must have complied.

Calculations for all clubs are available from the Swiss Ramble, well worth the modest subscription.