The BookKeeper: Real reason for Premier League PSR complaints is the 217% rise in costs

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As the dust settles on another chaotic summer of extravagant Premier League spending, there’s time to take a step back. To look at things with less emotion. To remember we’re all here to watch talented footballers actually play the game, not just wonder where their short, peripatetic careers may take them next.

Alternatively, there’s also more time for everyone to bemoan profit and sustainability rules (PSR). Grumbles about PSR have been a theme of the past three months. As Premier League spending ballooned over the £3billion mark — more than the other four main European domestic leagues combined — PSR and its supposed influence remained a constant in the background, a grim reaper bearing a calculator rather than a scythe.

How we’ve arrived at PSR taking up such prominence in footballing discourse is, mostly, not a result of rules tightening. Domestic PSR loss limits have not changed since they were introduced in February 2013. The story is different in the three UEFA competitions, and nine English clubs had to consider their approach with continental rules in mind, too.

More broadly, the driver of PSR’s fame is club activity. Despite collective Premier League revenues nearly doubling since PSR was introduced, cost increases have been higher: wages are up 115 per cent; non-staff costs, excluding depreciation, have risen 143 per cent; player amortisation, or the annual cost to clubs of transfer fees, increased from £549million a decade earlier to £1.7bn in 2023-24, a 217 per cent rise.

Those three cost categories consume 64 per cent, 24 per cent and 27 per cent of revenues respectively. Add them together and you can see why clubs are making losses: 64 + 24 + 27 exceeds 100 per cent of revenues, and that’s before we include any interest costs, which also impact PSR calculations. In 2013-14, eight Premier League clubs posted an operating loss; in 2023-24, that figure was up to 18 of the 20.

Hence, clubs are turning to the player-trading model long pioneered, and more recently supercharged, by Chelsea. They led the way with £294million in sales this summer, an amount only previously surpassed by Monaco in the 2018 window, when they sold Kylian Mbappe to Paris Saint-Germain.

Just as Premier League clubs broke spending records, so too selling ones fell: £1.8billion was made from player sales, over £400m more than the previous high mark, set just a year ago. This was the third summer running where outgoing transfers topped £1bn.

It can be linked to PSR. Clubs running operating losses require player sales to improve their bottom line. Chelsea have done it for years, Manchester City, too. Selling members of your squad represents an immediate boost to financials; of course, if such deals are used to fund more transfer spending, they need to be repeated.

Bournemouth became only the ninth club anywhere to pass £200million in sales in one window, and while that was in part them being picked over by wealthier clubs, it also served as a balancer to the hefty spending they’ve undertaken since their December 2022 takeover. Wolves might have had some PSR concerns in June before Manchester United spent £62.5m on Matheus Cunha.

The division’s ‘Big Six’ dominated spending again, though that was hardly new. Arsenal, Chelsea, Liverpool, Tottenham and the two Manchester clubs accounted for 49.3 per cent of gross spending, having averaged 47.9 per cent in the previous 10 summers.

More tellingly, those six teams contributed 67.1 per cent of the division’s £1.3billion net spend this summer. That was well above the recent 48.4 per cent average, and reflects a theme of the window: the richest clubs raided the rest of the division.

Of the ‘Big Six’ clubs’ £1.5billion spending this summer, 39 per cent of it went on players at one of the other 14 Premier League sides. The only time this percentage has been higher since City joined the informal ranks of that group was in 2009, at the outset of their Abu Dhabi project.

How much of this summer’s leap is down to the rules and how much is just the natural order of football is open to interpretation. For better or worse, the richest have long been able to wrest stars from the less well-off; there is, though, a welcome debate to be had about how much PSR solidifies the status quo.

Taking the most heated transfer of the summer, Alexander Isak’s move from Newcastle to Liverpool, there’s a fair argument that the deal had little to do with PSR, at least insofar as we all agree some restraints should be in place. Without any rules at all, there’s a possibility Isak would still be at Newcastle, surrounded by more of the world game’s best and most highly remunerated players courtesy of the vast wealth of the club’s Saudi Arabian owners, challenging for titles already. But that’s a rather larger discussion.

In the world as it is, the rules hardly precluded Newcastle from giving Isak what he appears to have wanted financially. He was being paid over £150,000 a week, doubling which would have loaded £9million extra onto the St James’ Park wage bill. But extending his contract would have reduced amortisation costs by around £3m if he signed a new five-year deal. The extra £6m committed annually on the Swedish striker could have been covered, for two seasons, by the £12m that was generated by selling Sean Longstaff to Leeds United.

Newcastle, for their part, have been less vocal about PSR this summer than in the past. Where a year ago they were left selling players right up to their accounting deadline, this time they entered the window with much less to worry about. The sale of Isak, a deal The Athletic estimates has generated around £80million in accounting profit, has only helped their position further. They might bristle at losing their best player, but sales like Isak’s can set a club up for years.

Perhaps this summer’s most common complainants have been Aston Villa. Manager Unai Emery, in his opening-game programme notes, stated the rules have “become a limitation for the clubs that are doing good management, who’ll never be allowed to dream”. On a gross basis, Villa were the Premier League’s lowest spenders.

Emery is more articulate than many, and debating the fairness of the current system is a worthy endeavour, but even that snippet was rooted in a generous interpretation of ‘good management’. Villa have ambitious owners, but were they to walk away tomorrow — highly unlikely, but precisely what these rules were brought in to help mitigate against — the club would be in serious trouble. They’ve been big sellers recently, but it follows a five-year net spend of over £400million.

Villa have received £365.7million in owner funding in just the past three seasons, much of it to help staunch big day-to-day losses (2023-24 operating loss: £145.3m). That they can require such funding and still remain within the rules suggests those rules need tightening, not relaxing.

Between their 2018 takeover and the end of 2023-24, Villa spent 132 per cent of income on wages and player amortisation costs. Of clubs to play in the Premier League in that time, only Nottingham Forest (138 per cent), Everton and Leicester City (both 133 per cent) racked up higher ratios. All three have been either punished for domestic PSR breaches or remain subject to charges.

Villa were on guard against PSR issues this summer too, but it was on the European stage where their real concerns lay. Already in a Settlement Agreement with European football’s governing body UEFA, they faced an uphill struggle meeting the organisation’s squad cost rule (SCR), which directly limits spending on wages and transfers. It drove their relative lack of expenditure.

With that rule assessed to the end of December for this calendar year, the summer offered the last chance for clubs to get their houses in order. Arsenal were also known to be working with SCR in mind, and they were keen to make more sales than they ultimately managed. Their heady net outlay suggests they pushed spending to the limit.

Yet even as nearly half the division now have to comply with rules specifically targeting player spending, clubs ramped things up anyway. In part, that is to do with another bumper Premier League TV cycle starting this season, but the reported fees remain jaw-dropping.

They are also underestimates.

Research by The Athletic over the three Premier League seasons 2021-22 to 2023-24 finds combined transfer fees paid by clubs per their accounts exceeded those listed on Transfermarkt, a website which tracks player movement globally, by an average of 24 per cent, a disparity largely generated by agent payments and the four per cent transfer levy the division applies on all incoming deals. Apply that uplift to this summer’s reported spend and you arrive at a total of £3.9billion. On a macro level, it is hard to make the case that clubs have reined things in.

Naming PSR as the primary cause behind everything that unfolded this summer would be foolish. There are myriad factors impacting transfer activity. But it was certainly a factor and, though many complaints appear rooted in self-interest, there’s growing reason to agree that change is needed.

At UEFA level, that change has already come, with tighter loss limits and a new regulation directly pointed at squad spending. The Premier League, eventually, is expected to adopt the latter, too. But prorating three years of player profits down to 12 months, as UEFA’s rule does, reduces the immediate efficacy of successful trading in the market, the very strategy that poorer clubs increasingly rely on to climb the ladder. Moreover, this window showcased the perils of linking any limits to revenue, as SCR does — it naturally allows the highest-earning teams to keep spending more.

That has long been the case but as income gaps widen, it only further enables those at the top. In 2013-14, when domestic PSR was introduced, the difference between the average revenue of the ‘Big Six’ and the remaining 14 Premier League sides was £205m. A decade later, in 2023-24, that gap was £405m.

This summer’s activity helped reinforce the view that the current system emboldens the already richer. It is true all the way down. Newcastle, outside the ‘Big Six’ but battling to get in and mostly clear of PSR troubles, completed each of the four biggest deals by an English club not in that group, signing players from Stuttgart, Forest, Brentford and Villa. Those four Newcastle moves were among the 10 largest ‘non-Big Six’ transfers of the summer globally; for reference, Real Madrid managed three.

Football has, in many ways, long been like that. The rich use their muscle; the poorer must be more innovative to succeed.

Getting rid of rules to allow a couple of clubs into the former category wouldn’t boost competitive balance. Tightening them further, and de-linking cost controls from revenue, just might.

But with each passing summer of enormous transfer spending, the chances of turning the boat around fade ever further.

(Top photos: Newcastle summer signing Jacob Ramsey, left, and Chelsea newcomer Alejandro Garnacho; by Getty Images)

This news was originally published on this post .

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