The 85% cap on player spending

[wolvesjoe]

It now looks almost certain that the new Premier rules for spending, to be fully introduced in the 25/26 season will be based on player spending caps.

For the majority of clubs, who do not qualify for Europe, then it will be a 85% cap, for those qualifying a 70% cap. The aim is for a figleaf of competitiveness.

The table shows Wolves were close to hitting the targets for 70%, so a little wiggle room there. Also clear which clubs are going to be in selling mode at the end of this season.

Its a very incomplete set of figures, however, and I cannot yet find a better, more coherent presentation of what the spending limits are actually going to be.

For instance, where does the shift to a formal spending cap leave allowable losses. Take Wolves for example: operational costs for running the club, outside of player expenses, currently at around 40m pa. With an 85% cap, Wolves would be looking at around a 10m deficit per annum. So the question is then: what can the rest of the allowable losses be used for? Will clubs be allowed to spend more on players up until the 35m current limit on losses? Or would any further investment by club owners have to go towards non-playing purposes, such as ground improvements?

And how are spending on academy players, the women's team, community projects and involvement to be interpreted? If these run at 5% of turnover, does that mean that clubs can in fact go up to 90% spending on players, when this 5% is taken out?

Third obvious question: the league has to find some kind of solution to the chaos caused by making points deductions during the season. It seems that minor examples of over-spending, will only invoke financial penalties. So doesnt that then become just part of what an aspirational club will budget for, to maximise their buying power in the market? How do the rules deal with cynical attempts to find loopholes, but loopholes, which are after all only attempts to compete better in a financially rigged league?

And when should sanctions be applied, so that clubs that abide by the rules are not being punished for doing that?

Another question: where do expenses on coach and coaching staff fall? Changing a coach involves substantial amounts in compensation, so how can this be budgetted for?

So, for me, an awful lot of issues to clarify, before any judgement can be made. The Premier league's main concern has clearly been to bolster the financial advantage of the top six, as they have emerged and solidified over the last 12 or so years. Removing any possibility of a Benefactor coming along has been the priority, and the system for doing that is now pretty much complete.

VAR has shown that ill-thought out changes can create worse and more problems that they solve. Are we heading for a financial VAR??

 

[SingYourHeartsOut]

I thought......

Coaching costs were included in spending in UEFA, so presuming it will be the same.

The rule is annual, so it's going to be far harder to comply, no digging yourself out of a hole with an expensive season.

The playing field becomes even more unequal as the spend is a proportion of turnover without a fixed cap. I.e. currently £200m you can spend £235, £400m you can spend £435. Now £200m you can spend £170, £400m you can spend £340.

 

[iamthenewno2]

The playing field becomes even more unequal as the spend is a proportion of turnover without a fixed cap. I.e. currently £200m you can spend £235, £400m you can spend £435. Now £200m you can spend £170, £400m you can spend £340.

I am sure I am missing something but is it more unequal, in the above example at present the difference in allowed spend is £200m (430-230), in the new scenario it is £170m (340-170)?

 

[wolvesjoe]

I thought......

Coaching costs were included in spending in UEFA, so presuming it will be the same.

The rule is annual, so it's going to be far harder to comply, no digging yourself out of a hole with an expensive season.

The playing field becomes even more unequal as the spend is a proportion of turnover without a fixed cap. I.e. currently £200m you can spend £235, £400m you can spend £435. Now £200m you can spend £170, £400m you can spend £340.

. Its hard to say it is more unequal until we know/see more. Maximum spending on player costs will go down both for top6 and the rest.

Current system says turnover plus allowable loss is limit, so 200+35 for mid-table club, roughly.

But that includes all spending, not just player spending, so a different calculation.

Take Wolves with operational costs of 40m approx. Currently 235-40, gives 195 approx for player spending.
Under new system, player expenses would be 170m, so a 25m cut.

For one of the top six, looks slightly different. Current turnover estimate for ease of calculation= 500m, so currently able to use
535-80 for operational costs=465m on player costs.

New system is based on 70% if qualifying for Europe gives 350m for player costs, so a 115m cut in maximum spending.

Figures given are somewhat approximate of course for purpose of illustration.

Other costs are left out of this schema, such as interest payments and compensation for coaches being fired.

 

[wolvesjoe]

I thought......

Coaching costs were included in spending in UEFA, so presuming it will be the same.

The rule is annual, so it's going to be far harder to comply, no digging yourself out of a hole with an expensive season.

The playing field becomes even more unequal as the spend is a proportion of turnover without a fixed cap. I.e. currently £200m you can spend £235, £400m you can spend £435. Now £200m you can spend £170, £400m you can spend £340.

Very good point about annual enforcement of costs will enforce much more conservative spending plans for fear of being caught out overspending.

Not sure, however, if it will be annual, or proceed on a rolling 3 year basis.

 

[Mile End Wanderer]

85% to keep the best league in the world yet it’s different for UEFA competition competitors?

Agents must be rubbing their hands together

 

[wolvesjoe]

85% to keep the best league in the world yet it’s different for UEFA competition competitors?

Agents must be rubbing their hands together

The 70% for European qualification, will in reality not mean so much for squads, as the extra income from European competition with cancel out the 15% cut in the cap.

 

[SingYourHeartsOut]

Very good point about annual enforcement of costs will enforce much more conservative spending plans for fear of being caught out overspending.

Not sure, however, if it will be annual, or proceed on a rolling 3 year basis.

The UEFA rules don't involve a 3 year rolling period do they? Anyway I feel after the ridiculous idea of Double Jeopardy with Everton, where breaking the rules becomes an excuse to break the rules again, that should be binned anyway. I did think it made a sensible way for a bit of a promotion splurge, but as in the Forest judgement, they seem to have stopped that and actually made it harder to stay up (without breaking financial rules).

 

[Sedgley Gold N Black]

I wouldn't be surprised to see PL sides opt out of the Europa Conference league, especially if you're one of the "big" 6 and end up in that competition.

 

[wolvesjoe]

Some interesting tables:


And another one:


And a final one:


Over last two seasons, only Brighton and Man City have received more in transfer fees for sale of players.

 

[Sedgley Gold N Black]

I thought......

Coaching costs were included in spending in UEFA, so presuming it will be the same.

The rule is annual, so it's going to be far harder to comply, no digging yourself out of a hole with an expensive season.

The playing field becomes even more unequal as the spend is a proportion of turnover without a fixed cap. I.e. currently £200m you can spend £235, £400m you can spend £435. Now £200m you can spend £170, £400m you can spend £340.

My understanding of the UEFA one is that the squad cost control rule is annual and limits you to spending 70% of your revenue on player + coach costs but there's also a "financial health" rule, which is more aligned to the current rules, permitting a loss of 60m euros over a rolling three year period that increases by 10m if you demonstrate good health over a year, presumably by a profit.

TBF there's a very detailed document on UEFA's website around the rules, although the PL will no doubt complicate it even further than just the 85% v 70%.

 

[wolvesjoe]

My understanding of the UEFA one is that the squad cost control rule is annual and limits you to spending 70% of your revenue on player + coach costs but there's also a "financial health" rule, which is more aligned to the current rules, permitting a loss of 60m euros over a rolling three year period that increases by 10m if you demonstrate good health over a year, presumably by a profit.

TBF there's a very detailed document on UEFA's website around the rules, although the PL will no doubt complicate it even further than just the 85% v 70%.

Overall impact with an 85% cap possibly not that great a difference from current situation.

But it does mean a system that operates on a different basis. The slight scope for flexibility in the current system will be reduced.

Expect more player trading at lowered prices in particular as clubs forced to trade to renovate squads.

 

[Sussex Wolf]

I thought......

Coaching costs were included in spending in UEFA, so presuming it will be the same.

The rule is annual, so it's going to be far harder to comply, no digging yourself out of a hole with an expensive season.

The playing field becomes even more unequal as the spend is a proportion of turnover without a fixed cap. I.e. currently £200m you can spend £235, £400m you can spend £435. Now £200m you can spend £170, £400m you can spend £340.

Overall impact with an 85% cap possibly not that great a difference from current situation.

But it does mean a system that operates on a different basis. The slight scope for flexibility in the current system will be reduced.

Expect more player trading at lowered prices in particular as clubs forced to trade to renovate squads.

A proportional limit would be fairer on smaller clubs than the current fixed limit.

Using the 85% proposed limit, that means clubs will be able to spend 85m for every 100m of revenue - just focusing on the revenue and spending that’s covered by the rules. So a smaller club, with 200m in revenue could spend 170m. But a larger club, with 400m could spend 340m, and one with 800m, could spend 680m.

The current system applies a fixed 35m loss limit irrespective of the turnover, so the larger clubs can spend proportionately more of their revenue. Using the bookends of 200m and 800m in revenue, they can spend 235m and 835m respectively. The fixed limit benefits the larger clubs because it’s not proportional. The proposed 85% cap appears set to have roughly the same impact on smaller clubs as the current PSR regime, but will have a greater impact on the larger clubs.

This is further magnified if the larger clubs qualify for Europe, and actually limited to 70%, while the smaller clubs are only limited to 85%. So a newly promoted club could spend 170m of their 200m revenue while a larger club in Europe, could spend only 560m of their 800m in revenue. Of course the UEFA rules will apply whether the PL changes PSR or not, so that 70% limit will apply to clubs in Europe.

 

[Monketron]

Given that Fosun want Wolves to be self-sustaining this shouldn't bother us as much as clubs with owners who just want to spend big and not worry about losses (i.e an Everton or Villa). Right?

I feel like this makes it even more important to increase revenue from matchdays too.

 

[The Wolf In The North]

Seems to be some complexity in the permutations, and care will need to be taken that no club accidentally squirrels away any expenditure under the wrong line of the P&L.

Thank goodness the authorities are so adept at clarity and consistency, and are renown for meting out appropriate punishments to transgressors to deter any shenanigans.

 

[Darvo]

Some interesting tables:


View attachment 41946And another one:
View attachment 41947

And a final one:
View attachment 41948

Over last two seasons, only Brighton and Man City have received more in transfer fees for sale of players.

Based on the first table, its hard to see how FFP has been a problem for us?

 

[Superted]

I much prefer an annual assessment as it should be much simpler to understand.

What I'm less clear on is how UEFA will deal with clubs that have qualified for European competitions.

The PL can assess the clubs accounts for any given season and apply sanctions in the following season (or, if they were relegated, the next season that club participates in the PL).

So if the PL allow an 85% ratio and the club spends that and qualifies for Europe, it then has to drop it's ratio to 70% to comply. The increase in revenue from league position and European qualifcation etc. would help but how do they apply a sanction? Presumably it couldn't be any sort of sporting sanction as the competition would be over before the PSR assessment is undertaken?

 

[Sussex Wolf]

The Athletic tries to make sense of the impact. Their long and short is that the biggest hit will be on middle ranked clubs aspiring to grow into a larger club, and those who occasionally qualify for Europe… now I wonder who that might be!

What do the new PSR rules mean for every Premier League club - and their transfers?

The Athletic analyses how different life under the new financial regulations might be for the Premier League's haves and have-nots

theathletic.com

 

[theweave]

I am sure I am missing something but is it more unequal, in the above example at present the difference in allowed spend is £200m (430-230), in the new scenario it is £170m (340-170)?

Depends what the aim is. If its to create a level playing field then yes. If its to prevent clubs going bust then it's correct

 

[Perton Wolf]

The Athletic tries to make sense of the impact. Their long and short is that the biggest hit will be on middle ranked clubs aspiring to grow into a larger club, and those who occasionally qualify for Europe… now I wonder who that might be!

What do the new PSR rules mean for every Premier League club - and their transfers?

The Athletic analyses how different life under the new financial regulations might be for the Premier League's haves and have-nots

theathletic.com

This makes stadium expansion even more important, it needs to happen! Otherwise the best we can hope for is the upper echelons of the bottom half every season.

 

[Sussex Wolf]

. Its hard to say it is more unequal until we know/see more. Maximum spending on player costs will go down both for top6 and the rest.

Current system says turnover plus allowable loss is limit, so 200+35 for mid-table club, roughly.

But that includes all spending, not just player spending, so a different calculation.

Take Wolves with operational costs of 40m approx. Currently 235-40, gives 195 approx for player spending.
Under new system, player expenses would be 170m, so a 25m cut.

For one of the top six, looks slightly different. Current turnover estimate for ease of calculation= 500m, so currently able to use
535-80 for operational costs=465m on player costs.

New system is based on 70% if qualifying for Europe gives 350m for player costs, so a 115m cut in maximum spending.

Figures given are somewhat approximate of course for purpose of illustration.

Other costs are left out of this schema, such as interest payments and compensation for coaches being fired.

I agree. As I commented earlier, I think the proposed change actually makes the limits less unequal because the proportional restriction grows with revenue.

But as the Althletic explains, the hardest impact is on middle tier clubs, and those who occasionally qualify for Europe. The very large clubs who routinely qualify for Europe are already bound by UEFA rules, and have such large revenues that player budgets are generous. Their owners will probably be happy to see the rules essentially ensure their clubs make a profit.

The small, recently promoted clubs will essentially be similar as today under PSR except without the flexibility to spread losses over three years. It will make it harder for them to adapt to the PL in their first season as they cannot overspend in that first season, and then cut back spending in the following two seasons as they could under PSR.

But for clubs like Wolves, Brentford, Brighton, West Ham, etc. our revenues aren’t high enough to fund large expensive squads without clever player trading, and the occasional Europe qualification drives us to the lower limit. So it will force us to concentrate even more on player trading, which in turn will benefit the larger clubs who will have an even greater pipeline of PL proven talent to buy…

 

[wolvesjoe]

I agree. As I commented earlier, I think the proposed change actually makes the limits less unequal because the proportional restriction grows with revenue.

But as the Althletic explains, the hardest impact is on middle tier clubs, and those who occasionally qualify for Europe. The very large clubs who routinely qualify for Europe are already bound by UEFA rules, and have such large revenues that player budgets are generous. Their owners will probably be happy to see the rules essentially ensure their clubs make a profit.

The small, recently promoted clubs will essentially be similar as today under PSR except without the flexibility to spread losses over three years. It will make it harder for them to adapt to the PL in their first season as they cannot overspend in that first season, and then cut back spending in the following two seasons as they could under PSR.

But for clubs like Wolves, Brentford, Brighton, West Ham, etc. our revenues aren’t high enough to fund large expensive squads without clever player trading, and the occasional Europe qualification drives us to the lower limit. So it will force us to concentrate even more on player trading, which in turn will benefit the larger clubs who will have an even greater pipeline of PL proven talent to buy…

Yes, I can see it becoming even harder to hold onto talent, although difficult to know how different that will be from the current set up.

I have always argued that aspirational clubs need to use the allowable losses to the full, to give more financial power and more flexibility. Used properly the losses have allowed for a sort of investment cycle, where clubs could invest for two years, then sell players in the third year. Keep on the good side of the regulations, but chance to build the squad. This new system may take away a big part of that flexibility.

Ultimately, club owners will see more profit and reduced losses, even if competitively the disadvantage continues.

 

[Oldgoldilox]

Based on the first table, its hard to see how FFP has been a problem for us?

Yeah, I don't understand these numbers either, they don't seem to tally with what's been published elsewhere.

 

[inaglasshouse]

Another field of financial sludge to run through to make any progress in the league. Dressed as fairness when in fact its an utterly corrupt protection racket.

 

[JohnB]

Any idea what the transition position is?

For example Chelsea have probably largely spent their budget for the next 4-5 seasons unless they sell each year. If that is scrapped and ignored under new system then that feels odd to me.

(My logic on Chelsea is a simplified example….

….say sold some academy players for £200m and bought new players for £1.2bn on a 5 year contract then….

Year 1 - £240m amortised cost, £200m gain from sales so net loss of £40m is easily manageable for them.

What most seem to forget is years 2, 3, 4 and 5 they start each year with £240m amortised loss and so need sales (or lots of revenue) to be able to do anything further.

In my head Chelsea have not just spent this year’s budget but most of next few years.

Villa and Newcastle may be similar and forced to sell.)

 

[Darvo]

This 85% cap is applied to club turnover?

So, you can’t spend more than 85% of your turnover on players (fees, wages and agents). Is that right?

If nothing else, it should make it easier to account for.

 

[hollo]

This 85% cap is applied to club turnover?

So, you can’t spend more than 85% of your turnover on players (fees, wages and agents). Is that right?

If nothing else, it should make it easier to account for.

Forest will have to offload about 20 players to comply.

 

[WickedWolfie]

Forest will have to offload about 20 players to comply.

Easier said than done - someone has to want them....

 

[JadeWolf]

Aren’t Fulham paying 128% of their turnover on wages? They’ll have to do some serious cost cutting, or put the prices of their tickets up loads.

 

[lets all have a disco]

Aren’t Fulham paying 128% of their turnover on wages? They’ll have to do some serious cost cutting, or put the prices of their tickets up loads.

3k a season ticket in that new stand , when it finally opens.....mind you , you can have a dip in the pool at halftime...

 

[JadeWolf]

3k a season ticket in that new stand , when it finally opens.....mind you , you can have a dip in the pool at halftime...

Awful, awful football club.

 

[Chris H]

Based on the first table, its hard to see how FFP has been a problem for us?

Yeah, I don't understand these numbers either, they don't seem to tally with what's been published elsewhere.

Our profit/loss shown in that table includes the £125m loan write off from Fosun which is excluded from PSR (FFP). So add £125m to our loss for it to be more comparable to other clubs (none of which have a loan write off as far as I’m aware).

 

[Darvo]

Our profit/loss shown in that table includes the £125m loan write off from Fosun which is excluded from PSR (FFP). So add £125m to our loss for it to be more comparable to other clubs (none of which have a loan write off as far as I’m aware).

Many thanks