The first day of September normally signals the end of the summer transfer window in the Premier League, but clubs now have two deadline days to contend with.
June 30 has become an important date for the executives running Premier League sides as it coincides with the last day of the financial year. That means it’s the date by which they need to have their houses in order as they look to comply with the profit and sustainability rules (PSR) that are now being punished with points deductions.
Nottingham Forest are the latest top-flight team to fall foul of the regulations and were docked six points on March 18 for a “significant” breach of PSR. As a promoted club, they were allowed permissible losses of £61million ($77m) in 2022-23 but were found to have exceeded that threshold for a three-year period by £34.5m.
Forest had their points deduction reduced from six to four after being credited for cooperating with the Premier League and are also appealing the punishment, while Everton, also docked points this season for PSR breaches, had their 10-point hit reduced to six points on appeal.
Everton were again referred to an independent commission by the Premier League in January for failing to comply with the permitted threshold for the assessment period ending 2022-23.
Only last week, Championship club Leicester City, who were relegated at the end of the 2022-23 campaign, were referred to an independent commission by the Premier League for an alleged breach of PSR. Leicester said they are “extremely disappointed” by the decision.
Under PSR, clubs are allowed to lose a maximum of £105million over three seasons — or £35m a season — but certain costs can be deducted, such as investment in youth development, infrastructure, community work and women’s football.
But is there a flaw in the system? If clubs are likely to get three or four points deducted for a breach, is it worth hanging on to players after June 30 if they think the player or players they need to sell can get them a couple of wins at the start of the season? They could then sell them instead at the end of August. It could be especially tempting if that team had a kind set of opening games when the Premier League fixtures come out in June.
Maybe, but it’s not one you’re likely to see come into play, according to some experienced former Premier League executives we spoke to.
“I don’t think anybody would do that,” responded an executive who, like all in this story, asked for anonymity to protect relationships. “The risk is that you don’t get a four-point deduction, you get 10 points or some other sanction that hasn’t yet been introduced.
“Nobody is going to want to take that risk. You are not guaranteed to win the matches, so you could lose all three and then get points knocked off.
“Knowing the finance people around the Premier League, and they are mostly sensible people, you would need an absolute maverick owner to overrule you on something like this. But even then, the risk is too high.”
Grealish’s sale to Man City in 2021 represented ‘pure profit’ for Villa (Nathan Stirk/Getty Images)
A former director of football at a Premier League side, who was responsible for buying and selling their club’s players, agreed.
“If you have an offer, you are selling,” he said. “When you are a director of football, you know the situation is going to happen and if you sell before June 30, then it will be a smoother transaction and you can try to get a replacement in before pre-season.
“And if you arrive to buy a player before June 30, I am sure they will be cheaper than if you arrived in July or August. Why? Because of financial fair play and the June 30 deadline.
“But if you keep hold of the player beyond June 30, knowing you have to sell them, then you are only delaying the problem. You could sell the player in the summer and take the points deduction, but the financial losses of the season could carry on because they average it over three years.
“In England, a lot of teams need to sell an average of one player a year.”
For Aston Villa, that player was Jack Grealish. In 2021, Manchester City paid £100million for Grealish, a product of Villa’s academy, which meant the transfer fee was attributed as pure profit.
Villa are now pushing to qualify for the Champions League, transformed after investing heavily in players such as Emiliano Buendia (£33m), Leon Bailey (£30m), Pau Torres (£31.5m), and Moussa Diaby (£36.4m). There have been plenty of other signings for relatively big fees, too.
But to combat this, and with PSR in mind, they have been selling homegrown players. Grealish was the first, but others — most notably Aaron Ramsey to Burnley (£14m) and Cameron Archer to Sheffield United (£18.5m) — have followed Grealish out the door.
Despite this, they posted a loss of £119.6million for 2022-23 and the general sense is that they need to shift a player for a considerable profit before June 30 to comply with PSR.
Kieran Maguire, a football finance expert and author of The Price of Football, has noted that from 2024-25 onwards, Villa will no longer benefit from the Grealish sale in terms of PSR calculations.
Maguire, as with the former Premier League executives, also believes it would be too risky for a club to miss the June 30 deadline to improve their chances of putting points on the board in August.
Richarlison is one of the players Everton sold for financial reasons (Tony McArdle/Everton FC via Getty Images)
“Is it possible to game the system to a certain extent? It is always possible, and it is the equivalent of a professional foul,” Maguire says. “It shouldn’t take place, but it could take place.
“If you get your sums wrong, then what happens if that player plays for you in the opening match and does their ACL (anterior cruciate ligament) and you can’t sell them for another 12 months and you were budgeting on that sale?
“Football is strange in the sense that the money comes in in lumps, but the money going out is quite constant. For example, you know you have enough money to pay the wages until October and then the fee you get for keeping the player and selling them will allow you to pay the wages in November and December.
“It is a very high-risk strategy, and it is something I would never advise a club to do because it is so easy to mess up.”
One issue clubs are now having to combat is that due to their finances being readily available via Companies House, it is easy for their rivals to spot who is struggling to stay under the PSR threshold.
This is important because it gives the buying club a stronger negotiating position if they know the selling team has to offload their player before June 30.
“That (being taken advantage of) has always been there, except it used to be the traditional transfer deadline — not June 30,” said the former Premier League executive. “If you have a player out of the squad in August and you know you want to sell him, interested clubs will know that and often wait until the end of the month because they know you will be desperate to sell.
“It is no different to that, but the significance of June 30 has now created a second pinch-point. You have the transfer window that has always had the element of the buying club having more power, but you now have the year-end date, which is far more prevalent.”
For the former Premier League director of football, now employed in the same role in a top European league, trying to take advantage of a selling club is part and parcel of recruitment — but they believe the bigger issue at hand, especially concerning PSR, is that the transfer fees being paid have reached an unsustainable level
They noted Declan Rice’s £105million switch from West Ham United to Arsenal last summer as an example — saying that even though Rice is a talented midfielder, nobody in the industry thought Arsenal were getting a good deal.
Other examples cited of the market reaching unsustainable heights include Chelsea’s £106million deal to sign Enzo Fernandez from Benfica in January 2023, while also spending £115m to land Brighton’s Moises Caideco last summer.
The director of football’s prediction is that it will become more common for teams to target free agents and players who have a year left on their contract as a way to avoid big transfer fees, also suggesting that the UK internal transfer market will reset itself to a more sustainable level.
“The way to survive in the Premier League — and you can keep the high salaries because other revenues are going up — is to reduce the transfer fees for amortisation,” they said.
Experts feel that big transfer fees like Rice’s will become less common (Stuart MacFarlane/Arsenal FC via Getty Images)
“Clubs will try to reduce the classic £30million-£40m transfer to £15m-£25m. That would be a big saving for clubs. The Italian teams are great at regulating their internal market and help each other to keep the balance from a market point of view.
“Everton want £60million-£70m for Jarrad Branthwaite, but who is going to pay that? Chelsea won’t, Manchester City wouldn’t, and neither would Real Madrid or Bayern Munich.
“There is going to be a big decrease in transfer fees in the next market.”
Even with amortisation — an accountancy term used to describe how a player’s cost is written down over the length of their contract — the inflated transfer fees continue to damage a club’s balance sheet.
“I don’t think wage inflation in the last two seasons has been anywhere near what it was four or five seasons ago, but the transfer fees have gone crazy,” added the former executive.
“The numbers being quoted for all players at all levels are unbelievable. I am not sure people recognise that the cost of a transfer fee has a big impact on profitability because they often look at league position and wages. But the amortisation of a transfer fee is key.
“It is why Chelsea did eight-year contracts because it keeps their losses low — but you then have a player on your books for eight years and if he isn’t playing and nobody wants him, then you have that on your books for eight years, which is highly risky.”
In December, the Premier League voted for a five-year limit on transfer fee amortisation but Maguire has carried out research on inflation in football and what it means in regards to the £105m PSR threshold that was introduced a decade ago.
“If you measure inflation as the ability to pay, which is based on revenue, then that £105m in 2013 would be £216m today,” Maguire said. “Football revenues have doubled over the last decade and that means the ability to pay wages and transfer fees have doubled, which means the £105m looks a redundant figure.”
Regardless of how they decide to approach PSR, now that breaking the rules carries the prospect of a points deduction, Premier League sides are going to be more mindful than ever of the June 30 deadline.
The cases of Everton and Forest have just added weight to the changes that clubs were starting to make when it came to getting their finances in order for PSR.
Whether it was Manchester United sailing close to the wind, Chelsea cashing in on multiple players to help balance the books, or Forest waiting to sell Brennan Johnson at the end of the summer transfer window and resigning themselves to a points deduction, the impact is already being felt.
(Top photo: Darren Walsh/Chelsea FC via Getty Images)
