Newcastle’s potential new owners will have to adhere to spending restrictions to avoid Premier League points deductions and being hit by UEFA’s Financial Fair Play Regulations
- Newcastle’s potential new owners will need to follow spending regulations
- The club is on the verge of a takeover by a wealthy Saudi-led consortium
- A club can make losses of up to £26m over three years for UEFA competitions
Even if Newcastle’s takeover happens, spending restrictions in place at domestic level in the Premier League (EPL) and at UEFA level will make it difficult for the club to spend astronomical amounts on transfer fees and wages.
The EPL’s Profitability and Sustainability Regulations and UEFA’s Financial Fair Play regulations (FFP) were put in place to ensure that clubs become more self-sustainable by breaking-even in the medium to long term.
UEFA, the EPL and the Football League all have different regulations setting out the acceptable losses that clubs are able to make. In the EPL, a club can make ‘acceptable losses’ of up to £105m over three years, and the figure is €30m (£26m) over three years for UEFA competitions.
Newcastle’s potential new owners will have to make sure they follow spending regulations
Yasir Al-Rumayyan, the new face of Newcastle, is head of a multi billion pound consortium
Sanctions vary depending on the regulations but can involve potential points deductions in the EPL and spending, squad size restrictions and even expulsion from competition in UEFA competitions. Manchester City and PSG have previously fallen foul of the UEFA regulations and were restricted, among other things, in their transfer and wage spending for a number of seasons.
City have been handed a two-year ban from the Champions League for further FFP infringements, subject to an ongoing appeal.
UEFA FFP relates only to Champions League and Europa League club participation, and not to domestic leagues. However, even if the club has not qualified for the Champions League or Europa League, if it wishes to play in future years, it will need to adhere to the spending regulations now because UEFA will effectively look back three years to ensure compliance.
Current owner Mike Ashley has accepted a £300million deal to sell Newcastle United
The club is likely to target bigger names, but must adhere to EPL and UEFA regulations
The UEFA regulations do allow clubs in certain instances to spend over the £26m loss amounts through entering into a voluntary agreement (VA) with UEFA. This would allow Newcastle to potentially spend significant amounts on transfers and wages in the short term as long as a detailed business plan is in place to demonstrate to UEFA how the club will break-even over a longer period. A club owner who wishes to spend significant sums must guarantee such losses and commit funds as part of the VA. There will always be a risk that the VA business plan is not adhered to and monitoring by UEFA could still lead to disciplinary sanctions imposed on the club.
For EPL purposes, Newcastle can spend more than they earn (up to the £105m mark over three years) so long as their owners are willing to provide secured funding. Practically however, as the club will want to participate in UEFA competition, they will be required to adhere to more stringent UEFA FFP rules (i.e. a maximum of a £26m loss over three years).
It will be imperative as a result for Newcastle to substantively grow its commercial revenues via high value partnerships with apparel manufacturers and brands. The greater the revenue generated, the greater the permitted expenditure on transfers and wages.
Daniel Geey is a sports lawyer at Sheridans, a specialist in football law, and the author of ‘Done Deal’, an insider’s guide to the football business. Read more about Geey’s work here: https://linktr.ee/Footballlaw The fee for this article has been donated to the mental health charity, Milestone.