No more than 70% of income can be spent on transfers, salaries and agents
“Vedomosti” Sport” selects the most significant deal of the past week
On April 11, a meeting of representatives of English Premier League (EPL) clubs was held in London, at which its participants unanimously voted to adopt new profit and sustainable development rules (PSR), The Guardian reports . The need for reform became clear following sanctions this season, when the league stripped Everton and Nottingham Forest of points for financial fair play violations.
In addition, English clubs barely entered the market in the January transfer window due to fears of cost overruns and the risk of punishment: the combined spending of the 20 Premier League teams amounted to £100 million – the lowest figure for a non-Covid season since the winter of 2012. when clubs spent 60 million. A year ago, transfer costs amounted to 815 million pounds. This has led league officials and team management to define the current break-even rules in the Premier League as not meeting their goals. The main motivation for the discussion about reforms was fears that the Premier League could lose its status as the most profitable and attractive league in the world in terms of salaries.
Since the start of 2024, England’s top clubs have discussed several ways to improve the current system. Give Me Sport claims that some team executives have proposed introducing a so-called “luxury tax.” PSR offenders were expected to pay a specified amount into an “emergency fund” to help financially distressed clubs in the English Football League, which includes all professional divisions. Currently, a similar system operates in the United States in America’s Major League Baseball and the National Basketball Association and refers to the amount spent on the salaries of team players. But in the Premier League, a proposal to introduce a luxury tax failed to gain the support of 14 clubs to greenlight a potential rule change.
The “pegging” system was also discussed. This is a form of salary cap in which the amount of money spent by the club for these purposes would be correlated with the wage fund (payroll) of the worst team at the end of the season. So, for example, if Sheffield United finish the 2023/24 season in last place with an annual wage bill of £50 million, then each club will have to spend a multiple of that next season. This proposal was also not supported.
One of the main changes in the new rules was the elimination of the consideration of sales of assets to related parties when reviewing documents for compliance with PSR. This rule is best illustrated by the recent situation with Chelsea, which for the last calendar year showed a loss of 89.8 million pounds, notes The Times. To comply with profit and sustainability regulations, the club sold the hotel buildings on the site near its home stadium, Stamford Bridge, to its subsidiary Blueco 22 Properties Ltd. And he earned £76.5 million from it. Clubs can continue to use such clever schemes, but they will not be taken into account when reviewing financial documents under the PSR.
“The case with Chelsea is not isolated. Previously, clubs such as Reading, Birmingham City, Derby County, Sheffield Wednesday and many others have sold properties to their owners to try to gain an advantage in terms of PSR,” says football finance analyst Kieran Maguire.
Under the new rules, clubs will only be allowed to spend a certain percentage of annual income (maximum 70%) on first team and coaching staff salaries, transfer depreciation costs (usually financial statements spread payments for players over several seasons) and agent fees . For clubs that have not made it into European competition, the spending limit will be raised to 85%. At the same time, teams that violate the financial rules of the Premier League will continue to be punished by deduction of points, The Athletic emphasizes . The new regulations will come into force from the 2025/26 season.
The 2024/25 season will be a transition season in the Premier League so that teams can prepare for new requirements. It will still use the rules in force since 2014, under which clubs are allowed to show losses of no more than £105 million over a three-year reporting cycle. It was for breaking this rule that Everton and Nottingham Forest were fined in the 2023/24 season. An increase in the amount of allowable losses is currently being discussed – representatives of a number of clubs believe that it is outdated. A final decision on this issue will be made in June at the annual general meeting of Premier League clubs.
The new financial system of the Premier League is very similar to the rules invented in 2022 by the Union of European Football Associations (UEFA) – European Cup participants also have restrictions on spending on payroll, transfers and agents. But UEFA, unlike the Premier League, is implementing new financial control standards more gradually – over three years.
The new “financial sustainability and club licensing” rules replaced UEFA’s previous financial fair play (FFP) system, which allowed clubs to make losses of up to €30 million over a three-year reporting period. UEFA innovations came into force in the 2023/24 season – participants in European cups can spend 90% of their income on salaries of players and coaches, transfers and agent fees. In the 2024/25 season the bar will drop to 80%, and in the 2025/26 season – to 70%. It is this season that new requirements in the Premier League will come into force.
