As Premier League clubs discuss adopting new financial controls to replace Profit and Sustainability Rules (PSR), Spurs are in a strong position compared to their rivals
With 10 games remaining of this Premier League campaign, Ange Postecoglou’s Tottenham Hotspur are well positioned to make a late rally for a Champions League berth next season.
While Spurs suffered a somewhat chastening defeat at Fulham on March 16, the 4-0 win at fourth-placed Aston Villa six days previous was significant, with just three points and one place separating the two sides, with Spurs having a game in hand on Villa. Champions League football next season would be extremely valuable for Spurs.
From the start of next season’s competition, the new ‘Swiss Model’ system will be introduced, meaning more teams, more games, and more money. Spurs have put a great deal of emphasis into creating a healthy business in recent years; the jewel in the crown, of course, being the £1bn stadium build that was completed in 2019.
The Tottenham Hotspur Stadium has the potential to be a catalyst for the club in the coming years, especially at a time when revenue growth is vital in relation to how much clubs will be able to invest into on-pitch talent in the coming years, something that has for so long been intrinsically linked with competitive success. Spurs fans have had to swallow fallow years in terms of that success for a long while now.
But the club is one of the select few in European football that has the tools to be able to navigate the next decade or so and spend on achieving trophies – a lucrative business. Earlier this month, Premier League clubs convened to discuss the ‘New Deal for Football’ around how to give a more equitable share of revenue to the EFL.
For half the member clubs, they wanted to know what the new financial regulations that are set to replace the current Profit and Sustainability Rules (PSR) would look like before taking such a vote. It is anticipated that the Premier League will abandon the current PSR model, which has been the focus of much scrutiny and attention over recent months following two charges against Everton and one each against Nottingham Forest and Leicester City.
Much of the talk has been around moving to a model which is more aligned with what UEFA has at present – the squad cost ratio rule – where how much a team can spend is in line with the player and head coach wages, plus amortisation costs, against revenue. UEFA’s squad cost ratio rule was introduced for the 2022/23 season and gave clubs a three-year window to comply, with allowable figures of 90 per cent in year one, 80% in year two, and 70% in year three.
Quite how the Premier League’s own version would work has not yet been decided, with some reports suggesting that an 85% figure may be allowed for those outside of European competition, who will be bound by the 70% that UEFA has in place.
Speaking to a Parliamentary Select Committee earlier this year, Premier League CEO Richard Masters said: “We have some proposals out for consultation with our clubs about moving and aligning more with the UEFA system. UEFA has spent two years changing its financial regulations away from what used to be FFP to something that is called ‘squad cost ratio’, which is more of a wage-to-turnover calculation. “Over time, we have historically aligned with UEFA because seven or eight of our clubs are in European competitions, we need to consider whether that is an appropriate move for us, how we do that, and when.”
That ‘when’ appears to be imminent.
But with club finances among the 20 member clubs varying wildly, what it would look like for individual clubs will be very different, although Spurs are almost certain to be in a strong position heading into a new era of financial controls in the Premier League and European football.
While the precise nature of the Premier League’s own version of a squad cost ratio has yet to be determined, the current UEFA model, which the Premier League is likely to largely align itself with, adds together the wages of players and head coaches, player amortisation and impairment (the write-down of player book value), termination payments made to players and head coaches, and agents fees. Those figures are then divided by a club’s operating revenue, the profit made from player sales, and any other transfer income, for instance, loan fees received for players.
So how would Spurs fare?
It is important to point out that Spurs have yet to publish their financial accounts for 2022/23, although some hints have been given through the already published reports of Deloitte’s Money League and UEFA’s Financial Report.
With regard to wages of players and head coaches based on the 2021/22 financial year, according to figures presented by football finance expert Swiss Ramble, Spurs had a wage bill of £209m for 2022 with £178m of that going in the direction of players and head coaches. The ‘relevant’ wage figure was some £180m behind Manchester City’s figures for the 2022/23 period (£359m), with Liverpool (2023) next highest at £317m (2023)
In terms of amortisation costs on the balance sheet, which is how transfers are accounted for by dividing the guaranteed transfer fee received over the length of the contract (now capped at an allowed limit of five years), Spurs are by some way behind the Preier League’s so-called ‘Big Six’ clubs, with the club’s amortisation costs at £80m for 2022 compared to Manchester United’s £170m. Both Newcastle United (£87m) and Aston Villa (£93m) had higher amortisation costs than Spurs.
Player impairment, which allows for factors to be taken into account where a player’s marketability has been severely diminished, through bad form or a serious injury, was at £2m for Spurs. When it comes to severance costs, here is where the 2022 accounts won’t tell the full story, with the cost of Antonio Conte’s sacking to be reflected in the 2022/23 financial year, which is due imminently.
All these figures, according to Swiss Ramble’s data, give Spurs a squad cost of £259m. That term ‘squad cost’ isn’t related to the cost of assembling the side; it is merely all the costs associated with the running of the football side of the business with direct relevance to what happens on the pitch being added together to be divided against operating revenue, player trading profit, and other transfer income.
Spurs’ revenue for 2022 stood at £443m, although the recently published Deloitte report predicts revenues of £541.6m for 2023, comfortably a club record and the first real major step forward in realising the potential of the new stadium.
Concerning player trading profit, UEFA’s regulations allow for the best-performing period of 12, 24, or 36 months to allow for the volatility of the transfer market. In Spurs’ case, the best profit achieved over either of those was £19m. That makes for £463m in adjusted revenue.
That makes Spurs comfortably the best-performing club against the current UEFA squad cost ratio rules with a figure of 56%, which is 4% better than the next best-performing club, Manchester City.
Any new financial regulation will likely do little to address what is seen as the competitive imbalance between the ‘Big Six’ and the rest. Whether or not the different 85% figure for clubs outside of European competition, and the 70% for those in European competition is implemented remains to be seen, and there may be some upset caused if clubs who qualified for the Europe Conference League were bound by the same 70% figure as clubs in the Champions League given the enormous difference in prize money on offer.
But for Spurs, they will find themselves in a position where they have significant room for manoeuvre and remain compliant in the eyes of both the Premier League and UEFA, to a far greater degree than some of their rivals.
The actual squad cost for 2022 of £259m would stand at £324m based on the current figures, meaning the club would have room to increase spending on wages and in the transfer market, significantly, in the years to come.
Using the 2023 figures when they arrive will likely improve this picture once more, as will the potential of Champions League football next season. With Tottenham’s revenue growth now placing them at eighth in world football, above Chelsea and Arsenal and having closed the gap on Liverpool, the next few years could herald something bigger for Spurs in terms of their ability to truly compete.
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