Premier League discussing rule change that FSG and Liverpool have pushed for
John Henry has long been an advocate for greater cost control in the Premier League
Liverpool will send representatives to discuss potential changes to the Premier League’s profit and sustainability rules (PSR).
The Reds will be one of the 20 Premier League shareholders to discuss proposals for change with League chiefs, with one of the main items on the agenda for the two-day meeting, which begins on Tuesday (February 6), being whether to adopt UEFA’s method of cost control and abandon PSR in its current form.
While no vote will be taken this week, the early discussions will seek to try and find common ground on the thorny issue of cost control in the Premier League, something that Liverpool principal owner and Fenway Sports Group supremo John W. Henry has been vocal on in the past.
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At present, Premier League clubs are permitted to lose up to £105m over a three-year period. That figure is permitted if there is a commitment to ownership to meet it, and there are allowable losses, with such things as investment into club infrastructure, community, the academy, and the women’s not counting towards the £105m limit.
Liverpool have no concerns over the PSR limit, with the club’s strong balance sheet meaning that they and Tottenham Hotspur have the greatest room among Premier League clubs when it comes to PSR. Spurs’ strong position, despite heavy debt and significant losses in recent seasons, comes from the fact that much of the losses can be attributed to investment into the £1bn Tottenham Hotspur Stadium they moved into in 2019.
But the current PSR regulations have impacted the Premier League significantly recently, something that has had a knock-on effect when it comes to the January transfer window, with just £100m spent by Premier League clubs when compared to 12 months previous when £715m was spent.
The 10-point deduction handed down to Everton in November in relation to the 2021/22 accounting period following an independent commission, followed by the charges against the Toffees and Nottingham Forest for the 2022/23 period that were delivered in January, have sparked concern among Premier League club chiefs, and clubs have moved to be more conservative with their spending in the January window for fear of breaching PSR or leaving themselves in a tight spot for the next financial year, potentially impacting summer spending.
The Premier League will begin dialogue with clubs today on a possible shift from PSR to something more in line with UEFA’s squad cost rule, where a limit of 70% is imposed when it comes to allowable spending on wages and transfer fees in relation to turnover. At present, Liverpool’s wage-to-turnover ratio sits at around 63%, according to projections for revenue made as part of the Deloitte Money League report last month.
One of the suggestions is that the Premier League adopt a slightly different approach than UEFA, with an 85% limit afforded to member clubs outside of European competition and not in receipt of the lucrative sums that come with it, the aim being to improve competitiveness across the division.
What it is, in effect, is a form of wage control, and that is something that FSG chief Henry has been keen to see introduced into the Premier League for some time.
Speaking exclusively to the ECHO last year, Henry said: “You are right that there are ever-increasing financial challenges in the Premier League.
“The league itself is extraordinarily successful and is the greatest football competition in the world, but we’ve thought for some time there should be limits on spending so that the league doesn’t go the way of European leagues where one or two clubs annually have little competition.
“Excitement depends on competition and is the most important component of the Premier League.”
For Liverpool, the model will need little to no adjustment, the club is already well within the boundaries for compliance, whether it be through PSR rules or UEFA’s squad cost ratio. But for some of their rivals, there is a potential problem in how they progress, with some, such as the likes of Chelsea, likely to have some work to do to abide by both current and potential regulations.
When FSG acquired Liverpool in October 2010 there was the expectation that greater cost controls through stronger regulation would be introduced, but the teeth weren’t as sharp as the Reds owners hoped they would be.
But Henry and Co. may get what they had been seeking all those years ago in some form or another if Premier League clubs decide that this is the way to go. With so many of the League’s clubs in European competition, and with CEO Richard Masters having a desire to see some uniformity and alignment across the Premier League and UEFA, it could well be.