Never underestimate the complexity of football's ever-changing spending rules

01/28/2025 02:16 AM

As Norwich City fans, it's all too easy to be drawn into a single perspective of the game; absorbing everything that is written or spoken about our club without looking into too much detail at other aspects of football.

One such issue caught my eye a couple of days ago. Manchester United, one of the biggest names in world football, is writing to its fans to inform them that the club are at risk of breaching spending rules and that ticket prices could rise as a result.

The first reaction of anyone with a cynical mind might be that this is another excuse for 'offshore Jim' to rinse the United faithful of their hard-earned cash, with season ticket renewals just around the corner.

Thankfully, I don't have a cynical mind, so I won't go there. Plus this wouldn't be of much interest to NCFC fans if I was suddenly minded to disappear down a Man United-focused rabbit hole.

Nevertheless, financial fair play has become a hot topic within the game over the past couple of seasons, and with good reason.

Whether it's purely a coincidence, with the imminent threat of the arrival of an independent regulator, which has recently focused the attention of the Premier League's hierarchy (there's that cynical mind popping up again), or certain Premier League clubs themselves having recently lost their sense of financial probity, who really knows.

But the mood change has been significant, with Everton (twice) and Nottingham Forest being charged with PSR breaches.

It's resulted in some fans questioning whether the Premier League has been targeting certain so-called smaller clubs (something which, I very much doubt) in order to prove it can regulate itself, without the need for external influence, accountability, or, indeed, whether the PSR rules themselves are really fit-for-purpose.

And, all this is before the outcome of the ongoing Manchester City case is known.

What's clear, is the PSR is an absolute legal minefield, difficult to understand and the cause of much confusion among fans throughout the game.

When City released their 2024 accounts, having generated accumulated losses north of £60m in the previous three seasons, some fans were understandably questioning whether the club was in danger of breaching PSR. They weren't, not least because the first year (2022) of the rolling three-year period was a Premier League season when the permitted losses are higher.

For those who are really interested, the basic rule is that all clubs, whether in the Premier League or Championship, can lose £5m each year, or £15m over the three-year rolling assessment period.

However, Premier League clubs can have an additional £30m loss each season (£90m over three years) if underwritten by secured owner funding – £90m, plus £15m gets you to the often quoted, £105m allowance over three years.

For Championship clubs, there's an additional £8m loss each season (£24m over three years) if underwritten by secured owner funding – £24m, plus £15m gets you to the £39m figure commonly quoted for second-tier clubs.

Little wonder fans are confused, especially if any club is promoted and/or relegated during each assessment period.

But here's the crux of the matter. The headline accounting losses are not the same as the permissible PSR losses, not least because a PSR assessment loss can also exclude various allowable losses; for example for infrastructure improvements, academy football and the women's game.

As a consequence, clubs can actually incur annual accounting losses that are significantly higher than the acceptable annual thresholds, yet can still be compliant from a PSR perspective.

For example, Everton, with their first PSR breach, back in 2022, had headline accumulated losses in excess of £350m during the three-year assessment period, but their new stadium development costs, plus exceptional covid losses, reduced their overall losses to circa £120m for that assessment period.

It was still a breach, but nowhere near as high as their reported accounting losses. Ditto Manchester United, with accounting losses approaching £300m over the past three years, but their PSR losses are still close to the £105m threshold, hence their warning letters to fans.

With clubs regularly reporting accounting losses, it's perhaps a natural response to suggest a certain degree of financial incompetence by those running the game. It's an easy stone to throw in the direction of the game's administrators.

However, this ignores a fundamental principle, as there's a high correlation between revenues generated by individual clubs (hence their incessant drive for additional revenue streams), their annual spending on players' wages and transfer fees, and their playing success on the pitch.

As a consequence, if the current financial rules permit clubs to continually accumulate annual accounting losses, while common sense dictates that's not financially sustainable in the long run, it really shouldn't come as much of a surprise as to why all individual clubs regularly push the financial boundaries to the maximum.

Financial incompetence, or playing by the rules?

I guess personal viewpoints might differ on this one, but PSR has been with us for over a decade.

Oh, and the fun starts again with new financial rules from 2025-26.

Whether they will be any better than the existing PSR rules, only time will tell.

One thing is for sure, however – clubs will always be seeking to gain a competitive edge over their competitors, and they almost certainly 'game' the new rules to within an inch of their life, irrespective.

OTBC