Uefa’s profitability rules are stricter than the Premier League, as allowable losses are smaller, even though these have been increased in the updated guidelines, while clubs also have to contend with the new squad cost control ratio.
The biggest change in the new (2022_ rules was the introduction
of squad cost control with the ratio of player wages, transfers and agent fees
ultimately being limited to 70% of revenue plus profit on player sales.
All seven of England’s qualifiers for Europe are forecast to
lose money at the operating level over UEFA’s 2-year monitoring period,
covering 2022/23 actuals and the 2023/24 estimate, but there are large
differences between them. In particular,
Chelsea and Aston Villa have significantly larger operating losses than the
other clubs with £428m and £300m respectively.
However, that’s by no means the whole story, as operating
losses will be offset to some extent by profit from player sales. This is
especially the case at Manchester City with a substantial £265m profit,
followed by Chelsea £179m, Aston Villa £134m and Tottenham £116m.
Only one of England’s qualifiers has managed to generate a
profit before tax, namely Manchester City with £168m, though two others clubs
have restricted their loss to manageable levels, i.e. Liverpool £34m and
Arsenal £66m. However, forecast losses
are much higher at the other four clubs, especially Chelsea £201m, and Aston
Villa £173m, so there is still work to do for some.
Arsenal look to be absolutely fine, as their £66m loss over
the 2-year monitoring period turns into a £16m PSR profit after adding back
£82m allowable deductions. This is equivalent to a €19m profit, which would be
€44m better than the allowable loss of €25m.
In contrast, the Seiss Ramble thinks that Villa will
struggle to meet UEFA’s PSR target, despite their player sales this month.
Chelsea look to be miles off. Their reported £201m loss is improved by £73m
of allowable deductions, but this is offset by excluding the £77m property
sale. The resulting €234m (£204m) PSR loss would be €154m worse than the €80m
acceptable loss.
Liverpool look to be pretty comfortable, as their reported
£34m loss turns into a £39m PSR profit after adding back £72m of allowable
deductions. The €44m equivalent profit is a full €69m better than the €25m
acceptable loss.
Somewhat ironically, given all their previous issues with UEFA,
City are now miles better than target. Their £168m loss is boosted by £72m
allowable deductions, giving a £240m PSR profit. That is equivalent to €276m,
so a massive €301m better than the €25m acceptable loss.
It’s far tighter for United, though they will be just about
fine, assuming that they benefit from the full €80m acceptable loss, which
includes €55m for equity funding (from Sir Jim) and a €20m “good health”
uplift.
Tottenham’s reported loss is estimated as £155m, but they
have enormous allowable deductions of £182m, largely thanks to £144m
depreciation, giving them a £33m PSR profit. The €38m equivalent profit is €63m
better than the €25m acceptable loss.
Only two of England’s qualifiers are not compliant with
UEFA’s PSR target, namely Chelsea and Aston Villa, who are €154m and €59m above
the acceptable loss respectively.
The obvious question then is what will happen if a club has
breached UEFA’s financial sustainability regulations? In the past UEFA has imposed financial
penalties via a settlement agreement, as seen most clearly in 2022.
However, even when the fine was as much as €65m for Paris
Saint-Germain, only a small amount of the settlement (€10m) had to be paid
immediately with the remaining €55m conditional, though that depended on future
compliance with targets.
Chelsea and Aston Villa, who are both backed by very wealthy
owners, might consider such a penalty to effectively be a cost of doing
business. They might think it a price worth paying, if it allows them to build
a squad capable of challenging at the highest levels.
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