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Premier League clubs vote for 'anchoring' spending cap

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Premier League clubs have voted to move forward with a proposed spending cap as part of new financial rules that will take effect from the 2025/26 season.

As reported by The Athletic, the cap would “anchor” permitted spending to a multiple of what the lowest-earning side earns from the division’s centralised broadcasting and commercial deals.

The multiple in question is expected to be five times the relevant income of the bottom club after discussions around a multiple of 4.5 found a lukewarm response last year.

According to The Times, 16 clubs voted in favour of the proposals at a shareholders’ meeting at The Churchill Hotel in London on Monday, April 29. Manchester City, Manchester United and Aston Villa voted against, while Chelsea abstained.

The proposals are now expected to be finalised at the Premier League’s AGM in June along with a new squad cost rule. These new guidelines would replace the current Profit and Sustainability Rules (PSR) from 2025/26.

MORE: What are Premier League Profit and Sustainability Rules?

Using the most recent completed season as an example, Southampton earned £103.6 million in centralised revenues. If the proposed spending cap had been in place, that would have meant an upper limit of £518m.

In the 2022/23 season, only Chelsea — with a combined £539m spent on wages, amortised transfer fees and payments to agents — would have exceeded this mark. Manchester City were next up on £501m. Applying the hypothetical 4.5 multiple to these numbers, City would have been the only team other than Chelsea spending beyond the limit.

Premier League clubs competing in UEFA competitions would also need their numbers to conform to the European governing body’s financial rules. Currently, clubs in the Champions League, Europa League and Europa Conference League can spend no more than 90% of their revenue on squad costs. This will fall to 70% in the same 2025/26 season when the new Premier League rules are slated to begin.

Earlier in April, the Premier League clubs unanimously approved a “squad cost control” rule that will effectively fall into line with UEFA’s regulations if adopted at the AGM. Clubs playing in UEFA competitions would be able to spend 70% of their turnover, with those not involved allowed up to 85%.

The most obvious explanation for the Manchester teams being opposed to these constraints is they are the two clubs who bring in the most revenue. On the other end of concerns about a lack of competitive balance within the Premier League are claims that neutering the most powerful clubs in the competition might have an adverse effect on the league’s global standing.

The overwhelming support of the proposals form the majority of clubs, including from half of the traditional “big six”, perhaps shows how flimsy this logic looks outside of a Manchester bubble.

Villa, as an ambitious club enjoying their best season in recent memory, are the most unexpected dissenters. However, if Unai Emery leads his team to the Champions League, they will have to conform to the UEFA restrictions stated above while bringing in far smaller revenues than this season’s top three of Arsenal, City and Liverpool. Add in the effective backstop of a hard Premier League spending cap and Villa may have concluded that regulations where spending power is still effectively tied to revenue will limit their capacity for further growth.

MORE: Haaland keeps Man City on track for fourth consecutive Premier League title

The latest Premier League vote comes against the backdrop of a season dominated by the current Profit and Sustainability Rules (PSR). Everton and Nottingham Forest have each had points deducted for PSR infringements.

In the simplest terms PSR allows clubs to lose £105 million over the course of three seasons, or £35m per season, on a rolling basis.

This is on the proviso that £90m is covered by secure funding from owners, such as buying up more shares instead of giving their clubs a loan. The three-year losses allowed without such guarantees are £15m.

These calculations do not include spending on a variety of exempt categories, such as youth development and infrastructure projects. Additionally, after the 2019/20 and 2020/21 seasons were heavily affected by the coronavirus pandemic, the Premier League made allowances for clubs to write off losses suffered as a result of the COVID-19 crisis.

The PSR era has brought heavy accountability but also a mess that could still conclude with teams being relegated after the final ball is kicked this season. Among the motivations behind the Premier League members voting for revamped financial regulations is a desire for greater simplicity and clarity, along with addressing creeping concerns over competitive balance.

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