🤒 The Desperate Moves Made by Clubs to Avoid PSR Penalties

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We bounce around from sport-to-sport on this platform but something that underpins every sports club and sports league is sustainability.

The way in which sustainability is implement in the Premier League is with PSR (Profit and Sustainability Rules). There were some very desperate moves made last week ahead of the June 30th accounting deadline by alot of teams.

Today we explain why this date was so important and everything these clubs were doing to safegurard themselves against financial penalties.

There are a few key things to remember when we discuss PSR. The first and the most important thing is:

• Clubs are allowed to lose £105m across their last three financial years

Beyond that:

• When you buy a player, the transfer fee and the players’ salaries are amortised over the length of the contract

• When a club sells a player, the profit from that player is immediately recognised in PSR calculations

• As a result, players from club academies where there was £0 transfer fee to acquire the player represent pure profit for Premier League clubs on their financial accounts

An example of this is as follows:

Club A signs a player on a five year contract for £15m on £5m a year in wages. In the same window Club A sells an academy graduate for £15m.

The purchase equates to £4m in costs (£15m transfer fee / 5years = £3m plus £5m wages / 5years = £1m). This sale represents £15m in profit for Club A.

In this example even though £15m came in and £15m “went out”, it will show a gain of £11m on the accounts and will make for a favourable PSR calculation.

A lot of Premier League clubs were scrambling to ensure their books for the 2023/2024 financial year were on point ahead of the June 30 financial reporting deadline. Some teams were in more precarious places than others.

Leicester:

• Had to sell Kiernan Dewsbury-Hall for £30m to Chelsea

• Let their manager Enzo Maresca and his coaching staff leave for £10m to Chelsea

Everton:

• Had to sell Lewis Dobbin (Academy graduate) for £9m

• Sold Ben Godfrey to Atalanta for £10m

Aston Villa:

• Had to sell Douglas Luiz to Juve or £42.3m!

Chelsea:

• Sold Ian Maatsen for £37.5m to Villa

• Sold Omari Hutchinson to Ipswich for £20m

• Sold Lewis Hall to Newcastle £28m

All of these Academy players were loanees that ended up becoming permanent deals. They represent a healthy pure profit for the London club.

Newcastle:

• Sold Eliot Anderson for £30m to Nottingham Forest

• Sold Yankuba Minteh for £30m to Brighton

As you can see, there were some desperate moves made by Premier League clubs to prevent them from being penalised by PSR.

Some of that desperation forced clubs to sell their best and most promising talent.

Some of you who are eagle-eyed may have noticed a few of these deals are to the other clubs facing the same PSR issues too!

This therefore begs the question, what is more important? Rules in place to prevent horrible financial mismanagement of football teams (think Everton in the last 5 years. Derby County from 2013 onwards. Leicester from 2019) or liberal rules to allow clubs to do what they want?

If the path to sustainability incentivises clubs to sell academy graduates earlier than they would have done originally are the rules having the desired effect?

Will a club soon make a decision that an important player (like Douglas Luiz) is worth more than 4 points to them so we will intentionally take the points hit?

The journey to future-proofing the Premier League is working so far but it has not come without some bumps.

I wonder how long this iteration of the rules stay in place.

I leave you this week with a very heart-warming story which should go some way to help future-proof a British club.

Wolves sold Max Kilman to West Ham for £40m last week. Whilst to many that is an ordinary football transfer, Maidenhead United FC are set to make £4m from the sale which will completely revolutionise the non-League club!

Maidenhead sold Kilman to Wolves in 2018 for £40,000 but held a sell-on clause on the talented defender. This summer that sell-on clause is being exercised to great benefit.

To put this into perspective, Maidenhead currently play in the 5th Tier of English Football and on their two most recent accounts showed cash balances of:

• 2023: £48,727

• 2022: £159,151

Upon hearing the news their Chairman recently went on SkySports and said the first thing they will look to do is sort the pot holes in the company car park!

An amazing story which will have a profound impact on the small British football team.

See you next week.