Newcastle claim bid to join elite hampered by spending rules

Newcastle United manager Eddie Howe (right) has been restricted in the transfer market – Reuters/Carl Recine

Newcastle United believe Premier League spending rules prevent them from splitting the ‘Big Six’.

The club’s chief executive, Darren Eales, warned there was still a huge financial gulf between them and the established order in the Premier League, with new rules restricting sponsorship deals linked to club owners. Eales said a “rising club” like Newcastle is being prevented from closing the gap quickly enough to become the sustainable top-six team they aspire to be.

There is growing tension within the Premier League as Newcastle and other clubs do not believe there is a proper balance between the desire to protect clubs “from bankruptcy and those wanting to invest” to consistently compete for titles.

Newcastle increased its 2023 revenue from £180m to £250.3m but announced a loss of £73.4m over that 12-month period. That takes their combined losses, approved by an independent auditor, since the takeover to around £105m. But Eales insisted they comply with the Premier League’s Profit and Sustainability Rules and will remain so in the future.

“When the takeover occurred, the PSR regime was already in place,” said Eales, speaking to reporters to announce the publication of the latest set of accounts. “So, we’ve always known those are the rules and we operate within them. We will always be compliant.

“Those are the rules of the game, so to speak. But I think it’s also fair to say that if you’re trying to be a club with upward mobility, it becomes a big challenge. You have to do your business within that regime, it’s difficult. You have to be able to create that level of income to be able to spend on the team.

“There are many ways to have a team on the field that can perform and compete, but ultimately, the investment in the team and the size of the wage bill is an important factor in finishing in the table. The challenge for us as a club, and we accept and enjoy it, is that we have to be efficient and maximize our resources. We have to think in the medium and long term and we have to be strategic.

“We cannot think week after week, month after month, window after window. “If we are going to get where we want, which is to be among the top six sustainable clubs competing for trophies, we have to take a long-term view.”

Newcastle claim bid to join elite hampered by spending rulesNewcastle claim bid to join elite hampered by spending rules

Newcastle co-owner Amanda Staveley (centre) with her husband Mehrdad Ghodoussi (right) and chief executive Darren Eales (left) – Getty Images /Chris Brunskill

Eales confirmed that Newcastle are highly unlikely to make any big signings this month, which is why loan deals for players like Manchester City’s Kalvin Phillips are so attractive. And the PSR will also continue to curb its ambitions in the summer, even though they are owned by the richest sovereign wealth fund on the planet, the Saudi Public Investment Fund.

“There is always an argument about a lot of Premier League rules,” Eales said. “There is always the challenge of how to have a regime that protects football clubs from bankruptcy and have the ability for clubs to invest and have upward mobility.

“That’s always the tension you have. There will be a dialogue from all clubs in terms of: “Have we properly addressed that tension by allowing clubs to be competitive and protecting them against bankruptcy or overspending?”

The figures are striking: despite its 40 percent year-on-year growth, Newcastle’s revenue is dwarfed by the established order in the Premier League.

“To take a step back and look at the way the PSR calculation works,” Eales said. “There are ways to create some wiggle room.

“By increasing trading income and looking at our accounts today you can see that there has been a 40 per cent increase in turnover. That’s back-to-back years of 40 percent increases and that’s great from a projection perspective because it shows we have a lot of growth potential going forward.

“But to put it into perspective, we want to be one of the top six sustainable clubs and Tottenham’s last available accounts were £440m.” [revenue]. We’re at £250m, so it’s a big step up even to the bottom end of the top six. We have also seen that Manchester City have revenues of £710m in their latest accounts. “There is a long way to go to increase that income.”

‘January is not a good window to do business’

Newcastle fans hoping to see the team improve this month are likely to be frustrated. Eales did not rule out any income but any spending by Newcastle this month will reduce his ability to invest in the summer.

He said: “It’s a difficult window to get value when you’re halfway through the season and you’re trying to provide quality. The clubs are not willing, or are less willing in January, to lose these types of players. . Summer is always better from a value and planning perspective.

“Secondly, we have had several injuries and we have very good players who will return in the second half of the season. Like everything, we have to address it in the medium and long term, instead of reacting instinctively. For us, January is not a good window to do business. That doesn’t mean we don’t do any business, as we saw with Anthony Gordon last year. [But] It is difficult to perform any major surgery.”

Newcastle will have to sell players they would rather not lose to fund further investment to improve the quality of the team. This is probably an academy graduate like Sean Longstaff or Elliot Anderson, or one of the “crown jewels” like Alexander Isak, Bruno Guimaraes or Sven Botman.

“Increasing revenue is one way to create headroom with PSR,” Eales said. “The other, and it seems counterintuitive, but when there is an exchange of players.

“You have a £50m player at your disposal that you can sell and you bring in another player of the same value. What’s the point of doing that, you might say? It is risky because we already have that player here and we know what he can do, but if you sell a player for 50 million pounds and bring in an identical one for 50 million pounds, with the same salaries, but amortizing it in five years, player you are incorporating, that’s just £10 million a year. So you’re creating £40m of headroom.

“If you are changing players, you create more room for maneuver. We have seen many examples of this elsewhere. Philippe Coutinho at Liverpool and they brought in Allison and Virgil van Dijk. Jack Grealish leaves Aston Villa [to Manchester City] and they have reinvested and recharged. Declan Rice at West Ham [to Arsenal]. It’s simply the nature of the beast. In a PSR world, every player has a price.

“It’s hard to say specifically about certain players, but I can say that if we’re going to get to where we want to get to, sometimes you need to trade your players. “Whether it is the length of the contract of the player in question, or the offer is too good to refuse, it is necessary to recharge in certain areas.”

Newcastle will continue to grow its commercial revenue. There are more sponsorship deals in the pipeline and Eales stressed they will not bend the rules to close the gap more quickly.

“At some levels, it instills discipline because you have to plan the strategy,” Eales added. “We have the positive tailwinds of Sela as a shirt sponsor, the money from the Champions League and Adidas coming in in June, which will be a big leap for us as we can control our own retail sales and merchandise, something that had not been the case before.

“With the performances we have had on the field and the buzz in the club, we are seeing more and more commercial partners who want to be part of this journey. It’s a snowball going down a hill. The fact that we do better on the field helps us with business partnerships.”

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