Premier League Spending Cap

For a long time now, football fans have been decrying the state of finance in the game. One seldom has to look far to find examples of the chaos and heartache wrought by financial mismanagement.

This includes going into administration, as has happened to Derby, Bury, and Wigan, or point deductions for breaching Financial Fair Play like in the cases of Everton and Nottingham Forest. Since the transfer of Neymar to Paris Saint-Germain for an eye watering €222m in 2017 the market has spiralled to the point of lunacy.

Not too long ago, Extra Time Talk previously looked into the dark side of transfer fees. We have known and said for a long time that this cannot go on, and finally the football regulators have acted.

The Proposal

Allow us to take a look at exactly what’s being proposed. In its simplest form, the proposal is to set a limit on clubs spending from the 2025/2026 season. The limit itself would be a multiple of the TV revenue generated by the league’s lowest-earning club. The multiple was initially suggested as 4.5, but rumours are that it has increased to five.

So, what does this mean in practice? If it was in effect last season, Southampton would have been the lowest earners at 103.6m. Setting the cap at five times that value would be 518m. For reference, that would have put free-spending Chelsea in breach.

If the cap was lowered to 4.5 times, then Manchester City would have also been in breach, but the rest would have remained in compliance. The fact the proposed cap includes wages, agent fees, and transfer fees is an important clause. The majority of transfer expenditures in the modern market are spent on player wages.

The Response

The response to the proposal seems positive from the majority of fans and clubs. However, as expected, there were some outliers. The initial vote was taken at the Premier League shareholders’ meeting in April and was passed by the majority of clubs. Manchester United, Manchester City, and Aston Villa all voted against the spending cap, while Chelsea abstained. Opponents of the plan are concerned about damage to the Premier League product.

The fear is that they could end up snookering themselves if this stops them from being competitive in the global market like the time they unilaterally changed the transfer window closing date. In that example, the league was forced to quickly reverse its position and fall back in line with continental trends.

Unlike in American sports, however, a continental salary cap is probably unrealistic for a myriad of reasons. The Professional Footballers’ Association may also have something to say if the salary cap starts to affect players’ salaries. An unintended consequence could be the increase in the number of players that represent themselves, so as to carve out a bigger chunk of the pie.

The Verdict

As always with these things the devil is in the details. Thus, we will probably have to wait a while to see if the system works. This is probably the Premier League’s last great attempt to stave off the introduction of an independent regulator. In recent days, Richard Masters has come out with a series of counter-proposals and objectives to the government’s plan to introduce the independent regulator.

Some would argue that the FA has had ample opportunity to get their affairs in order, from clubs going bust, to the “fit and proper owners test.” Whatever ends up happening, it is blindingly obvious that the current system is not fit for purpose.

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