The Athletic reported that the Premier League shareholders meeting is about to be held, and new financial regulations may be ushered in. The Premier League is at a crossroads. Since the first Financial Fair Play rules were introduced in the 2015-16...
The Athletic reported that the Premier League shareholders meeting is about to be held, and new financial regulations may be ushered in.
The Premier League is at a crossroads. Since the first Financial Fair Play rules were introduced in the 2015-16 season, there has been a growing awareness of the need for reform. Current Profitability and Sustainability Rules (PSR) allow losses of up to £105 million ($137 million) over a three-year accounting period, but loopholes have made these rules less effective. As a result, there were lengthy discussions on what to do next.
Two important proposals were put forward in the spring of 2024: the team cost rule (SCR) and the top-to-bottom anchoring rule (TBA or simply "anchoring"). At the annual general meeting in the summer of the same year, it was agreed to implement these two rules on a non-mandatory trial in the 2024-25 season.
The team cost rules roughly follow UEFA's reforms, allowing 85% of revenue to be spent on player costs, while the anchoring rules are designed to "protect the competitive balance of the Premier League in advance."
Over the past 18 months, a comprehensive assessment of the two main proposals has been carried out through a shadow scheme run on the PSR, with "extensive" consultation with stakeholders. Now is the time to decide whether to move forward.
The anchoring proposal, in particular, will be an unprecedented measure. The Premier League's richest clubs will be restricted to the same financial level as the bottom clubs, which would put a hard cap on spending by top clubs and theoretically avoid the financial imbalance seen in other European leagues.
"The Premier League's objectives are to safeguard the league's value, competitive balance and ensure clubs operate in a financially sustainable manner." A league spokesman said last week.
The issue has wider implications, not just limited to the 20 Premier League clubs at Friday's meeting. England's top flight leads the way in player spending, but the connected nature of football means the impact is not limited to just one level. Inevitably, other places will be affected.
Beyond the aura of the top flight, two clubs in League One (England's third tier) last week highlighted the serious problems facing club finances across the country. Most clubs in England are losing money and many rely on funders to pay their bills. In theory, slowing wage growth in England's top flight would be a step towards reversing this trend.
What is anchor rule TBA?
As the name suggests, the top-down anchoring rule (TBA) will enforce a cap on clubs' spending on wages and transfer fee amortization (including agent fees), linked to a financial indicator linked to one of the least wealthy clubs.
The Premier League's proposed "anchor" spending limits would be set based on the amount of central broadcast rights and sponsorship revenue allocated to clubs, capped at five times the amount received by the lowest-earning club.
In the 2024-25 season, although Southampton ranked bottom, it received 109.2 million pounds, which means that if anchor restrictions were implemented at that time, the upper limit would be 546 million pounds. It is expected that the anchor limit will rise to £600m for the 2025-26 season as the new TV contract cycle begins. This cap will be adjusted as the overall central allocation changes, but it is a hard spending cap for all 20 clubs, regardless of their financial situation. Introducing an anchor limit would theoretically further control spending, as clubs can only increase team spending as league television revenue grows.
In contrast, other proposals such as the Squad Cost Rules (SCR) are linked to club income, while the anchor limit applies to all clubs, hence the name "salary cap". If the anchor limit is passed on Friday and legal action ensues, the cost incurred by the Premier League will reduce the anchor cap. For most clubs, the anchor limit will not change anything directly, as only four clubs currently have revenues above the indicative cap of £600m. Even adding in average player profits over the past three seasons, only a handful of clubs come close to that. Most clubs earn well below that level and are subject to other financial rules, so they won't be affected by a high cap in the short term.
However, six clubs need immediate attention to anchor restrictions: Arsenal, Chelsea, Liverpool, Manchester United and Tottenham Hotspur. These clubs often participate in European competitions and are already restricted by UEFA's SCR system and can only use 70% of related income for team costs. However, the anchor limit may be lower than the 70% limit for some clubs.
According to the latest figures, no club currently has an SCR limit above the proposed hard cap of £600 million, although Manchester City is close to that limit in the 2023-24 season. Arsenal and Liverpool are expected to report significant revenue growth in the 2024-25 financial year, raising their squad cost limits.
Even so, the proposed anchor level of restrictions would not suddenly force all of England's top clubs to slash player costs. More worryingly, as non-broadcast revenue continues to grow, anchor limits or hard caps may become a bigger issue in the future and clubs will still be reliant on broadcast revenue distribution. The broader impact of setting hard spending caps is harder to determine. A reasonable expectation is that even if this increases the likelihood of some players moving to clubs with higher spending limits, it will slow down the growth of player wages.
If a club violates an anchor limit, it will only be penalized on the second violation. The penalty is an immediate deduction of 6 points, followed by an additional deduction of 1 point for every £6.5 million exceeded.
What is SCR?
Squad Cost Rules (SCR) are not new to Premier League clubs. They were first introduced by UEFA a few years ago and have been trialled domestically over the past two seasons.. The three major British agencies CAA Base, Stellar and Wasserman also issued similar threats to the Premier League. While judgment may have been clouded by the arrival of more legal challenges last week, ultimately key decisions will be made by representatives from the 20 Premier League clubs in a conference room tomorrow. This is not a simple shareholder meeting, and the outcome is unclear.
The three proposals are independent, so some clubs may support one but not the other. 14 votes are needed to pass any one proposal, with all three proposals expected to gain support. Clubs such as Liverpool, Aston Villa, Everton, Sunderland and Burnley are expected to support anchoring, SCR and SSR, with others likely to follow after lengthy discussions.
However, anchoring mechanisms are expected to encounter the greatest resistance. According to industry sources, Manchester City and Arsenal are expected to reject the system that has been trialled for 15 months, but they are equally likely to support SCR if the anchor mechanism is not approved. The north London club's stance is said to be more uncertain than City's.
What does this mean for clubs competing in European competitions?
Some big clubs oppose the new rules, especially the anchoring rules, mainly because they are worried about their competitiveness in European competitions. Although all clubs competing in European competitions are affected by UEFA's 70% SCR limit, the introduction of anchoring rules could weaken the competitiveness of English clubs overseas. However, this view only applies to a handful of European clubs. According to the latest figures, only four non-English clubs are in the top 10 in world football revenue: Real Madrid, Barcelona, Bayern Munich and Paris Saint-Germain.
According to calculations by The Athletic, of these four teams, only Real Madrid and Barcelona will have a team cost limit higher than the current hard cap of £600 million proposed by English clubs in the 2024-25 season. Based on this, Real Madrid's spending power will be far greater than other teams, which is also a key factor for the dissatisfaction of some top Premier League clubs.
