The recent changes in the realm of football financing will unnerve Tottenham chairman Daniel Levy, one of the Premier League’s strongest proponents of PSR.
Levy, the club’s most senior executive and owner of 29% of Spurs, has long guided the North London team toward self-sufficiency. When Spurs moved into the gleaming Tottenham Hotspur Stadium in 2019, they had achieved a total profit of £434 million between 2009 and 2019.
Since then, Spurs have suffered four straight losses totaling £307 million, even though during that time the epidemic destroyed the team’s yearly matchday revenue of more than £118 million.
But in accounting, profit is ultimately an illusory notion. It consists of non-cash components like amortization and depreciation. Additionally, PSR (Profit and Sustainability Rules, or Financial Fair Play, to use the old terminology) does not account for depreciation on the Tottenham Hotspur Stadium, which is presently over £70 million annually.
When these and other PSR-deductible costs are taken into account, Spurs is one of the few Premier League teams with a higher PSR capacity, or the ability to spend within PSR. Spurs are among the best managed teams in Europe, at least in terms of business, according to a number of indicators.
Therefore, any change to the current financial regulations is the last thing that Levy and ENIC need.
The implications of the Leicester City PSR verdict on Tottenham.
Many pundits were certain that Leicester City would be included to the regrettable group of teams that the Premier League will punish for violating PSR in 2022–2023 along with Everton and Nottingham Forest. But the Premier League has since issued a statement reaffirming that an impartial appeal board has approved Leicester.
Leicester has acknowledged exceeding the three-year £105 million PSR barrier by £24 million, resulting in a total PSR loss of £129 million, as has been widely reported.
However, because they rescheduled their accounting period, the Foxes were effectively exonerated on June 30, 2023, despite having been demoted by that date.
Therefore, the appeal board decided that the Premier League lacked the authority to tax Leicester in the same way that they would have charged Tottenham or any other elite team in a similar circumstance.
The Premier League and EFL teams are furious over the verdict, which may completely destroy the PSR system at a time when it is constantly being scrutinized.
Spurs will be especially interested in the following passage from the Premier League’s statement following the decision:
“If the Appeal Board’s ruling is accurate, it will have made it possible for any club that above the PSR level to escape responsibility in these particular situations. It is obvious that the regulations do not intend for this. Maintaining the idea of fairness necessitates the Premier League’s ability to apply its regulations consistently. The League will now think about what other steps it can take to guarantee this.”
In fact, Levy and ENIC are among the Premier League’s poorest owners—especially when compared to the other members of the so-called “Big Six.”
Because of the PSR system’s anchoring effect on teams like Newcastle United, they are currently able to compete with clubs whose owners are significantly wealthier.
To eliminate PSR, a mere 14 teams must vote in favor of doing so, and should the Leicester case further undermine public confidence in the system, Spurs may suffer as a result.
Spurs might succeed with the new PSR structure.
Investors find Spurs’ cost management to be highly appealing, as the team has the lowest salary to turnover ratio in the Premier League. The only teams with more yearly income are Liverpool and the two Manchester clubs, and Spurs is growing faster than any of its competitors.
Levy is seeking to invest in Spurs and believes the team is worth £3.75 billion, so these accomplishments will be a key selling factor. These are also reasons why Tottenham will probably prosper the next season when the Premier League switches to a squad cost ratio structure.
Premier League teams are supposed to spend no more than 85% of their revenue on wages, transfers, and agent fees, in line with the rules of UEFA’s PSR system.
With £550 million in income during the previous season, Spurs had a £467.5 million PSR budget. For comparison, Spurs spent £282 million on salaries and amortization during the previous season. They would have more flexibility as a result than nearly any other team in the new PSR era.
It is another matter entirely whether the owners, and maybe new minority investors, are ready and able to finance further spending.
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