How Will The Spending Cap Affect Premier League Sides?

Premier league players

Sixteen Premier League clubs have voted in favour of developing plans to introduce a spending cap ahead of the 2025/26 season. A spending cap would place restrictions on clubs’ expenditures concerning transfers, wages, and agents’ fees.

The clubs have endorsed plans for the Premier League to conduct the final economic and legal evaluations necessary for the development of a spending cap framework. The framework may be presented to clubs during the annual general meeting in June and if approved, will replace the existing Profit and Sustainability Rules (PSR) starting from the 2025/26 season.

The likes of Manchester United, Manchester City, and Aston Villa opposed the potential implementation of a spending cap, while Chelsea chose to sit on the fence. Proposals reportedly suggest capping spending to a range between four and five times the TV revenue earned by the lowest-earning Premier League club.

How Will the Spending Cap Work?

The spending cap will be reportedly calculated by multiplying the television revenue of the lowest-ranked team by five. This approach, termed “anchoring”, aims to establish regulations to curb extravagant spending by wealthy teams, potentially offering a less punitive alternative to the current rules.

This system would complement newly suggested squad cost regulations, which propose restricting expenditure on players, transfers, and agents fees to a percentage of a team’s revenue. For teams qualifying for European tournaments, the limit would be set at 70%, while for others, it would be 85%.

Both the proposed spending cap and squad cost regulations would go into effect for the 2025–26 season. This gives the teams the time to prepare ahead before its enforcement. 

PL Profit and Sustainability Rules

The Profit and Sustainability Rules of the Premier League allow clubs to incur losses of up to £105 million within a span of three seasons. According to the Premier League, these existing regulations are crafted to promote the long-term financial stability of clubs and uphold the competitive balance of the league by preventing the emergence of unfair advantages.

However, the existing financial regulations of the Premier League have received heavy criticism as the likes of Everton and Nottingham Forest suffered eight and four points deductions respectively this season with claims of the current rules heavily favouring clubs with the highest revenues being made.

Chelsea conspicuously exceeded spending limits over the summer and may face potential consequences under the PSR. Similarly, Manchester City is facing imminent financial sanctions for actions spanning from 2009-2018. This represents a significant change for the league, which is considering abandoning rules that put Everton at risk of relegation.

Earlier this year in February, the Premier League received a caution regarding its inability to secure a funding arrangement with the English Football League (EFL), with the government threatening to enforce an agreement through a newly established football regulator.

Subsequently, in the following month, the Premier League failed to reach a consensus with the EFL on a funding deal and instead announced that the top-flight clubs had consented to implement a new financial framework across the competition, intended to replace the existing Profit and Sustainability Rules.

How Are the Big Spenders Affected by the Introduction of a Spending Cap?

The objective of the spending cap is to at least narrow the wide gap between clubs with immense financial resources and the clubs at the bottom.

Had the “anchoring” system been implemented in the 2022/23 season, the spending cap would have been established at £518 million which is equivalent to five times the revenue of Southampton, who finished in 20th place.

Statistics show that of all the big spenders in the Premier League, Chelsea is the only side to have exceeded this threshold. The Blues had a total squad expenditure of £539 million, followed by Manchester City with a total squad expenditure of £501 million, Manchester United’s squad expenditure totalled £453 million, Liverpool at £412 million and Arsenal at £326 million. It is no surprise that all the teams mentioned above, highlighted by the demand for Man City tickets, reflect their spending.

The proposed regulations would introduce a cap, but judging by the stats above, many teams are already operating close to its parameters.

These rules wouldn’t just limit how much a team can spend on player salaries, but also how much it spends on transfers and agents’ fees, too.

The final vote requires the support of 14 clubs to pass. United, City, and Villa have purportedly opposed the idea, with Chelsea abstaining. The Manchester rivals and Chelsea are three of the four wealthiest teams in the Premier League. Manchester City, for instance, broke the league’s revenue record last season, amassing £708.9 million, surpassing Manchester United’s record set just weeks prior at approximately £629.3 million.

Clubs with fewer financial resources endorse the proposed regulations as they prevent the wealthier clubs from outrightly outspending them, thereby increasing the league’s internal competitiveness. In contrast, wealthy teams, particularly Manchester United, believe that the rules may diminish the league’s competitiveness on the global stage while also penalising teams for their financial success.

According to The Athletic, a spokesperson for the UK’s Professional Footballers’ Association said in a statement that they would “wait to see details” but insisted “we have always been clear that we would oppose any measures that would place a ‘hard’ cap on player wages. There is an established process in place to ensure that proposals like this, which would directly impact our members, have to be properly consulted on”.

The Premier League stated that additional specifics regarding the rules will be refined following the economic and legal evaluation, leaving room for the potential scenario where clubs might be permitted to exceed the designated cap if such expenditures are balanced out by sales. The Premier League will be aiming to present a comprehensive set of new financial regulations for voting at its AGM in June.

How Will these rules affect the competitiveness of the Premier League? 

The goal is to at least reduce the gap between the top and the bottom. The rules are designed to decrease the widening gap between the exorbitantly wealthy clubs and those at the bottom of the ladder.

However, top and quality players, who are the major differences on the pitch, will still prefer the top clubs based on history and pedigree, leaving the bottom clubs behind despite the imminent wealth gap reduction.

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