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What effects would spending cap have?

All-star games, closed leagues and overseas matches may all be off the table for now, but the English Premier League is feeling more American by the day.

On Monday, the majority of clubs voted in favour of drawing up full proposals for a hard spending cap that would be tied to the TV income of the league’s bottom club — a system known as anchoring. A formal plan could be put to a binding vote as early as next month.

Spending caps have been one of the key structural factors in ensuring the financial success of US sports leagues. They prevent the wealthiest teams from simply amassing all the talent and blowing the competition away on the field, and help bake in margins by keeping a lid on costs. Incidentally, the Premier League’s two richest clubs by revenue — Manchester United and Manchester City — reportedly voted against the plan.

If introduced to the Premier League, the short-term effects of such a cap may be limited. Analysis from football finance guru Kieran Maguire suggests that only one club — Chelsea — would currently fall foul of a limit pegged at 5 times the broadcast revenue of the lowest ranked team. In fact, most teams would gain extra headroom to spend. And the rules wouldn’t change until the 2025/26 season.

Over a longer horizon, the impact on the business model of football could be quite profound. Just as domestic TV revenue is stalling, anchoring should apply a firm brake to wage and transfer fee inflation — costs that have outstripped income growth for years and left European football with mounting debts and stubborn losses. It should also temper the financial power of state-backed clubs.

Combined with Uefa’s squad cost rule, which sets a limit of how much a club can spend on players relative to its income, a hard spending limit lays a potential path ahead to profits. That in turn should help increase club valuations, a key objective for many owners.

There is still some way to go. Players’ unions will fight tooth and nail to block anything they see as a salary cap. And Premier League clubs may yet get cold feet about doing anything that gives European rivals the chance to catch up or cements the dominance of the big teams.

But that the very idea of a hard spending cap has got this far shows just how quickly the mindset in football is changing.

 

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