FFP battle facing Newcastle’s new owners now explained – Must-read stuff from Kieran Maguire

Speaking to The Mail’s Craig Hope, football finance expert Kieran Maguire has helped explain why a Saudi-backed Newcastle United are opting to spend carefully this summer.

He insists that our new owners are trying to take the sustainable approach, preferring not to “max out on FFP” in their first year – something that could leave us with very little leeway in 2023 or 2024 and a mistake Everton suffered from last summer.

Not only that, it is widely accepted that our spending potential will only shoot up once we maximise our commercial revenue through lucrative sponsorship deals – an area that’s costing us to this day after Mike Ashley failed to invest in such avenues.

Over the course of three years, the Premier League’s Profitability & Sustainability rules allow for a loss of £105million. Thanks to Mike Ashley’s shrewd spending, Newcastle posted a healthy profit of £44million in that period.

Newcastle can also make a £30m adjustment at £10m a year for developing women’s football, youth, infrastructure etc as well as including the £20m loss during Covid which, added on to the £44m profit from P&S, gives us £200m to spend.

So, it isn’t necessarily a case of not being able to afford signings such as James Maddison, but it is about maintaining a sustainable strategy that won’t see us turn into another Everton.

Explaining the situation, Maguire had this to say when speaking to The Mail:

“They’re trying not to max out on FFP in the first year of ownership. Then, they would have no leeway, nowhere to go in 2023 and 2024.

“They have seen the mess at Everton, which is a stark reminder of what can happen if you spend money badly. What Newcastle need to do now is grow their revenues, allowing them to incrementally spend more on transfers.’

“Dan Ashworth is the best signing they have made. His advice to Amanda Staveley and Co will be, “Don’t be like a lottery winner who goes and blows the lot and then, a year later, looks at all of their trinkets and realises they don’t like a lot of them and don’t know what to do with them.”

“If they have their own perception of what a player is worth, then they’re right to stick to it. Newcastle are also conscious that it’s not just about James Maddison. If they are seen to pay £50m, then the next player they sign, there will be at a Newcastle premium. They are keen to be seen to be running the club on an even keel, not going down the same route as Chelsea and Manchester City in the early days of their new ownerships. Both of those were also before FFP, they could make mistakes and the owner would just write out another cheque – Newcastle can’t do that.“

Further spending now would also impact the P&S limit in the next three years, meaning we would be making less profit than we have in the past and significantly reducing that £200m we had to spend. We also have to remember that our new owners want to spend money on all areas of the club, so this must be factored in and helps explain why we can’t throw it all on a shiny new striker and quality right winger.

So, how do we boost our spending potential? Well, it seems the next step for Newcastle would be improving commercial revenue – something that increased by just £2million between Ashley’s purchase of the club in 2007 and 2019 – by getting new sponsorships and/or selling the naming rights of the stadium. Maguire touches on some of this below, also discussing the benefits of European football for FFP:

‘’They have done very well so far,’ says Maguire. ‘They stayed in the Premier League, which was not guaranteed. But it has to be an evolutionary path with the ambition, first of all, of getting into the Europa League. They can make £30-40m from that alone. From there, the Champions League. But there isn’t a quick fix because of FFP, which was created to prevent another Manchester City or Chelsea. And it is working, in terms of what Newcastle can do. 

‘Commercial revenue is the one area they have most control over and the biggest scope for improvement. When Mike Ashley bought the club in 2007, it was £26m. By 2019, it was £28m. That is poor. They also need a better player development and trading model – like Chelsea and City – and to start making money for themselves. But this takes time.“

In the 2020/21 season, our revenue of £140m – less than a quarter of what Man City earn – was ranked just 15th in the league. However, that total should rise soon after it was recently announced that FUN88 will be replaced ahead of the 2023/24 season.

After boosting our commercial revenue and finding lucrative sponsorship deals, our next biggest challenge would be to qualify for Europe.

This would open a whole new door to transfers, both in terms of funds and attracting more options, but it may take time, patience and sustained, steady investment over a few seasons before any European tour can begin.

Asked about Amanda Staveley’s dream to win the Premier League within five to 10 years, Maguire said this when asked if it was a realistic aim:

“In 10 years, yes. In five years, that’s a stiff challenge, although not insurmountable, if they can drastically increase their commercial income, become a regular European club and continue to make the right signings. 

“This isn’t just about money, it’s about the right decisions at the right times. They have hit it out the park in terms of recruitment so far. But you only need a couple to set you back – look at Lukaku, Kepa and Werner at Chelsea, Newcastle can’t afford to make those mistakes on the journey they’re on.”