Yesterday, at the monthly meeting of Premier League chairmen, a vote was passed regarding installing some kind of rules on financial restraint for Premier League clubs.
Details are vague as yet but a rough idea has been outlined for what is essentially a watered down version of the UEFA Financial Fair Play rules that will officially kick in next season.
Essentially the framework of these new rules, whilst still in development, will look at addressing three areas of concern amidst worry from clubs that money from the lucrative new TV deal due to start next season wouldn’t end up staying with clubs and would instead just be used by agents to ramp up wages and transfer fees ultimately not benefiting the club at all.
The three areas included in the rules are to limit losses a club can make avoiding a situation where a team can bankroll itself to success. The second area looks toward club security by ensuring losses are covered by the owners assets, and finally the third area looks to address player wages after Deloitte revealed that 70% of all Premier League income was dished out in wages alone.
1 – Restrictions on club making a loss of more than £105 million over three years
Basically this is just as it says on the tin. The restrictions could come in a number of forms such as having losses limited further or a points deduction, but as this is still a new concept the devil in the detail is yet to be agreed. It means that teams won’t (or shouldn’t) be able to splash a load of cash on transfer fees unless their business can actually afford it.
It’s not quite as black and white as it appears though as money can be offset from losses by spending it on things such as ground improvement, training facilities and youth academies.
2 – Clubs who report a loss of over £5 million need to have those losses guaranteed by the owners assets
This is to avoid a Leeds/Portsmouth type scenario. Realistically it happens already as all clubs owners will have to agree to this before the yearly accounts are signed off, but at least it will be down in writing now and the Premier League can take action if needed, although what sort of action remains to be seen.
3 – Clubs whose wage bill exceeds £52 million can only increase that by £4 million per season
This is to limit what a club can spend on wages. We’re just about on the limit of this using figures and an educated guess. However if done properly it could be the rule that helps us out as it limits what other clubs can offer.
Having said that, this only applies to the central split of TV money (the equal share each club receives every season) and clubs can still use revenue from other streams, like ticket sales or commercial revenue, to subsidise their wage bill so the net result will still be that the clubs with bigger income can spend more on wages.
Financial control is a good thing and should be welcomed with open arms but, as always, the success of the rules hinges on their implementation and how they are followed through. These rules have been voted in by a majority but as yet there is no finalised version of what they will entail, nor is there a set date for when they are to come into force although as early as next season has been mentioned. You can read a helpful little Q&A on the rules here.
Will it make a difference though?