Swiss Ramble is an account on Twitter focusing on finances and deals primarily with those involved with football. Back in October, after the Newcastle takeover, Swiss Ramble posted a lengthy thread explaining the intricacies of the Financial Fair Play rules and how Newcastle could navigate them.
I will pick out the more salient points here (mostly the ones I actually understand), but if you’re after all the ins and outs I highly recommend reading the thread for yourself, but bear in mind that this thread was posted in October, before the Magpies’ spending spree in January, so the actual figures will be different now.
What the whole thing boils down to is this: We maybe do owe Miserly Mike some thanks for our outstanding run at the top of the Balanced Books Championship as running the club with such minimal debt has put us in a good position with regards to FFP.
“Spending ability will be limited by the Premier League Profitability and Sustainability rules. These allow a £5m loss a year, which can be boosted by £30m equity injection, giving allowable losses of £35m a year. This works out to £105m over the 3-year monitoring period.”
“Newcastle made £38m pre-tax profit over 3 years up to 2020 (latest published accounts), but they can make a £30m adjustment for “good” expenditure (depreciation, women’s football, youth development & community). Adding this £68m to £105m allowable loss gives £173m possible spend.” Given Newcastle’s January expenditure which was said to be around £95m that leaves us £78m to play with …. or does it?
The way transfer fees and wages are calculated on FFP isn’t just a case of simple deduction from a set budget. The fee paid for a player is divided across the length of the contract the player signs. In short, if a club paid £100m for a player on a five year contract, that goes on the books as £20m each year (plus wages etc), which again leaves more in the pot.
Fans should curtail their excitement, however, as we have to remember that our owners are all experts in finance and will be extremely savvy when it comes to parting with money, so are likely to keep expenditure low in the short term and ramping up the spending in line with the club’s growth – getting into Europe will likely loosen the purse strings more as that will also bring in more revenue.
Thankfully, spending on infrastructure doesn’t affect what we can spend on personnel, so any improvements to training facilities, stadium, academy and women’s teams will not affect the transfer budget.
There is a lot more detail in the Twitter thread which pertains particularly to Newcastle and it is definitely worth a read if you’re a fan of figures, graphs and comparisons to other clubs.