What do the new PSR rules mean for every Premier League club – and their transfers?

A train that has been rolling down the tracks for a year or more finally reached the Premier League last week and, unanimously, its 20 clubs indicated they were prepared to jump on board.

A provisional agreement was reached at a shareholders meeting in London that will see new financial rules introduced ahead of the 2025-26 season.

Squad cost measures will supersede the Premier League’s current profit and sustainability regulations (PSR), with spending limits shaped by a club’s turnover and player sales. A soft salary cap, in effect, replaces the traditional hard backstop of acceptable losses.

This new path follows one first mapped out by UEFA in 2022 and promises that club finances will be assessed from a new angle. The Athletic analyses how different life under the new regulations might be.

What are the new PSR rules and when do they come into force?

In a Premier League season that has seen both Everton and Nottingham Forest docked points for breaches of spending limits, the suitability of PSR rules first introduced in 2013 has increasingly been drawn into question.

A three-year accounting period has traditionally allowed for attributable losses of £105million ($130m, a figure that reduces for seasons spent in the Championship), but there has been a gradual acceptance of the need for reform.

UEFA has helped accelerate that with its changes introduced over the past 18 months. Any club competing in European competitions will have to adhere to rules limiting spending on player wages, amortised transfers and agent fees to 70 per cent of overall revenue by 2025-26. The move towards that benchmark began with the limit set at 90 per cent this season and 80 per cent in 2024-25.

Everton and Forest have been docked points under the current system (Catherine Ivill/Getty Images)

The Premier League, in short, has opted to follow that continental lead. The 20 clubs, whose representatives met in London last Thursday, agreed in principle to introduce new financial fair play rules from the start of the 2025-26 season that will effectively mirror the UEFA model.

A new framework will limit Premier League clubs competing in Europe (usually seven or eight each season) to spending 70 per cent of turnover but — and this is the key difference from UEFA — allow the remainder of the division to push up towards the 85 per cent mark. That agreement was required to gain the support of the Premier League’s supporting cast, who cannot count on the same financial muscle built up through competing in Europe.

The new system, which cannot be ratified until the Premier League’s AGM in June, will shadow the existing PSR model next season, before its roll-out in time for 2025-26. Any club found to be in a significant breach of the regulations will still be subject to points deductions, despite some clubs pushing for punishment in the form of financial penalties.

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Who do they appear to benefit most?

The more things change, the more they stay the same. The clubs turning over the greatest sums will still be able to spend the most and the ‘Big Six’, with the possible short-term exception of Chelsea, will see little threat in the changes coming down the track.

It is estimated that Manchester City, whose annual revenues climbed to almost £713million last season, will still be able to spend in the region of £560m on wages, transfers and agents fees even when operating to a 70 per cent limit. City’s wage bill was £423m in their most recent set of accounts, leaving ample space to spend transfer fees spread over a player’s contract.

Manchester United and Liverpool will lag behind but, based on forecasts calculated from 2022-23 accounts, will likely have the potential to spend in the region of £450million per season.

Over half of Premier League clubs, meanwhile, will not be able to exceed a squad cost spend of £200million, even when allowed to extend themselves to an 85 per cent limit. Player trading will be their best way to increase spending capabilities.

“It benefits the clubs that generate big revenues, but it also benefits the clubs who are currently good at player trading because it’s going to be traditional revenue streams plus your profits on player sales,” says Kieran Maguire, lecturer at Liverpool University and host of the Price of Football podcast.

“We don’t know the exact details yet, but those clubs who have effectively utilised the player development model — the likes of Brighton and Brentford — it will give them a step up.

“Manchester City and Chelsea have both been excellent in terms of player sales. They will benefit. Clubs who have reasonable control over wages and amortisation will benefit because it will give them the scope to spend more if the owner chooses.”

Who will they make life hardest for?

Those caught between levels — the clubs that aspire to climb the rope ladder but see others at the top with a pair of shears. Sound familiar?

The existing PSR rules have applied the brakes to the spending of Newcastle United and, to a lesser extent, Aston Villa this season. Everton, too, have been punished for their attempts to push through a glass ceiling, with breaches of PSR in both 2021-22 and 2022-23.

Any club wishing to replicate the financial might of the ‘Big Six’ will continue to find that challenge awkward. Newcastle, for example, will find the same blockades in their development as they currently do. Their spending capabilities will not be transformed until they deliver regular success, building turnover along the way.

Seventy per cent of their turnover will remain a lot less than the clubs they wish to catch for some years to come and, with that, comes the difficulties of consistently challenging. The new rules only entrench the need for long-term growth planning.

UEFA’s cost-control model does at least allow clubs to spend as they wish on community projects, infrastructure, their women’s team and youth development, areas where investments are exempt from the spending rules. Stadium improvements can bring increased matchday revenues, for example, while placing a focus on academy improvements can also improve the prospects of bringing through homegrown talent.  The opportunity for growth will remain — only its pace cannot be as quick as some would like.

“It’s going to make a glass ceiling, potentially more than there already is,” says Chris Weatherspoon, accountant and policy advisor to the campaign group Fair Game.

“I’m not sure the changes will impact hugely. I suppose the ones it impacts the most are the ones you call aspirational clubs. Certain clubs like West Ham, Newcastle, and Aston Villa, the clubs just outside that top six. You’re almost saying that’s where the aspirational clubs are stuck.

“It could only be a truly good thing if everyone started from the same point. You could argue that it’s better than what we’ve got, but I don’t see it as a fix.”

How does playing in Europe change things? Does it create a problem?

Those fortunate enough to have a ticket to UEFA’s competitions will have to act differently from the rest of their Premier League peers. Rather than having spending limits capped at 85 per cent, they can’t go beyond the 70 per cent mark.

The Premier League’s two-tier system is designed to afford its lesser lights greater spending powers. Setting a 70 per cent limit on Brentford and Fulham would inhibit them more than it will Manchester City, who have grown accustomed to raking in roughly £100million a season from the Champions League alone. That figure will rise again once central distributions increase in an expanded competition format next season.

The clubs regularly competing in the Champions League will not feel too much of a squeeze with a 70 per cent cap, but those who reach Europe only sporadically, especially when only qualifying for the less lucrative Europa League or Conference League, could effectively see their spending powers fall behind those they might previously have considered equals in the Premier League.

Take West Ham United in the Europa Conference League last season, who will offer similar figures to those Aston Villa can expect from this season’s competition, as a case study. Winning a first major trophy since 1980 earned West Ham just £19million in prize money from UEFA. Though matchday income was naturally pushed higher through seven additional home games in Europe, the returns from those adventures could not be considered transformative.

West Ham winning the Europa Conference League might have hindered them under the new system (Eddie Keogh/Getty Images)

Yet West Ham, like any other club in UEFA competitions, would have seen spending capped at 70 per cent under the new rules. Compliance, for some, could be harder after qualifying for Europe.

Not even a place in the Champions League will be a guaranteed financial remedy for those who have not been European mainstays.

“If you look at Newcastle last season, the ratio they worked to would’ve been 85 per cent but this year drops by 15 per cent, to 70 per cent, while you’re competing in more games, while you’re playing harder teams in the Champions League,” explains Weatherspoon.

“Based on last season’s numbers, Newcastle would have been able to spend around £215million on a revenue of about £250m. Let’s say the Champions League adds £50m once you factor everything in, which takes revenue from £250m to £300m. You’re back to £210m if you’re working to 70 per cent.”

Are any clubs already in danger of breaching the new rules?

There is still more than a year before the proposed changes could become fully operational and, therefore, ample time for finances to be improved.

Yet placing the new spending limits on the Premier League’s 20 clubs last season illustrates compliance will not be straightforward.

The obvious caveat is that clubs spent without the 70/85 per cent rules in place, but calculations suggest almost half of the Premier League might have encountered issues under squad cost rules.

Wetherspoon compiled an estimated cost-control revenue figure and set that against squad costs for 2022-23. Nine clubs, including Chelsea, Newcastle and Aston Villa, would not have complied.

Maguire’s own forecast suggested eight clubs might have had issues had the new rules been in place last season and, perhaps tellingly, the clubs that faced PSR challenges in the past 12 months, either through charges or restricted spending, are forecast to struggle. Leicester City, Everton and Nottingham Forest were all on the wrong side of compliance for 2022-23.

What does it means in plain English? Five of the SuperLeague Six can spend a lot more money, along with Financial Teacher's Pet Brighton. Aspirational/ambitious clubs such as Villa, Forest and Newcastle who want to spend more money will not be able to do so & instead need to cut pic.twitter.com/VFIB2rGUrD

— Kieran Maguire (@KieranMaguire) April 11, 2024

One thing yet to be resolved, however, would be the sanctions clubs might face. UEFA has mapped out a clear framework for breaches in its regulations, with the percentage that a club goes over its limit, and how often that has happened, shaping the fine it will receive. There will also be sporting sanctions open to UEFA if breaches are significant, from transfer bans to expulsion from European competitions.

There is a universal consensus among Premier League clubs that points deductions are still the most appropriate sanction for serious breaches. Anything less, such as fines, would not bring a suitable deterrent to those pushing the boundaries of spending limits.

Are they likely to make the Premier League more competitive?

This is no silver bullet. This is a remodelling of a concept rather than a revolution. So, no, do not get your hopes up for a level playing field.

The elite will continue to have greater spending powers than the rest and, in all probability, use that to continue their dominance at the top of the table. As you were, then.

“This isn’t aimed at making the Premier League competitive,” says Maguire. “UEFA explicitly state the aim is not to create a level playing field or to reduce the existing gaps. In practice, it changes nothing. For two or three clubs they might be better off if they wanted to spend money, but owners like Tony Bloom and Matthew Benham don’t want to spend more money.

“They’re happy in the position they are at present. It could help them buy players from clubs in financial distress, but they were in that position anyway.”

Owners of Premier League clubs, those who hold the purse strings, are broadly on board with the plans for good reason. UEFA’s motivation for this tweak came in the wake of the Covid-19 pandemic, where they say top-division clubs suffered losses of €7billion (£5.92m; $7.36m). A cost-control rule they said would help “limit the market inflation of wages and transfer costs of players”.

The new system will be a positive to owners (Henry Nicholls/AFP via Getty Images)

Costs — primarily the salaries of players — have continued to rise and this is an attempt to rein in inflation. Spending limits are a grasp for sustainability but also a measure of protection for those funding it all. That outlook ticks boxes, especially for those primarily with skin in the game for business reasons, such as American investors.

Ambitions within the Premier League are also focused on not allowing the existing disparity to grow. There has been talk of “anchoring” during these negotiations.

It has been suggested that the wealthiest club could only ever spend the absolute maximum of four and a half times either the revenue or wage bill of the 20th Premier League club, a process that would ensure the richest club in the Premier League is tethered to the poorest.

The details remain subject to an economic and legal assessment and further club engagement ahead of the Premier League’s AGM in June.

(Top photos: Getty Images)