Why did clubs spend so little in January? PSR rules explained

It’s been more bargain basement than big spending for Premier League clubs this January – what has made this transfer window one of the thriftiest for years?

The Covid-hit 2020/21 season aside, the English top flight spent less than £100m combined for the first time since 2012 across the winter window, with 13 teams refusing to open their wallets altogether.

This isn’t what we’re used to. Even ignoring Chelsea’s shopping spree 12 months ago, in the pre-Boehly era the 20 Premier League clubs spent £322.9m between them in January 2022 – over £230m more than this window.

Forget taking things one game at a time, Profit and Sustainability Rules are the new buzz words in the Premier League, because they’ve played a major part in why so many managers have been able to mute their WhatsApps over the last four weeks.

So what is the deal with PSR – or the catch-all term you may be more familiar with, FFP – and will it change things forever now?

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Sky Sports’ Sam Blitz explains what the Premier League’s profit & sustainability rules are and how they affect clubs’ ability to spend.

So what is it that stopped Chelsea adding to their huge spending under Todd Boehly, denied Arsenal the chance to sign a striker which pretty much everyone has agreed they need – and kept the infinite riches of Newcastle from propping up their injury-hit squad?

Let’s start at the beginning…

Profit and sustainability cheat sheet

Premier League clubs can…

  • Make ‘allowable’ losses of up to £5m/season (averaged over three seasons)
  • Increase that figure to £35m/year with owner investment (averaged over three seasons)
  • Spread out any transfer costs over a maximum of five years

What are the Premier League’s Profit and Sustainability Rules (PSR)?

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Sky Sports chief news reporter Kaveh Solhekol explains the Premier League’s process for Profit and Sustainability – when penalties may be handed out and why the process is being fast-tracked this season

In the simplest terms, when every Premier League team tots up their annual accounts, they can have made a loss no greater than £105m across the previous three seasons.

Sounds straightforward, but do not worry – this would be a very short article if it were that easy. There are a fair few caveats and sub-clauses to get through before any club can find itself in the clear, or not…

For a start, not all losses are created equal.

Clubs can only lose £15m of their own money across those three years. So that’s no more than £15m extra on outgoings like transfer fees, player wages and, in a lot of clubs’ cases, paying off former managers compared to their income from TV payments, season tickets, selling players and so on.

Anything above that, up to the £105m barrier, must be guaranteed by their owners buying up shares, known as ‘secure funding’, and essentially means bankrolling the club.

In those circumstances, the Premier League require clubs to submit plans to explain their financial plans for the next two seasons.

If any club owner is not feeling particularly flashy, or cannot find the best part of £100m down the back of the sofa, that does not leave much wiggle room. Some Premier League clubs have expensive tastes.

Of teams still in the top flight, only Chelsea and Everton utilised that full amount in the most recent published accounts (for the 2021/22 season) – with nine clubs, including Arsenal, Liverpool and Manchester United receiving no equity injection at all.

Oh, and for sides who have spent any of the last three seasons in the EFL, owners can only put in £8m of secure funding for those years, leaving an overall maximum annual loss of £13m for the campaigns in question.

What counts towards PSR and what doesn’t?

Declan Rice celebrates Arsenal's 4-3 away win over Luton Town
Declan Rice signed a five-year deal at Arsenal in the summer, meaning his £105m transfer fee is only put down as a £21m ‘loss’ per year

Talking of expensive tastes, let’s start off with transfer fees. Premier League clubs spent almost £2.4bn in the 2023 summer transfer window, an average of £120m each.

That has now left them with little wriggle room in January – as we’ve seen with the small amount spent – though even those huge sums from last summer aren’t going on their balance sheets all at once.

Using a process called amortisation, clubs are able to treat players as ‘assets’ in a financial sense rather than one big outgoing – even if they do pay the whole cost up front.

If you sign a £50m player on a five-year contract, they are ‘worth’ £50m at the start and £0 at the end in your accounts, so can be put down as a £10m loss every year.

That’s exactly why we have seen Chelsea and other clubs signing players on contracts as long as eight years, and why Premier League clubs voted in December to limit spreading those transfer fees over a maximum of five years from now on.

Beyond the creative accounting, there are a number of other expenses which do not count towards PSR. These are not set in stone, but are generally accepted as being costs which are incurred ‘in the general interests of football’ such as a club’s infrastructure, any associated women’s team and the cost of running their academy.

There was also some added leeway granted for the unforeseen income drop caused by Covid-19. Losses across 2019/20 and 2020/21 were averaged, and clubs were allowed to exclude any drop in income which could be directly attributed to Covid – though this will drop out of the three-year accounting period for the current season.

Those two regulations play a major part in the Premier League’s decision to hand down a 10-point deduction to Everton.

When the Toffees first sent the Premier League their PSR calculations for 2021/22, they claimed their losses after allowable exclusions only amounted to £87.1m.

The authorities disagreed on what could be left out of PSR and said Everton’s losses had amounted to £124.5m, almost £20m above the allowable total.

That dispute looks to have plenty more legs in it, with Everton appealing the decision in December. An appeal board will be appointed to hear their case, though a date has yet to be set.

Are clubs on red alert after January charges?

There is clearly some trepidation around the Premier League right now.

Everton’s points deduction was the first serious PSR-related punishment handed down by the Premier League, and the league announced more charges against the Toffees, and Nottingham Forest, midway through January.

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Sky Sports chief news reporter Kaveh Solhekol explains the process behind charges brought against Everton and Nottingham Forest by the Premier League for breaching Profit and Sustainability rules and what could happen next.

There has been criticism of the division’s approach to finances in the past, but the actions of the last few months have made it clear clubs must sit up and take note.

This season, for the first time, the Premier League has picked up the pace with which it deals with potential breaches of PSR regulations, and has required teams to hand over their yearly accounts by December 31 every year.

Forest and Everton both told them they had been in breach of the regulations when they submitted their most recent accounts, ending at the conclusion of the 2022/23 season – meaning they had lost more than £105m across the previous three seasons.

On January 15, a Premier League statement confirmed the league was conducting further investigations, and said it would be appointing two separate independent commissions to decide what punishment to hand down to each club.

Sky Sports News chief reporter Kaveh Solhekol said: “They are going to act pretty quickly because these rules are new and streamlined.

“This is all part of a fast-track process because the Premier League want to make sure that if there are any fines or any points deductions, they are in season.

“How fast will the process be? Can the clubs appeal? The commission will hear the case and it will last between one and five days, but we should have a decision within 12 weeks so early April.

“The clubs will have the chance to appeal if they want to. It has to be heard and concluded and have the final decision by May 24, which is five days after the season has ended.”

What has stopped teams from spending more?

To put it simply, these PSR rules have put big clubs under pressure they haven’t felt for a while.

As mentioned before, they can no longer claim any exemptions because of Covid – as the three-season cycle we are in no longer includes the 2020/21 season.

For the likes of Newcastle, the frugal spending under the Mike Ashley era is also now a distant memory. The three-year cycle the Magpies are now in only includes transfer windows since the Saudi PIF takeover, and losses have unsurprisingly begun to rack up since then.

Look at Arsenal, too. Yes, they have been slow and steady in their spending – but when you put down £170m on Delcan Rice and Kai Havertz alone in the summer, that’s a big outlay for any club. And they, like any club playing in Europe, have new UEFA rules to adhere to as well – keep reading for more detail on that.

Let’s not forget Chelsea either. Their spending appears to have finally caught up with them – as we saw during January with the potential for Conor Gallagher to leave the club. They have been creative in their accounting, which you can explore in depth below, but that only goes so far.

How UEFA’s rules tighten Premier League clubs’ finances even more…

As promised, here’s another set of rules on clubs’ financial outgoings, for any Premier League sides who do, or hope to, play in Europe.

UEFA are currently implementing new rules, and have dropped the ‘Financial Fair Play’ moniker which they previously used. The heads of European football have said their new rules are not designed to create a level playing field, but rather force clubs to live within their means.

In the same style as the Premier League, clubs are permitted to make three-year losses of €60m (£51.8m), with €55m (£21.5m) of that through ‘secure funding’ from owners.

Aleksander Ceferin
Aleksander Ceferin has overseen a move to a more stringent financial framework for clubs competing in Europe, which came in at the start of 2023/24

But for anyone feeling the pinch from those lower numbers, there’s also the added cushion of an additional €30m (£25.9m) loss allowed for clubs who UEFA deems in good financial standing, for a total of €90m (£77.7m) over the previous three years.

That’s still lower than the Premier League – but it is an improvement on the €30m three-season loss UEFA would permit before this season.

There’s also a catch. Starting this season and tightening over the next two years, clubs will be increasingly bound by ‘squad cost’ limits – in essence, the amount they spend on wages, transfer fees (in amortisation form) and compensation as a proportion of their income.

That figure currently stands at 90 per cent, but will tighten to 70 per cent in 2025/26.

Football finance blog Swiss Ramble recently crunched the numbers on these figures, and found that out of the Premier League’s ‘big six’, Arsenal (79 per cent), Chelsea (90) and Manchester United (86) would be in breach of those requirements on their current spending when the rules become more stringent.

How is UEFA’s ‘squad cost’ ratio calculated?

The sum of…

  • First-team and manager wages
  • Player amortisation (transfer fees)
  • Agent and intermediary costs
  • Fees paid to pay off former players/managers

Divided by…

  • Day-to-day income
  • Incoming transfer player and manager fees
  • Any other transfer income

Are the Premier League going to change their rules too?

Well funny you should ask, actually. Premier League chief Richard Masters said this week the competition is looking at whether it might move to a system more in tune with the European set-up, and specifically in line with the squad cost ratio.

Masters told a Parliamentary Select Committee that given up to 35 per cent of the league’s clubs play continental football every season, and already have to abide by those UEFA laws, there would be considerations made as to whether the wider league might follow suit.

That would reflect what happened when the Premier League’s original PSR regulations were drawn up, a year after UEFA’s first FFP rules were introduced.

“We have some proposals out for consultation with our [Premier League] clubs about moving and aligning more with the UEFA system,” he said.

“UEFA have spent two years changing its financial regulations away from FFP to the squad cost ratio.

“Over time we have historically aligned with UEFA, because seven or eight of our clubs play in European competition. We need to consider whether that is an appropriate move for us, how we do that and when.”

Any new regulations, much like UEFA’s squad cost ratio, would most likely be phased in over time, and may still be some way off altogether to allow clubs to prepare and adjust their financial plans.

Why Chelsea’s big spending has finally caught up…

It’s worth noting Chelsea are currently being investigated by the Premier League and FA over payments received during Roman Abramovich’s ownership – but let’s look at the current state of play.

In terms of the financial situation surrounding the new American bosses, outgoings play a big part in balancing the books.

Enzo Fernandez scoring Chelsea's opener at home to Brighton
Enzo Fernandez became – and remains – the Premier League’s most expensive player when he joined Chelsea for £105m from Benfica last January

The Blues have recouped almost £300m in player sales since the American’s takeover, and unlike the way amortisation works on new signings, they can bank all of the money they make on outgoings at once in their accounts.

Many of the sales came from players brought through the academy – Mason Mount, Billy Gilmour, Ruben Loftus-Cheek – and can be banked as ‘pure profit’.

For players like Havertz, their sale price is offset against the amount their ‘value’ has already decreased – in his case 60 per cent of what Chelsea paid for him, the proportion of his contract he had already run down – and so the income from those players does not tally up quite as nicely.

Football finance expert Kieran Maguire has suggested Chelsea’s recent signings have also come in on lower wages than those who have departed Stamford Bridge, too, while the £40m Infinite Athlete shirt sponsorship they signed in October is another boost to the balance sheet.

We are yet to see the Blues’ 2022/23 accounts to add up exactly where they sit with regards to PSR, but given they have been willing to countenance parting with Gallagher in January – despite playing such a central part in their season – it would appear they are sailing close to the wind.

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Sky Sports News’ Dharmesh Sheth and Tim Thornton explain why Chelsea could be forced to sell Conor Gallagher due to concerns over breaching profit and sustainability regulations

Armando Broja is one player the Blues have managed to make some income out of in January, though they were forced to accept a loan fee of £4m from Fulham given the striker’s hefty £50m price tag seemingly put interested suitors off making a permanent move.

When will Ratcliffe’s investment boost Man Utd’s coffers?

For any Manchester United fans who have made it this far, here’s some reward for your patience. Let’s go back to that £90m secure funding, which can balloon the losses allowed by Premier League sides.

Under the Glazers, there has perhaps unsurprisingly been no sign of that over the last three years, meaning the club could only lose an average of £5m per year.

However, new investor Sir Jim has already committed a decent little sum of £245m to be earmarked on improving the state of the club.

His investment was not ratified in time to buy up any equity which would have loosened the purse strings at Old Trafford, but he has said he expects to be given the green light in mid-February – which could make for an interesting, and perhaps far busier, summer in the north west.

And what happened to Newcastle?

Newcastle have published their 2022/23 accounts, and announced a pre-tax loss of £73m for the season – a hefty chunk of cash.

Even accounting for those allowable exemptions, that would mean their losses from 2021/22 and 2022/23 combined would be well in excess of £100m, putting them in real danger of falling below that £105m limit if they don’t curb those figures for this season.

There is a reason Miguel Almiron and Kieran Trippier were close to leaving the club in January, and with the latter the club’s vice-captain it certainly wasn’t because he was surplus to requirements.

In the end, they did not make a single senior transfer during the window, though if they do still need to balance the books they have until June 30 to get players out of the door to raise some cash.

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