Business With Blain: Busted Flush
By JohnB
The Premier League’s Profitability and Sustainability Rules (PSR) are a busted flush in their current form but, after the drama of last season, it has certainly attracted the attention of the clubs.
Clubs like Everton and Nottingham Forest being the only ones concerned about sanctions is, at least temporarily, a thing of the past.
Aston Villa, Chelsea, Fulham, Leicester City, Newcastle United, Southampton, Wolves and even the commercial giant that is Manchester United have seemingly been dragged in, too.
Each club has their own challenges, but the need for compliance stimulates one of two behaviours; one is a need to cut costs and increase income, typically through player trading, and the other is caution over increasing player costs, through excessive transfer fees and wages.
For the time first time in the Premier League’s history, the need for all clubs to satisfy the PSR regulations before the end of their financial year, typically June 30th, created a mini transfer deadline day, which was promoted by the legacy media and commercial radio stations in particular, pushing the idea of imminent firesales.
On June 13th, the BBC reported that Manchester United had made a £35million offer for Everton centre-back Jarrad Branthwaite. It was an offer Everton rebutted immediately as wholly inadequate. Man United wanted their man and exerted their huge influence, and soon the media were reporting that the deal, when factoring in add-ons, was £43m, and that the player wanted to join the Red Devils — personal terms had even been agreed. Apparently.
More Than A Game sources are insistent that the offer from Man United was not only significantly below Everton’s valuation but, and maybe critically, was below £30m before add-ons.
Everton held their nerve and proceeded with their own player trading. Through the media they were ‘warned’ to be more reasonable with their expectations, with the messaging being that they had to sell to comply with the PSR.
On June 20th, a Bloomberg interview with Sir Jim Ratcliffe, who they described as co-owner of Manchester United, exposed some of the politics and messaging that goes on in football, and for the first time he exhibited publicly a level of candour that has not been evident before from other Premier League owners.
“I believe, as explained to me, a coalition of the six major clubs would have a certain level of influence in the [Premier League] but that broke down after the Super [League] Club initiative.”
Billionaire Ratcliffe, who controls football operations at Man United, also went on to say:
“They need to be careful the top six clubs are not disadvantaged because they don’t get a strong say in that committee because at the end of the day it’s those six or seven clubs that drive the [Premier League], that’s what the world is interested in.”
On June 22nd, Everton signed Tim Iroegbunam from Aston Villa and the next day, Lewis Dobbin left Goodison Park to join Aston Villa in what was to be called [incorrectly] a swap deal. It was claimed this deal included inflated fees for both players, that improved both Everton’s and Villa’s PSR position — this deal seems to have upset some parties, with legacy media being briefed about a formal complaint having been made to the Premier League.
On June 27th, the BBC reported that the Premier League had written to all 20 clubs to explain its rules regarding the fair valuation of players involved in transfers. The BBC referenced the Iroegbunam and Dobbin deals and the then-impending sale by Villa of Omari Kellyman to Chelsea (that deal subsequently went through on June 29th).
The BBC said the letter came about amid concerns that clubs were exploiting a loophole in the PSR, but made it clear no rules had been broken.
It seems to me that this letter has been issued to pacify those disgruntled clubs who did not like their own plans being disrupted or, as reported, clubs who sought clarification so they too could take advantage of the ‘loophole’.
Candidly, this is not a loophole per se. It is simply taking advantage of a common accounting practice. In short, income from player sales have a positive and immediate impact on the PSR, whilst the cost of buying players is amortised over the term of the player’s contract and consequently the negative impact on PSR is spread over multiple years.
It should be noted that while the Premier League letter ‘threatened’ that deals would be looked at closely, all three moves followed international accepted accounting practices, and were formally approved by the Premier League.
What’s in play here is a modest shift in the behaviour of the clubs; for the first time it seems they are taking the rules seriously as they have seen the impact of point deductions that minimally result in financial loss through reduced performance payments, as suffered by Everton and Nottingham Forest, but could also result in the ultimate sanction of relegation.
That being said, while there seemed to be a relative calm at Everton and Nottingham Forest, while Aston Villa pushed through the sales of Kellyman and Douglas Luiz — the latter joining Juventus for £42m — there was panic mode at one club.
Newcastle United were desperate to avoid a breach. So desperate, it seems, that they were willing to part ways with star forward Anthony Gordon, signed from Everton in January 2023, if Liverpool were willing to offer cash plus Jarell Quansah. The Reds did not bite, but that deal is one to watch for over the rest of the summer.
The Magpies eventually, it seems anyway, got over the line. They sold Elliot Anderson, an academy product who is yet to score a Premier League goal, to Forest for £35m. They sold Yankuba Minteh, who would have moved to Everton had Newcastle struck a deal to bring in Dominic Calvert-Lewin, to Brighton for £33m. If there is to be talk of inflated fees, then surely that would be a place to look. But we must again point out — the Premier League ratified these deals.
The marginal gains made by exploiting standard accounting practices are likely to be here to stay and the so called but technically incorrect ‘swap deals’ may become more prevalent with the value of academy developed players increasing as they may bring the easiest and quickest correction to a borderline PSR issue.
Ratcliffe only told Bloomberg what we already knew — that the six clubs who tried to help create a European Super League have not reduced their ambition to be protected, and that they will continue to use their substantial influence to try and get their own way.
Doing their work in the shadows suits their needs, it is incumbent on the other 14 to bring them out into the blazing sunlight and see how they fare then.
Well said John,
Hopefully we can hang on to Branthwaite and he goes anywhere other than man united when he does go.
Ratcliffe seems to believe that the top 6 teams should have anything they want and the other 14 teams should be grateful for them and basically know their place as nothing other than feeder clubs and that Utd should get a new stadium courtesy of the taxpayers, a view that seems to be shared by some of the people in charge of the premier league.
Hopefully there will be a more level playing field in the future but I’m not so sure, either way I am feeling uncomfortably optimistic about this season and am daring to dream of a season with no relegation worries and a chance to enjoy our final season at Goodison Park, surely that’s not too much to ask for.
Bang on JB.
If ever the phrase “Hate the game not the players” were applicable, it is here
Cute accounting is quickly labelled as cheating by those who don’t understand the fundamental principles involved - and who think they should have their pick of Branthwaite and others at whatever price they deem to be appropriate.