The Premier League’s Profit and Sustainability Rules were created with good intentions in mind. The rules came about following what happened to Bury or Reading, which did serve as a wake-up call for the football governance to act in a way that there was no repeat of the situation with those clubs.
Hence, one cannot debate the intention part of PSR, although there are widespread questions about whether it’s actually needed at a level that the Premier League operates at. The one issue that some reading of PSR brings about is that the scrutiny is more, loopholes plenty and the severity of punishment seems excessive.
The core job of PSR is to ensure clubs do not exceed the threshold of losses beyond the prescribed mark of 105 million over three years. At first, this was seen as a good measure to help clubs maintain the balance with their finances but has since become more of a nuisance rather than a useful tool for clubs to operate with.
The way PSR came down on Everton and Nottingham Forest in the 2023-24 season signalled the regulators are not here to mess around. The severe points deductions those clubs experienced did bring an iron fist to the table, which clubs are now wary of.
However, this also allowed clubs to find massive loopholes that neither the PSR nor the Premier League can do anything about. Chelsea sold their hotel and women’s team to themselves to evade PSR troubles, which in theory has helped them massively as they are the safest club when it comes to risks with PSR.
Aston Villa followed a similar method as they sold their women’s teams to their controlling owners as well as a small stake to an external investor, which effectively means themselves. Hence, there are questions asked about whether PSR is fit for purpose, with suggestions that it’s cultivating perverse incentives and short-termism while the discrepancies of PSR create a sense of injustice and erode trust in the league’s governance.
PSR is certainly a hand of the Premier League governance wing that allows the body to scrutinise clubs and their financial behavior. There’s the feeling of perverse incentives and short terminism, given the optics of the situation show that clubs with ambitions are stopped in their tracks, while teams with abundant resources are allowed to get away with their shortcomings.
Chelsea are a stark example of it, as the London giants somehow managed to spend upwards of 1.5 million throughout the last three summer windows since their new owners arrived. Last summer, when things did look bleak for the Blues when it came to managing their PSR obligation, they found and exploited a massive loophole in the system for their benefit.
The accounting books showed a massive loss based on Chelsea’s books around the unofficial June 30 PSR deadline for clubs. Yet, they sold their hotel in central London and the women’s team to the same ownership to help them balance their books.
Leicester City still have issues with their PSR balancing, as they exploited a legal loophole due to the timing of their relegation. Now, Aston Villa sold themselves the women’s team and may have avoided a PSR breach, as these exploitations of the system have exposed the system’s inconsistency while undermining the Premier League’s authority.
Yet, there’s nothing to be done legally to punish those clubs. Should the Premier League open proceedings against those teams for exploiting the very system they created, it would open a new can of worms that would further diminish their reputation.
Ideally, there needs to be a regulator that manages the league’s affairs and does not allow another situation where one team has an undue advantage over others. Chelsea since Roman Abramovich’s takeover or Manchester City following the arrival of Middle East owners may serve as a good example, when other traditional big clubs were seemingly operating within their means.
The concept of ‘within the means’ should be the benchmark for any financial regulation, as PSR has plenty of issues with it. The concept of PSR not only will bring the level of competition but will also stifle ambitious clubs from making their mark.
Aston Villa’s biggest issue are their wages in proportion to the revenues the club manages to generate, which currently stands at 85%. This is considerably higher than any other team, but that is also the cost of being ambitious. They have done nothing in terms of financial mismanagement or bypassing a system to their advantage.
Yet, their losses are expected to cross the prescribed threshold of 105 million over three years, which may result in sanctions. To argue from Aston Villa’s perspective, they had to bring in the players needed to elevate the club’s status while juggling between Premier League and Champions League commitments.
Moreover, there’s the unwanted pressure created by PSR, that forced a club like Aston Villa to massively gamble in the market on the future potential of making it to next season’s Champions League. They spent heavily last summer in a bid to retain a top-four place, and again in January when Jhon Duran left, but they invested heavily in the wages of Marcus Rashford and Marco Asensio, which eventually did not pay off.
Newcastle United are in a similar boat, despite having probably the wealthiest owners among all Premier League sides cannot make the splash in the market. They have to make sure to comply with PSR regulations, although they are not as great an example compared to Aston Villa, but still something to ponder about.
Overall, PSR is not fit for purpose when comparing what it brings to the table to the ambitions of the Premier League and its clubs. The Bury and Reading shocks are certainly reasons for clubs to have a sustainable mentality in the market, but the probability of it repeating among top-flight clubs is remote.
The tight scrutiny that PSR brings to the table needs massive reforms. For instance, there have been quieter transfer windows and reduced spending power for top flight sides than before. The Premier League thrives on the prospect of bringing the best players and spending money that attracts those stars to come here.
There are long-term risks if PSR continues to operate in this way, such as losing the status of being the world’s most attractive league and even the currently unimaginable prospect of some of the European rivals overtaking the Premier League in the longer run. More importantly, with reduced spending power and more focus on keeping in line with PSR rather than the club’s actual financial capability, the league might also lose the appetite to bring the best players and coaches, which may not be a problem at the current moment.
So the easiest change that comes to mind is amending a few things, and reforming the way things are operated. For instance, the clubs voting for a new ‘squad cost control’ system starting with the 2025-26 season might be the easiest answer for now. This brings about a spending cap on wages, transfers and mainly agent fees, which will be around 85% of any club’s revenues. These also align closely with UEFA’s FFP and aim to provide a clearer framework.
Whether the spending cap works or not remains to be seen, although it does help the Premier League move on from the rigidness of PSR and the long-term consequences of the current model. Overall, PSR, which might seem like a necessary tool to have for the Premier League brings, in more issues than it can solve. The spending cap may not be the absolute solution, but the clubs have decided to implement it which will allow for a period of experimentation that determines whether it’s fit for purpose.
