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Kieran Maguire issues verdict on Newcastle going ‘all in on one huge transfer’ amid £100m twist
Newcastle United have narrowly avoided a PSR breach for 2023-24 – but where do they go from here?
In the Mike Ashley era, Newcastle fans had little reason to be up to speed with the intricacies of Premier League’s spending rules.
The club lived within their means during the high street billionaire’s reign, breaking even across his 15 years on Tyneside.
Ashley’s frugality meant FFP (now Profit and Sustainability Rules, or PSR) was never a relevant concern, much to the frustration of supporters eager to see more ambition in the transfer market.
That sense of stasis has been obliterated under the Saudi Public Investment Fund, whose huge investment has already yielded Champions League qualification and first cup final in over two decades.
That success has come at a cost, however. And now, Newcastle fans know far more about PSR than they ever expected or wanted to.
The club are trying everything – from lucrative commercial drives to account-boosting quasi-swap deals – to lift the anchor that ties spending to revenue.
For the three-year PSR assessment period up to 30th June 2024, they got over the line. But they must now find a way to balance their immediate ambitions with their long-term vision.
Significantly, The are reporting that PIF will give new sporting director Paul Mitchell and manager Eddie Howe a £100m transfer budget this summer.
TBR spoke exclusively to the Price of Football author/podcaster and University of Liverpool football finance lecturer Kieran Maguire to explore how this news aligns with the club’s wider financial landscape.
Sales are needed
In terms of concrete transfer talk at St James’ Park this summer, the emphasis has been more on outgoings than incomings.
As well as the sales of Yankuba Minteh and Anderson, Miguel Amiron and Callum Wilson have been linked with the exit door.
More concerningly, so too have Alexander Isak, Bruno Guimaraes and Anthony Gordon, the club’s most prized assets.
The reality for Newcastle – or indeed for any side outside the Big Six, who average twice as much revenue as Newcastle’s peer group – is that a successful player trading model needs both acquisitions and sales.
“For all of the faults of Mike Ashley, he left behind the legacy that whoever bought club had a huge amount of headroom to significantly upgrade the level of expenditure at the club in terms of PSR,” says Maguire.
“That’s what we’ve seen from PIF. I think they have got the balancing act right. What you don’t want to do is go all in on one huge transfer.
“They’ve signed Lewis Hall from Chelsea, but they have to ‘box clever’. And that’s not necessarily a bad thing.
“Their initial strategy when the acquisition took place was consolidation to avoid relegation.
“They spend a lot of money that season, 2021-22. Player purchases were £150m, incomings were £7m. The following season, purchases were £153m, incomings were £3m.
“These figures are from the accounts. You’ve got a net spend of £292m there. That cannot go on.
“The whole point of player trading is that it involves both purchases and sales. For fans, the focus is on purchases. But the club has to start thinking about the exit door.
“They sold Minteh to Brighton, which is a good piece of business and a fantastic return. That is the way the club is going to have to go forwards.
“They have the people behind the scenes with the skills to do that.”
Newcastle’s youth development: A silver bullet for PSR?
Youth development, which encompasses staff costs and infrastructure, is exempt from a club’s PSR calculation.
What’s more, the sale of academy graduates, as seen with Anderson’s £35m move to Nottingham Forest, count as ‘pure profit’ under PSR – i.e. they have no original fee to offset against their sale price.
Newcastle have also increased investment in their academy since PIF’s takeover, leading many to suggest their long-term strategy is to create a Chelsea-style production line to circumvent PSR.
Understandably, Maguire isn’t entirely comfortable with such a clinical approach to youth development, but he can understand why the likes of Newcastle would go down this route.
“What we’re seeing is the commodification of children, which is a horrible phrase, but I use it on purpose because I want to make it clear, this is what Premier League clubs are doing.
“We have grown men seeing kids as trading chips. I think that’s disturbing, but it’s increasingly what we’re witnessing.
“You’ve only got to look at Chelsea’s approach. The number of academies they have that are nowhere near London… But they act as talent hubs.
“Because of the changes in the EPPP rules. hoarding talent is now very much the done thing. You only have to get one in 1,000 players who are worth £20-30m and it’s paid for itself.“
Newcastle’s multi-club ambitions
The multi-club model is in vogue at present, with the majority of Premier League clubs operating in some form of ownership networking involving two or more clubs.
Keen to emulate the success of Man City’s City Football Group, Newcastle have been explicit about their ambitions to launch a multi-club empire.
Amanda Staveley has admitted that the club has looked at clubs in Europe and further afield with a view to a potential acquisition for the associated accounting and commercial benefits.
But most importantly, Newcastle can make use of the multi-club model to overcome recruitment challenges in the post-Brexit environment, claims Maguire.
“Brexit has not been good from a footballing point of view,” he says.
“You can’t now sign 16 and 17-year-olds from within the EU, which means there is a greater chance they will go to one of the more senior clubs there. Having a satellite club can act as a holding area.
“I think Newcastle can develop on a global level here. They can go for the centres of excellence approach like Chelsea, but other clubs have first-mover advantage there, so I think it would be difficult.“
Quasi-swap deals: Is ‘fair value’ a myth?
Premier League clubs spent £245m on quasi-swap deals to beat the 30th June PSR deadline.
These deals, in which two players exchanged for similar values in separate deals in order to provide a short-term accounting boost, are entirely legal.
However, the Premier League made headlines when it wrote to clubs to remind them about their obligations to conduct these deals at fair market value.
That was amid accusations that the likes of Newcastle were inflating the value of outgoing academy players in order to secure maximum PSR headroom.
But that line of attack is nonsense, claims Maguire, and the Premier League has no recourse to close this alleged ‘loophole’.
“I think the Premier League is on a hiding to nothing with regards to this,” he said.
“There is no appropriate value or footballer. The very fact that Newcastle United have just sold somebody for £30m to Brighton who they bought for £7m last year and who never played for the club is indicative of that.
“And Brighton have no need to manipulate anything in the accounts, remember.
“And you can say, ‘well, this is based on our assessment, which is made in terms of the player being the right fit for Club X’.
“Also, the player might be worth more to Club X because they need a left-back who is really good at turnovers and so on.
“If you’re an accountant, you just have to say: ‘fair enough.'”
- READ MORE NEWCASTLE FINANCE NEWS: Newcastle owners PIF working on 14 deals as off-pitch masterplan revealed
Newcastle can form voting bloc with fellow PSR-threatened clubs
The Premier League’s constitution means that the only way that there will be changes to PSR is if a two-thirds majority of clubs vote for it.
That means a group of seven clubs can effectively veto any reforms.
Significantly, Newcastle were one of six Premier League clubs to attempt quasi-swap deals before 30th June.
So, theoretically, that group would only need the support of one other club in order to ensure that the there are no amendments to the rules on quasi-swap deals.
And that is a realistic prospect, according to Maguire.
“You saw unusual alliances forming in last year’s votes. Sheffield United’s voting was aligned with Newcastle’s. Now, if you look at the owners’ passports… There’s a connection there.
“Other clubs will also be taking the approach that it could happen to them in the future. Why vote for something that could come back to bite you in 12 months time?
“One club has written to the Premier League to complain, but the very fact that it was one club is indicative of the general consensus.”