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What cost control measures would work?

Writing for The Athletic, football finance guru looks at possible ways of restraining spending by top clubs.

At present clubs are allowed to lose £15 million pre-tax over a rolling three-year period. However, certain costs (academy, community, women’s team, infrastructure) are excluded, and owners are allowed to contribute via share issues a further £90 million over the three-year period.

Maguire tries to work out the effect of a crude version of the La Liga model that focuses on future expenditure

Those clubs that have had historic good control over costs would be rewarded, and the Big Six would still enjoy a substantial financial advantage over the other clubs. At the bottom end of the table, the sight of Everton might initially surprise but the club has spent a lot in recent seasons and this has resulted in high wages and amortisation fees, which would be clawed back by a tighter budget for 2021-22.

If such rules were to be introduced there would have to be a transition period in which clubs would adjust their spending behaviour to avoid having to face a “cliff face” fall in spending. 

The introduction of such a scheme might be seen as a disincentive for ambitious owners such as Farhad Moshiri at Everton and Wes Edens and Nassef Sawiris at Villa. Unless initial spending was turned into instant success, and thus revenue, they would be likely to be faced with much reduced budgets earlier than at present.

The fear among critics is that introducing such rules into the Premier League will “bake in” the existing financial advantage that the Big Six/Five/Four (delete as necessary based on whether you consider Arsenal and Spurs to be legitimate challengers to the other large clubs) possess. This will result in a disincentive for new owners to invest in Premier League clubs and could in the longer term make the product less unpredictable, and potentially less interesting to viewers.

Regardless of the rules, there are likely to be winners and losers. As soon as any changes to cost control are introduced expect to see accountants and lawyers at some clubs beavering away to find weaknesses and loopholes that can be exploited. Any independent regulator is going to need to be adept at Whack-A-Mole as a series of challenges arise to new measures.

 


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