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Newcastle have £100m PSR plan to trump Man United as Darren Eales reveals all
Newcastle United’s ambitions under the mind-meltingly wealthy Saudi Public Investment Fund have been anchored by the Premier League’s Profit and Sustainability Rules.
The system, which limits clubs from losing more than £105m over a rolling three-year period, means the likes of Man United and Liverpool have a huge – some would argue, insurmountable – head start.
Newcastle managed to dodge a PSR breach for the three years up to 2023-24, thanks partly to the last-minute sales of Yankuba Minteh and Elliott Anderson.
The exit-bound Amanda Staveley and Mehrdad Ghodoussi have done everything in their power to increase commercial income as another PSR workaround.
But until their is dramatic reform to PSR or the Premier League’s associated party transaction rules, the pair’s successors will be fighting an uphill battle to ensure sustained success at St James’ Park.
However, in a rare media appearance, Newcastle CEO Darren Eales recently claimed Newcastle are entering a “new era” in terms of the club’s PSR position.
What does this mean in practice? TBR spoke exclusively to Liverpool University football finance lecturer and Price of Football author Kieran Maguire to find out.
Newcastle to revamp player trading model
While PIF have been shackled by PSR, their net spend has been among the biggest in Europe since their takeover in October 2021.
That is thanks in part to the PSR headroom that they inherited from Mike Ashley, whose frugal approach enraged fans but mean they had major flexibility under Premier League spending rules.
Their net spend in 2022-23 and 2023-24 was around £236m. And amortisation costs mean that they will be counting the costs of those signings for several years to come.
For this reason, Maguire projects that Newcastle will be forced to emulate some of their elite Premier League peers by reinforcing their spending with more sales.
“What we will see is a transformation from a pure buying club to a trading club,” he said.
“If you look at some of the big clubs – Man City, Chelsea, Liverpool – the level of sales they generate is huge.
“Chelsea have made more money from player sales over the last decade than they have from ticket sales, for example.
“What that means for Newcastle is that fans will see the club reposition itself. They will buy talent that they then go on to sell.
“If you look at the sales of Anderson and Minteh, I think it indicates a change in the mindset of the club. You have to commodify the talent.
“You have to have money generated from player sales as part of your overall calculation, especially if we move towards a UEFA PSR model.
“It is matchday revenue plus TV money plus commercial plus player sale profit that becomes your top line, then you’re looking at 70-85 percent which will be your budget.“
How much PSR headroom do Newcastle have?
In his Q&A session with reporters, explained that the £70m loss Newcastle made in 2021-22 was no longer part of the club’s PSR calculation, which now encompasses 2022-23, 2023-24 and 2024-25.
With Champions League revenue for 2023-24 and Newcastle’s lucrative new sponsorship deal with Adidas in 2024-25, they should have more room for manoeuvre in the transfer market this summer.
Without seeing the accounts for 2023-24, which won’t be released until January next year, it is impossible to say exactly how much headroom they will have to spend under PSR.
But with soaring revenue, Maguire is confident Newcastle fans can expect to see significant additions made this summer.
“Eales has indicated that revenues above £300m are feasible. When you factor in the player sale revenue, that gives them some flexibility.
“I am always reluctant to give an individual figure because we don’t know what the player wage bonuses were for Champions League qualification, for example.
“If all the focus is on the top line, it ignores the fact that amortisation has gone up and so on.
“However, I think they are in a position this window where they can buy this summer, especially if they are buying players and amortising them over the course of five-year deals.“
St James’ Park expansion: How can Newcastle bridge gap with Man United and co?
Newcastle’s matchday income climbed from £28m to £38m between 2021-22 and 2022-23 but is still oceans apart from the biggest earners in the Premier League.
Tottenham and Arsenal now generate over £100m per season, while Liverpool are moving towards that mark.
Man United meanwhile earned £136m at the last count and have ambitions to expand and upgrade Old Trafford.
Stadium upgrades – either in the form of an expansion or a total rebuild – have been mooted at St James’ Park for a long time and their cost would not count towards PSR.
Eales revealed that the club are still waiting on the results of a feasibility study and will consult fans before they proceed.
With several options on the table, Maguire assessed the various routes available to PIF and how transformative they could be in Newcastle’s bid to close the gap on the likes of Man United.
“Newcastle are presently £100m behind Man United in terms of matchday income,” he said.
“Given we are operating in a cost-control model, that has to be addressed.
“Tinkering with St James’ Park, maybe adding on an extra tier, would not make a huge material difference to matchday revenue.
“I think therefore that you can either take the Spurs approach and build a new stadium on the existing site. But then where are they going to play for two or three seasons?
“We’ve seen Real Madrid take a different approach where they have changed the skeleton of the stadium.
“The best-case scenario is for Newcastle to have a stadium which is in the centre of the city. They do have additional property which could allow them to expand the capacity.
“There isn’t a huge range of options for monetising concerts and so on at St James’ Park, so redevelopment is more attractive in that regard.
“My personal view is a brand new stadium, even if it is on the same site, would be the best option. We’ve seen with Spurs, the option to have more hospitality and up-market experiences can be transformative.
“Spurs have gone from being a £35m-a-year matchday club to being a £110m-a-year matchday club.
“I understand that hardcore fans don’t like the gentrification of the team and stadium. But if you want to be competing at the top tier, that is the price you pay.
PIF want power and influence at Newcastle
It is no secret that PIF’s ambitions at Newcastle differ from, say, FSG’s at Liverpool, where the club is seen as a capital appreciation project.
Eales suggested as such in his Q&A session, observing that Newcastle are one of the smallest investments in PIF’s portfolio but, in terms of profile, one of the biggest.
Maguire was prosaic when asked about the sovereign wealth fund’s ultimate strategy.
“They want soft power and to increase PIF’s profile, they are a fantastic option.
“As a flagship project, Newcastle can only assist their networking and improve their standing.”