Welcome back everyone to the summing up podcast from Love Blake. I’m James Ship, your host as ever. Um, and I’m rejoined by regular guest to the pod Dom Smith.

Welcome back, Dom. Good to be back.

Yeah, good to have you back, mate. Um, so we are returning to a topic that we covered last year, which is very close to your heart. Um, football transfer

policies, football clubs, um, the finances of football. Pretty wellreceived last time we spoke. So, we want to get to get back together to um, talk a little bit more. And as with um,

everything football related, um, things are always changing, aren’t they?

Yeah, things are moving quickly and things for next season, the Premier League are changing pretty drastically.

And uh given that football finance is now kind of mainstream news and how much it affects everyone’s uh transfer budgets and wage budgets, then it uh

yeah, it feels like something that’s pretty appropriate to be talking about.

Yeah. So, I’ve now got another threeletter acronym to learn. So, thank you for that one. Um not your fault. So, we talked about profit and

sustainability rules last time, PSR. Um what are we now having to learn about?

Well, we are now um as of the 262 27 season for the Premier League going to SCR and that’s that’s your new acronym

that acronym. Um so squad cost ratio.

Okay, so previously uh PSR uh it it looked at profits and losses. Um squad cost ratio looks at the ratio of essentially the

cost of your playing squad compared to your revenue. So um it is a pretty drastically different change in terms of

how football finance is monitored in the Premier League.

So it sounds on the face of it more straightforward and simple. You take your turnover from all activities or footballing activities from all activities.

All activities and then a percentage of that is what you can spend on player costs and transfers or is there more to it than that? Yeah, I think maybe we’ll

get on to some of the the more complex elements to it later, but I think broadly it is simpler than PSR because it only looks at a couple of elements.

So yes, it looks at firstly what is a what is a club’s revenue? So for most football clubs, the majority of that is going to be match day income, your tickets, pies, beers.

It’s going to be your commercial income, sponsorships, um club shop, uh and and of course TV uh deals, broadcasting

rights. That’s going to be all the revenue of the club. And then ultimately um in the Premier League the rule is

that you can spend up to 85% of that revenue figure on your playing squad. So that is the wages of the playing squad,

that is the amortized transfer fees, that is the agents fees and that is the wages of the head coach or manager. So

at source it feels like it is kind of a bit simpler and broadly it is because it’s just those elements. The problem we had with PSR in terms of its

complications is that everything is considered in PSR because ultimately it’s your bottom line profit or loss that’s being looked at and therefore

every element of cost and every element of revenue is being picked apart not just the playing squad. STR is obviously focusing really on just revenue and playing squad.

Yeah. So on that on the income side of things then I think you you explained last time how some clubs were bringing in what we would call in the in the

accounting world exceptional items into their turnover figures. They were selling buildings, selling stadiums, selling women’s teams, selling selling

all sorts of things to boost that turnover figure. So that’s no longer going to be permitted to be included.

No longer. Yeah. And that’s one of the big reasons for [clears throat] the change really is that those sort of loopholes which are unsustainable in nature given that given that football

financial rules are supposed to be about sustainability. Um if you sell the women’s team for an overinflated price to a related company

that clearly is just um you know shifting around exercise. Nothing’s really happened. It’s not really sustainable. Um [snorts] and under PSR

again because it’s looking at your overall profit or loss that helps you for on a temporary basis to get to get through a sticky period where you might have spent too much. Yeah. Okay.

Under SCR, it’s it’s nothing to do with your revenue. It’s just a capital item that you’ve sold. Um, so it is not affected.

But advertising income is still included, I assume. And and that was another area, I think, where we’ve where we’ve seen some subjectivity applied to

an owner’s outside commercial company sponsoring the shirts of the club that they also own. Yeah.

How much should a reasonable price be for that? without naming any particular clubs. Um there’s still going to be that

sort of area of um let’s say discretion, subjectivity as as to what is a fair price for that and that will be included.

Yeah, absolutely. That will that will still be included. Commercial income is is a is obviously a massive part of of Premier League football clubs revenue

and um Yep. So the sort of finer details and um items around that will sort of still continue to be debated and

discussed. Yeah. And so then around the costs, it’s it’s just those pure footballing costs that you talked about, transfer fees, player wages, coaches

wages. Um so in the past, have you seen where some clubs may have been able to suppress certain costs in order to to

find a little bit more headroom here? Um and this will tighten it up a bit or how do you see it on the cost side of things? Are there any particular areas

where you think some people may have to change their strategy? Um I think in general Premier League clubs mostly are

already under this squad cost ratio anyway broadly speaking not all of them and not all of them so so easily but broadly they are.

I think where it helps clubs is that the any spending that you’ve got outside of the playing squad is now completely

irrelevant. So whereas before PS had some adbacks so you might spend some money on the women’s team or the academy or community project and depending on

the nature of it bit of a gray area you might be able to discount that from P because it’s like good spending. Yeah.

But it was always subject to debate. Um you know Everton had the whole thing with the with the interest on their stadium and they got penalized for that.

Um now clubs can sort of feel free actually to spend you know if they feel that they want to make an investment here and an investment there and it’s

not directly on the playing squad they can do that completely freely um and they’re not going to have to worry about the financial rules. Okay.

Um so I think that’s one of the maybe one of the maybe benefits and one of the things that will change um yeah is mainly probably around the outside the playing squad items.

Okay. One one particular point which I think well we know has been uh monitored, reviewed and changed over the lifetime of of PSR is the amotization of

player contracts. We saw that with Chelsea in particular some others who signed players on very long contracts so that they could write that off over a

number of years. Um I think when we last spoke you said that there was um sort of a maximum contract term that was brought in. Um has has that changed or is that

flexibility? Are we still going to see long contracts? So we still going to see pure profit for academy pay players.

So most of that has not changed, but the effectiveness of it probably has. I mean Chelsea strategy is a bit of a double-edged sword anyway. And I don’t

think we’re likely, you know, that wasn’t that was always going to be a short-term strategy because although in the short term, you sign a player on an 8-year deal looks really great because

if they cost 80 million pounds, only10 million pounds a year, but you’re also stuck with that player.

If they’re not any good, as they’ve signed a lot of players, a lot of long contracts that have not turned out to be particularly good, you are then stuck with that player. You can’t sell them

because if you sell them, you’ll sell them at a loss. You’re paying their extortionate wages. So, it was a very short-term ploy anyway by Chelsea that I

don’t think clubs will be looking to repeat.

The academy player strategy is still there, but it’s a lot less, not a lot less, but it’s less prevalent.

So, under PSR, just to sort of reiterate that point, if you sell an academy player, and this isn’t really PSR, this is just accounting rules generally. Sell an

academy player, you haven’t bought them for anything. So, when you sell them, it is 100% profit. They come through the academy, sell them for 20 million, bam, 20 million straight into your profit calculations. Happy days.

Um, and the advantage with PSR is PSR is looked at over a threeyear period. So that can help you out for that whole threeyear period if you need, you know,

a bit of a boost or that can that can help you out in two years time maybe.

Um, under squad cost rules, um, player trading counts as part of your revenue.

So that in this example, your 20 million would still be part of your revenue and that would still enable you to then spend more. Y but it’s limited firstly because it’s 85% of that revenue.

Mhm.

And also SCR is a one season thing. You either apply it in that season or you don’t.

So it’s you can’t carry it forward. So if you did sell an academy player um and get a bit of money for them, you and you want to make use of that in your school,

you’ve almost got to make use of it sort of immediately if you wanted to use that money to say buy a player. Um, and actually those effects sort of linger on

because maybe you use that cash to buy a player, but you’re then paying those that player wages and amortizing their transfer fee over several other years. Yeah.

So actually the strategy of selling academy players, whilst it’s still viable and it will still happen, it’s not going to be quite the mainstay that

it was under PSR where it was almost vital for some clubs to meet the regulations.

That that’s really interesting, Tom. Um c can I just cut back then to why why is this being why is this being done fundamentally?

Yeah. Yeah. Checks notes. Um yeah so part of it’s come from the Premier League and part of it all of the club.

So firstly there’s an element of inseason control. So SCR is an easier thing to monitor. It’s relatively easy to monitor these this is a play this is

your squad playing squad’s wages. This is what your transfer fees are and this is what your revenues are broadly going to look like. all the other elements of

PSR, all the other costs are quite variable. Lots of things could happen during a season and what that led to is

um points deductions and things being looked at really historically. So the most recent example actually in the championship being Leicester who adopted six points which helped to get them

relegated for previous seasons misdemeanor and it’s all a bit you know it’s not a great look is it because the se the in the seasons they actually breached the

rules you know what about the clubs who were competing against them in that season those clubs feel sort of like they’ve been unfairly treated

um and just generally the Premier League don’t see points deductions as a thing they as a good look so by having this sort of inseason

control where they can easily see whether a club is over it or under it and monitor. Um and there are some flexibility and complications in these rules too if they do go over the 85%.

More on that later. Um so you know if there are misdemeanor it can happen in the season it’s done when it should be.

Secondly is UEFA regulation. So clubs in Europe operate under a squad cost ratio anyway. So it kind of makes sense to

sort of align somewhat Premier League rules rather than having completely different situations. and just looking at some of the clubs that have voted

against it as well. Um, you know, some of it, some of it’s obviously loophole related. There were so many loopholes.

Obviously, Chelsea are the ones mainly that have sort of been in the news cycle about that. Closing the loopholes um was a was a big thing to um and also it’s just the focus on on the pitch spending.

You know, what is sustainability for a football club? What makes football clubs inherently unsustainable is player spending. It’s player wages. It’s player

transfer fees. So, if a club chooses and wants to invest loads of money in other things, it’s kind of up to them. They can if they want, but what’s the thing

we’re actually looking to keep under control? Really, it’s player wages and player and player transfer fees.

Um, so yeah, a multitude of reasons really why SCR was ultimately preferred over PSR and and the politics of it is is quite

interesting because this was only approved by twothirds of Premiership clubs by by sort of the tightest of margins. and those clubs that voted

against it, I think they’re kind of more your I guess solid mid-table teams looking to push on that they seem to to

reject these new rules. Um whereas the larger clubs all albeit even though their total spend is going to be capped to 85% now they were in support of it.

What’s going on around the different clubs views of this?

Yeah, so you’re right to say how tight the vote was. um you [clears throat] know not many Premier League um votes are this tight um to approve anything of this nature in the Premier League you

need a 2/3 vote 14 out of 20 is exactly on the borderline of what you need and that was what was got and just looking here the clubs voted against it were

Bournemouth Brenford Brighton Palace Fulham and Leeds now think about broadly what a lot of those have in common is that they are

the smaller clubs of of the Premier League if we’re honest about it in terms of their global sort of appeal global fan base their stadium size and their revenues crucially.

Um, most of those clubs, maybe leadeds being the slight exception, they have quite small stadiums.

They’ve got not much of a global brand compared to the bigger players in the Premier League and therefore their revenues are sort of somewhat inherently capped

and therefore their spending is going to be inherently capped by SCR. Um, it’s going, you know, Bournemouth Stadium, you know, I don’t know the exact, it’s

around sort of 10,000, isn’t it? There’s only so much they can do with that. even if they built a whole new stadium, you know, what is the fan base of Bournemouth? How much can a club like

Bournemouth really increase their revenues? So, they’re sort of stuck in a little bit by SCR. Now, they were by PSR

as well, but those clubs sort of feel that essentially the bigger clubs are almost sort of locking in their advantage with SCR. Um, and yeah, for

the bigger clubs, their revenues are so big, especially the the big six as as they’re called. Everyone knows what who the big six are, even if you don’t agree that they are the big six, but they’re

the big six primarily because of global fan base and revenues and their revenues are so high that they are absolutely nowhere near the SCR limit.

Um, and also most seasons they play in UFA competitions and have to adhere adhere to SCR anyway, so it’s firmly in their interests essentially.

Yeah. Yeah. You talk about the big six. I always think it’s interesting.

Newcastle have probably got the richest owners in the world and yet still seem to have to sell some of the best players every year and are not classed as one of the big six for those reasons I guess

essentially. Yeah. Um obviously match day revenue is pretty reasonable. Got a got a big stadium. Um, but yeah, they don’t have that that global fan base and

that global appeal that the that the big six clubs do and therefore their revenue is is simply not as high and therefore they’re spending, you know, when they’re

trying to get up there and compete um pay the big wages, pay the big transfer fees. It’s it’s a struggle because they don’t have the same level of revenue as as the big six clubs.

Yeah, you mentioned those teams playing in Europe on a regular basis and and how the similar rules already. I think that the percentage applied is slightly different in European competitions,

isn’t it? But ultimately um you don’t see these new rules necessarily impacting on the strategies of those teams that are in Europe every year?

Not really. No. Um yeah, the UEFA percentage is actually lower. It’s 70% rather than 85 as it is in the Premier

League. Um and yeah, most of the the bigger clubs, they’re they’re below even 70%. So it’s again, it’s not an issue

for them. Where it could become potentially an issue is for the clubs that are in and around they’re sort of in and out of Europe a bit. they may be finishing sixth, seventh, particularly if they get into the conference league.

Um to have your um your effective cap go from 85% to 70 to 70%.

Um as imposed by UEFA could be challenging potentially. Um you know, if you look at the Conference League, the amount of money you get for the

Conference League is is not a lot. It’s only around 20 million quid if you win the whole thing. So actually having your

your wages capped by a further 15% could be a little problematic for some clubs there.

But UEFA are a little more lenient per se on their regulation. Um if you breach

UEFA’s cap, obviously they can’t really give you points deductions and things.

It’s not their league. Um they can do things such as ban you from the competition, um withhold your prize money, things like that, but they don’t tend to be quite so draconian. They tend

to say, “Okay, you’ve broken it now. Um, here’s a fine and we’re going to put you on a sort of suspended sentence if you like, and as long as you’ve sorted

sorted it out within a couple of years, um, all those other punishments will go away.” Um, and there is sort of a deliberate reason just to carry on with that that

the Premier, you might think, well, what why did the Premier League not just do 70% then? If that’s UEFA’s rule, why not [snorts] why not do that?” and the Premier League sort of say, well, by

doing 85% and some of the other complications around SCR in the Premier League, um it gives clubs who aren’t in Europe and therefore don’t have the

revenues of clubs that are in Europe, um a chance to actually spend more and catch up a bit to try and get into Europe. So, it’s seen as a sort of

flexible way and vice versa as well. So, if a club is in Europe and by virtue of being in Europe, they’ve had more revenues, they’ve spent more on their

squad, they’ve got a higher cost base, but then they drop out of Europe, um, they’ve got that flexibility of

going back up to 85% at a time where their revenues have dropped because they’ve come out of Europe, but their squad is still the same, still an expensive European squad.

I think I’m starting to see why those particular clubs maybe did vote against this, because you could see a world where the likes of a Brighton and a Bournemouth, who do qualify for Europe

and are having to cap at 70%. They’re threatened by teams below them in the Premier League when it comes to a potential relegation battle who are

spending up to 85% and therefore are potentially more competitive in the Premier League just because the other team is is in Europe. So that that makes a lot of sense actually, doesn’t it?

Yeah, there there really is a lot of moving pieces. I think you know I’ve actually sort of written a piece around the Conference League and how you know particularly that competition is

actually maybe not even particularly beneficial from purely from a financial point of view. Um and yeah, those those kind of clubs are the kind of clubs that although a lot of them who voted against

it haven’t been relegation threatened in recent times given the size and stature of their of their clubs and the fact that big clubs come along and you know

buy all their players, there is a chance that they are the ones that are more likely to be relegation threatened and therefore might need you know in a season where they might be in Europe.

We’ve seen it with clubs like West Ham for example who have won the Conference League and then slipped down the league dramatically afterwards um or during the

season. Um but also a lot of those clubs who voted against it are never really in danger of PSR breaches anyway. So for

them PSR was not an issue and they saw it as uh maybe an easier way for them to compete with the with the sort of bigger clubs than SCR is.

Okay Dom. So in Europe 70% but potentially some um understanding from UEFA around people that may exceed that.

85% in the Premier League absolutely locked in. 85% is the limit. No one can ever go over it and if they do what what

happens or um let me guess there’s a little bit more flexibility.

Yeah. Don’t we all wish it was it was that simple. Um it it’s not um this this is the part where strap in for some technicalities because this is the part

that does get a a bit technical. So 85% is what the Premier League call the green threshold. Mhm.

Um and if you’re below that, no problem.

85% or below, no issues, nothing to worry about. But there is also a red threshold which moves now at the start of the 26

27 season um when this kicks in the red threshold is 115 uh%. Mhm.

Okay. Of your of your revenue. So you it’s essentially an 85 plus 30 is what it starts at.

If you breach 115% straight away it’s a it’s a points deduction,

right? And that limit has been set to a to a level that the Premier League basically doesn’t think anyone will really ever breach because they really don’t want to be giving out points deductions where they can avoid it.

Mhm.

Um and if you are between 85 and 115% you get a a penalty, a financial levy,

and it’s a fixed amount. It’s it’s there’s a calculation so everyone will know when they’ve gone over it’s this this amount is the fine that we’re going to have to pay. Now, if you go over in

one season, so we’ll do an example. So, let’s say on season 1 you spend your your STR is 90%. So, you’ve gone 5% over,

um, nothing will happen other than you’ll pay a financial penalty for for going 5% over. In season two, your red threshold is then reduced. So, it’s no

longer 115%, it’s 110%. It’s been reduced by how much you overspent last season. Got it?

And that goes and goes and goes and goes. you can recover your red threshold back to a maximum of 115% with a compliance season. That’s it.

Back under 85%.

And if you hit a green the green threshold 85% or under um your red threshold can go back up by a maximum of of 10%.

Right?

So yes, it does get a little bit complicated. It is not as straightforward as as 85%. And over these years in you’ve heard all the

things about PSR over the years. what you’re going to be hearing over the next couple of years for clubs that are closer to the limit is all about their green and red threshold.

Wow. Okay. Look forward to that. So, Dom, just on these red and green thresholds for those clubs that can afford the penalties and have have these

these benefactors and aren’t necessarily work into the budget that that we would all understand. Why would they not just exceed the 85% um go up to 90 95 every

year and get that competitive advantage and just pay the fine?

Yeah. Um, yeah, I think I think that’s probably one of the most sort of pertinent questions. It’s exactly what I thought when I when I sort of first heard about these rules. Um, and yeah,

there’s a number of reasons. I think maybe we start with why it even exists in the first place, this 115%.

[snorts] Firstly, as I mentioned a couple of times, Premier League don’t like points deductions. They want to give clubs a chance if they’ve overspent to get the house back in order.

Secondly, um, they don’t want clubs to necessarily not feel like they can gamble somewhat if they want to. So

perhaps you’ve got a club that’s come up um from the championship and they want to sort of gamble the house a bit as clubs often do on staying up um on a

more short-term basis. Then that 30% in the red within the red threshold gives them that chance to on a short-term basis to sort of overspend.

Um and you might equate that to maybe a club going for Europe or a club that gets a load of injuries and needs to buy in the January transfer window, whatever it may be. So that there’s a deliberate element of sort of flexibility there.

Um, and ultimately you will know what the fine is going to be because it is a set calculation. But yeah, you’re right.

If if you’re you might think, well, okay, I’ll just spend 90% every season.

That’s going to give me six seasons of overspending before my threshold is back down to 85%. I’m going to pay a fine every season. Um, yes, those fines can

become expensive and add up. But if you’re say Newcastle, whose owners have an unlimited pot of money, you know what? Why do we care?

The answer is you might not do in the short term, but ultimately you are going to have to do something about it. So it is an unsustainable thing to do. If

you’ve been spending I mean 90% is quite a small example. That’s quite a small overspend. But if you’ve been doing that for six seasons, by the end of the six seasons you’ve

used up your 30%, you’ve got to go down to 85% now. What are you going to do about it? You’re going to have to sell players. You’re going to have to cut wages. So although you can overspend in

the short term by design you can overspend in the short term as long as you’re happy to pay a penalty ultimately at some point you have to come down to 85%.

And and from what you said earlier if you then do drop below 85% for one season does that automatically res reset right up to 115% again it resets only by 10%.

Okay 10% per season is the maximum you can reset it. So you would go back up to in that scenario I’ve just mentioned you

would go back up to 95%. Um but yeah, so fundamentally you might think, “Yeah, great. Okay, we’re going to overspend.

Um don’t really care about the penalties. We’re going to get this player. We’re going to get that player.” That’s great. But when you’re forced to go back to 85%, which you will be at some point, what are you going to do?

You have to you’re going to have to get rid of players. And that’s going to put you that’s going to send you backwards essentially.

So it’s not a sustainable path. And if you do go over that 85% threshold, either accidentally or by design, you’re

going to have to plan as to how you get back below it. Yeah.

So, it is only a really short-term thing that you can do.

So, it it doesn’t really help. It’s not really a strategy. Most clubs are going to want to stay within 85% or 70% if they’re regularly

in Europe anyway because it’s going to cause them a real headache trying to shuffle players around if if they’re constantly going over the green threshold and into the red one. Fine.

Sounds like another podcast um entirely just around green and red thresholds.

Um can we turn to um those clubs at the bottom end of of the Premier League and and as briefly as you as you can the

differences between the rules in the Championship for example and these new rules in the Premiership.

Yeah. So the Championship for now has rejected FCR which means they are still under PSR.

Mhm. [clears throat] So, if you get uh if you are a club that gets relegated from the Premier League,

uh immediately from the next season, you will be back under PSR. SCR will no longer apply to you. And PSR will apply to you in the same way that it did

before where it factors in how many seasons you’ve of the last three you’ve been in the Premier League and how many seasons you’ve been in the Championship.

And the same is vice versa. So, if you’re a Championship club um and you get promoted, PSR instantly no longer applies to you in the Premier League.

you must um comply um with day one of your new Premier League season. This is another reason why maybe

a club like Leeds who voted against SCR would do so because they see themselves particularly at the time of the vote as potentially

relegation threatened. They’d only just got promoted. Obviously they’ve they’ve survived um as it happens anyway. But

you know an 85% squad cost ratio is not an easy thing to meet for a championship club. Championship clubs are are very

highly leveraged and they you know they’re spending big to try and get to the Premier League in in the hopes that they do and when they get there sure you

get 100 million pounds whatever but that is swallowed almost immediately by buying players increasing wages. Um

so it’s much harder for a team that has only just come up to meet SCR rules particularly as naturally the teams that come up for the championship are going

to be smaller teams aren’t they? It’s not going to be Man United with a 700 million revenue or whatever. It’s going to be a smaller team that comes up and

therefore it’s going to be quite it is quite difficult for sort of yo-yo teams to to meet those um requirements and

also mix and match the requirements if they are going up and down a bit.

Are there any particular clubs as an example that may be better placed for promotion or to handle relegation

um than others? You know, I’m thinking those with larger stadiums, larger, broader fan bases. Are they well, it

feels like they would have been better suited under both PSR and SCR. Um, you know, in your opinion, are there any

particular types of clubs that that may benefit from these rules? It’s a it’s a bit of a double-edged sword in in [clears throat] and around relegation um

teams because whilst you might have a team um if we take Ipsswitch for example, they’ve gone straight back up to the Premier League, they’ve had

parachute payments to help them deal with the lack of revenue coming down. So you might think, you know, potentially they could be in a slightly better

financial position, but ultimately STR is a one season thing.

So next season their revenues will massively increase because they’re back in the Premier League.

Um, but yeah, it’s still going to go back to the same thing of if they want to survive, how many players are they going to have to buy? How much are they going

to pay them? How much of their existing players, you know, get a massive pay rise from going into the Premier League.

So, it’s still, you know, going to be very difficult. And we’ve seen clubs even when they do have a decent revenue base such as Leicester, um, they’ve been relegated to to League One.

And you know that’s because they’ve they’ve got players on huge Premier League wages still knocking around in the Championship.

Um and you know so their financial position is actually very precarious.

So it really is a double-edged sword. Um outside of relegation and promotion teams it’s a bit different um you know the teams that are best placed.

Yeah. Who’s who’s best placed to cope with these new rugs?

Yeah. The teams that are best placed ultimately they they are they are the big guys. It is it is the top teams. Um teams like Arsenal, Man United, etc. the

the big teams their squad cost ratios of somewhere around the 50% mark.

Um so they are really nowhere near these limits even though they do have giant wage bills and giant transfer budgets

but ultimately they have giant revenues and 85% of their giant revenues is a massive number that they’ve got plenty to spend on their squad. Mhm. Were there

any particular clubs that cuz you know you talked before about that three-year period over which BSR was measured and and and some clubs sort of saw it as

where they were in that threeyear cycle and when it reseted and when they had an opportunity to to go a bit further where they had to cut back. Are there any clubs that are well placed as these

rules changed to to sort of take advantage? Maybe they’ve got a relatively low cost base under the new rules and so have got the capacity to invest a bit more.

Yeah. Well, interestingly, some of the clubs that voted against it do have an okay um STR ratio. So, actually teams like um Brighton and Brenford um are

knocking around the sort of 60s in their percent. So, they’re well below 85%. So, you know, theoretically um they do have

room to carry on investing, go up to that 85% mark and maybe um you know, look to try and compete for those European places against teams that have

now restricted to 70. M but I think those clubs still feel that as much as they are not um anywhere near the SCR limit they still felt that

actually they had more flexibility with with PSR and if you think about their business model that kind of makes sense if you think of team like Brighton

um who’ve done a really great job at scouting players for a low price selling them for a big price um let’s take him

for an example 100 odd million to Chelsea that gives them that hundred odd million for three seasons to work with and completely you know they can they can base their whole system over three

seasons, scouting new players, developing them to sell a new one in a one season um situation. That just isn’t the same,

is it? They if they would have sold C if they would have if they sell 100 million pound player next season, that’s great. That gives them a revenue boost for one season and they’re

probably not going to be able to really do much with that.

Um because if they did use it to sign a bunch of players on really big wages, then well, they’ve still got those players for the next season. So, are they going to sell 100 million pound

player every season, you know? Um, so it just sort of limits almost the flexibility of their their business model in that way. So, although it looks

like they’re quite well positioned, um, and they are, but just not as nicely as they probably felt like they would have been under PSR.

Yeah, maybe this is where these red and green thresholds come in and you have a big sale in one year in order to claw that well that red threshold back up

again to 115% so that you can go again the following year. Strategically, it’s um you know, I’m sure brains bigger than ours are already thinking this through

and looking at ways of of finding um loopholes and ways um to maximize spending. Um you know, what what the

people that you follow out there saying about these rules already? Do do we think there’s any particular um sort of standout clubs that appear to be well set for this?

Well, it’s it’s much it’s much um yeah, it’s much more probably difficult to find loopholes because there’s just less to work with. It’s just revenues and squad costs. Um but you know someone

like Tottenham theoretically you would look at though look at them and think they were probably in a good position for PSR and probably going to be in a good position for SCR because of what

they’ve done with their stadium. Their stadium is such a big revenue generator.

They hold concerts and NFL games. I think there’s like an F1 carting thing inside it. It it generates so much revenue

um even as a non-Oing item. And that ultimately can be then used as your 85%

um for for your playing squad where you might find technicalities and loopholes is more likely to be in the

revenue side of things now in just to some extent fundamentally things haven’t changed. You football clubs are

looking to drive as much revenue as possible under PSR to help them make a bigger profit or a smaller loss and they’re still looking to do the same thing. Now, where it might get a bit

more technical and a bit more sort of loopholey, if you like, now is that if a club receives some income of some sort before, but it maybe didn’t technically class as revenue, they didn’t really

mind. It’s still going to filter into their profit calculations. Now, they’re going to want it to class as revenue.

So, let’s say Tottenham are holding some event, a Beyonce concert or an NFL game.

There might be some sort of like revenue sharing basis there. you know, maybe some things, some items are being sold and Tottenham get a cut of it, whatever

it might be. Um, they’re [snorts] going to look for ways to maybe contractually

ensure that for them that counts as revenue and not some sort of other income or some sort of cut that goes into somewhere else in the profit and

loss. They’re going to want it to show as we take all the revenue and then we pay you your cut as an expense. They’re not going to want to

say, “Oh, we only get we get 50%, you get 50%.” Yeah, they’re going to want to say we get 100% it all goes on our revenue and we pay you your 50% somewhere else in the P&L.

So you could get things like that.

Yeah, clever accountants will be involved as ever. Yeah, it’s interesting you mention um sort of Tottenham particularly with with the NFL games because the comparison with the

NFL is something we very briefly touched on last time.

Um but obviously over there they’ve got the salary cap where as I understand it, every team, every franchise um has the same spending

limit. This this isn’t what we’ve got here. This is based on turnover. So the big clubs will still be able to spend more and become more successful.

And we’re not moving towards a place where we think smaller um smaller clubs will in time be more competitive. We

don’t have a draft system where the best players go to the underperforming teams.

We don’t have a a locked team spending cap whereby every club has to spend exactly the same amount. So this to me it just feels like moving things around

in a in a marginal way and and we’re not moving towards um increased competition are we?

No. And to be honest I think that the whole discussion about whether financial rules are fit for purpose or whether

whether frankly anything can actually be done is you know an entire other podcast I think. But in terms of [clears throat] how that compares to the NFL it’s just

I’m no NFL expert at all but it’s it’s just a very different system isn’t it? they they have a locked sort of league. There’s no promotional relegation.

They’re not competing against other leagues in other countries as the Premier League is with European leagues for players. Um and it’s a sort of

locked um system of bargaining power and sort of um you know they’ve got their

salary cap is part of the entire negotiation of all the financials in the league, isn’t it? Um, if you tried to do some sort of salary cap in the Premier

League under the current rules, it’s it’s just impossible, isn’t it? It’s just not going to work. You know, where do you set it? If you set it at 100 grand a week, you lose all the best players to Spain and Germany and France.

Um, if you set it at 400 grand a week, what’s the point? That doesn’t help the sustainability of 99% of the clubs in the pyramid.

Um, so yeah, it’s it’s a fundamentally different different system. And yes, ultimately a lot of people will will look at these rules as they looked at

PSR and say, “Well, surely that’s just helping the bigger clubs to stay bigger.” Yeah.

Um and I think that’s it’s a fair observation. Yeah.

Yeah. Yeah. So, in summary, just to to finish off, um you’ve spent a little bit of time writing about this on on your LinkedIn blog, which people can

obviously find online. Um and and talking to me here today about this.

What What are your views as as to the switch from from PSR to to SCR? Do you think it’s, you know, we shouldn’t get too interested in it? Is are there some

important factors we need to is this revolution and everything’s going to change? Sounds like probably not. Um is it is it worthwhile?

Um I think broadly it’s probably better than PSR purely because it it focuses on the thing that matters which is squad costs.

You know me mentioned it earlier but why are football clubs fundamentally unsustainable especially in the EFL not maybe not quite so much the Premier League is because of player costs. um

because player transfer fees and wages cost a fortune and there is owner after owner after owner after owner who is prepared to fund the losses to do this.

So you know why why take into account things outside of the playing squad because those things are partially optional anyway as to whether you want to invest and spend on those things.

What is not optional for a football club is trying to get the best playing squad you can. So if you are going to impose some financial rules it makes sense that

they are focused on on the playing squad. Um, so yeah, I still think it’s un ideal. Um, I don’t pretend to have

any better ideas as to how you could help sort of bring a bit of parity to it. Um, but do I think it’s better than

PSR? Probably. PSR just has a lot of loopholes. Um, it takes into account too

many non-OOT items. Um, and yeah, for me it makes sense, a bit more sense to just focus on the playing squad element of the cost of a club.

Yeah, feels like it, doesn’t it? from from an accounts point of view really it makes a little bit more sense simplifies it um slightly. So um yeah perfect. Well

um we will see the upcoming transfer window um and and the changes that are made and if there is um you know any any

big high-profile events and maybe we’ll get back together again and and talk a bit further. But interesting to see it it pan out over the summer um you know

and see where it goes. Um and the World Cup of course as well. So final question is it is it coming home Dom? Um, I got

to say yes, haven’t I? You have to. I have to.

This will be very dated if people are looking at this after I will be. Yeah.

The end of the World Cup. But anyway, thanks for your time. Good to be here. Thank you very much.

Thanks. Cheers, Dom. See you all next time. [music]

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