Premier League clubs vote to curb spending power

Premier League clubs will have to submit details of commercial deals for approval by their rivals under new rules agreed among the top flight’s 20 shareholders.

The rules are a direct response to the £305million Saudi Arabian-led takeover of Newcastle United and will curb the potential spending power of clubs like the Magpies that are owned – or part-owned - by a state

The top flight started drawing up the rules in October after the takeover of Newcastle United by a consortium 80 per cent owned by the Saudi state’s Public Investment Fund (PIF).
The aim is to prevent owners inflating a club’s financial position by acquiring sponsors from ‘associated parties’, which are prepared to pay over the odds, in order to increase the cash available to spend on new players under Financial Fair Play regulations.
The concern among Premier League clubs was that the PIF could seek favourable deals for stadium, training ground or shirt sponsorships, from Saudi businesses.
They feared this could have dramatically strengthened the Magpies position in the transfer market, putting top flight rivals at a disadvantage.

The Premier League clubs have now voted on these ‘associated party transactions’ to ensure they are settled at a ‘fair market value’.
The vote was carried by a majority of more than 14 of the 20 clubs – the threshold for a decision – but the Telegraph reports it was not unanimous.

Previously, Newcastle United have voted to oppose controls on commercial deals and Manchester City have abstained.

Newcastle potentially threaten clubs at both ends of the table. A major injection of cash in the short term could send rivals down, and in the longer term they become a threat to the Big Six.

The mechanism to monitor the value of commercial deals will involve an evaluation by an independent assessor, clubs’ own assessment and the creation of data bank, which will contain anonymised information about previous top flight deals.

The system will be set up so that the Premier League board can decide on deals, without being privy to commercially sensitive information.

Currently, FFP rules allow a club to make a loss of £105M over three years before it becomes subject to sanctions. By increasing its revenues, a club stretches the FFP envelope giving it more strength in the transfer market.
As reported by Sportsmail, Tottenham Hotspur have the greatest potential to spend on transfers after years of strict financial management.

An analysis by expert Kieran Maguire, a lecturer in football finance at the University of Liverpool, suggests they could spend a whopping £400M and still stay within the FFP rules, because they have secure profit and revenues in previous years.

Newcastle could spend £166M as it stands, but analysts believe there is significant potential to quickly increase their commercial revenues, for example, by securing a stadium sponsor.

Dr Rob Wilson, from Sheffield Hallam University, has previously estimated that in time the Magpies could swell their revenues by £100M by updating the deals done under Mike Ashley’s 14-year reign.