How Newcastle will pay for St James' Park rebuild as 11 new stadium designs show PIF vision
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St James’ Park, Newcastle United’s home for all but the first 11 years of their history, is the beating heart of the club the city, and its significance to supporters extends well beyond its financial utility.
But the fact of the matter is, while the stadium is one of the biggest in the Premier League and certainly among the most iconic, it is holding Newcastle back in terms of Profit and Sustainability Rules (PSR).
The Premier League announced today that no clubs had breached PSR for the the three-year period up to 2023-24, which began shortly before the Saudi Public Investment Fund’s (PIF) takeover of the Magpies.
While they are almost 10 times richer than the rest of the league’s owners combined, PIF’s petrodollars are locked up under the terms of PSR, whose ostensible aim is to ensure clubs spend within their means.
There has been significant scrutiny over whether this objective, along with the stated goal of maintaining competitive balance, truly reflects the purpose of PSR, formerly known as ‘financial fair play’.
However, that is largely immaterial at present as any major scaling back of the system requires a two-thirds majority vote from Premier League teams.
That kind of consensus isn’t going to materialise any time soon given the fragmentation and different blocs that have emerged among the league’s shareholders.
In any case, the principles of PSR have broad support among clubs, even if there is venomous disagreement about the nuances of the rules and how they should be applied.
A new squad cost cap, expected to be set at around 85 per cent of revenue, is expected to replace PSR from next season, but most football finance experts agree the effect will be similar to the existing system.
Newcastle’s revenue was £255m at the last count, which would give Eddie Howe and Paul Mitchell – who are working wonders on the training ground at present – a squad cost cap of around £217m.
That’s £217m limit on wages, transfer fees, and agent fees over a single season. For context, they spent £274m in the last financial year on wages and transfer amortisation alone.
So, if PIF are to get anywhere near realising their grand ambitions on Tyneside, revenue needs to rise. Fast.
Commercial income is the most agile revenue stream, especially given the relaxation of rules relating sponsorships with owner-linked firms (APTs) that could allow PIF to inject extra funds indirectly.
However, the influence of the Premier League’s Fair Market Value committee means the Saudis don’t have carte blanche to do as they please in terms of sponsorships.
Media revenue meanwhile is largely static and largely outside of Newcastle’s control in any case.
That makes matchday income a key focus area. It’s long-term, but the redevelopment of St James’ Park or, potentially, a move to a new stadium altogether is a guaranteed revenue explosion on multiple fronts.
Excitement is brewing as the club await the results of a feasibility study into what is possible at the NE1 site, although one new news line raised some questions earlier this month.
PIF to fund Newcastle United stadium project via equity, says football finance expert
In under five years time, the Saudi Public Investment Fund projects that it manage nearly £1.5 trillion worth of assets, which would make them the world’s largest sovereign wealth fund, surpassing Norway.
However, a report from The Athletic regarding the future of St James’ Park has cited several anonymous sources who doubt that PIF will front the funds required to upgrade or rebuild the stadium.
Yes, the club’s hierarchy has suggested the opposite, but the mood music at Newcastle has been that PIF, who insist they see the club as an investment like any other, will not throw cash around for no reason.
Fundamentally, there has to be an upside for them as an investment company. That is the claim, anyway.
If they were to fund the stadium, it has also been suggested that they would use a form of shariah-compliant Islamic finance to see the project through, as opposed to using their own cash reserves.
However, Liverpool University football finance lecturer Kieran Maguire disagrees, exclusively telling TBR Football that an equity injection from the owners is more likely.
“Islamic finance doesn’t encompass the concept of interest,” said the Price of Football author.
“That is interesting given that the APT rules which are coming into play in the Premier League create artificial interest.
“I don’t think there will be much happening at Newcastle United apart from new investment via equity in any case, as we have seen with the recent share issues.
“That is PSR-positive from the point of view of Newcastle fans, the manager and other stakeholders because shareholder loans are now subject to that artificial interest.”
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What will St James’ Park rebuild look like?
With the Premier League in a major stadium redevelopment phase, it’s a good time to be in the construction business.
Everton are poised to move into their ultra-lucrative new waterfront home at Bramley Moore Dock and the likes of Arsenal, Man United, Chelsea and Aston Villa considering expansion.
Manchester City meanwhile are in the process of adding 7,000 extra seats. Three clubs in Spurs, Arsenal and United already generated £100m-plus in matchday income, with that bar only set to rise.
So PIF cannot afford to do half-measures when it comes to rebuilding, expanding, or relocating from St James’ Park.
However, half-measures aren’t really in the Public Investment Fund’s nature.
For the 2034 World Cup in Qatar, Saudi Arabia are building 11 new stadiums in total at billions of dollars worth of expense. Three are already under construction.
They are space-age to say the very least.
The Neom Stadium – situated in the under-construction linear city, The Line – is positioned 350 metres above the ground.
The Roshn Stadium's fractal design meanwhile looks like shards of broken glass, while the Qiddiya Coast Stadium's undulating structure is inspired by a Mexican wave.
The feasibility of some of the designs has been questioned, however, as have many of Saudi Arabia’s so-called ‘giga-projects’.
