Stoke City and new financial rules as clubs search for edge

Clubs have voted to follow in the footsteps of Uefa and the Premier League by switching from profit and sustainability rules – which saw them monitored over a rolling three-year period – to a system called squad cost ratio.

In basic terms, this means teams are allowed to spend 85 per cent of their revenue on football costs such as player wages and transfer fees. There are a couple of caveats, such as owner investment of up to £33m over a rolling three-year period counting as revenue.

Transfer income is spread out too so that if you sell, for example, Harry Souttar at 10.59pm on a January deadline day, you don’t lose all that income in an SCR sense if you don’t spend it in the next minute.

It makes for a complicated business and keeps football finance expert Kieran Maguire very busy as he tries to explain the new world to supporters.

He spent more than an hour discussing all this with Cardiff City fans as they prepare to return to the second tier, and it was insightful as he went through the nuts and bolts.

He said: “The profit and sustainability rules allowed a club to lose £39m over three years. You exclude your infrastructure costs, academy team costs, women’s team costs, the work you do in the community (from those calculations). Now we’ve got something new; SCR instead of PSR.

“If you take the money from ticket sales and the TV deal – Championship clubs will get £12m from the TV deal – plus sponsorship and merchandise and so on. You take that, take a third of your player sale profits over the last three years, divide it by three and you get a number.

“Let’s say that’s £30m, you can spend 85 per cent of that on players. That’s going to be player wages and the head coach – not total wages. It’s going to be the way that transfers are dealt with. If you sign a player for £6m on a three-year contract it’s a bit like renting the player for £2m-a-year for three years. It’s that £2m that goes in. Agent fees gets thrown in.

“Then the owners come into it. The owner can put in up to £33m over three years but you can put in up to £15m in a single year. If the owner wants to put in £15m this year and £15m the next, in year three they can only put in £3m. That’s the way it works. That £15m gets added to the ticket sales and broadcast revenue and so on.

“Because it’s a new system, you’re not going to get penalised for past misdemeanours.”

Maguire said: “There are always winners and losers. Under the EFL rules, if you’re going to change something it needs a two-thirds majority. I think as recently as a month ago the EFL was concerned it wouldn’t get approval for the rules but I think there’s been a bit of a selling operation in place.

“The fact that you could effectively ignore what’s happened in previous years would be attractive to some clubs. The fact that owners can still put money in.

“I think there was also a concern that the current benefits for clubs in receipt of parachute payments would be amplified under the new system. I think there has been a beauty parade by the EFL saying they’ve still got an advantage but that advantage is not going to grow any further. Parachute payments and how we solve those is a bit like doing a Rubik’s cube in the dark. Every time you make a turn to improve it, you find something else gets worse.”

With every set of financial rules there have been clubs who have tried to push the boundaries or find loopholes that allow them spend as much as possible in the race to be in the top flight, stay there or fight for trophies.

It will be interesting to see how Championship clubs manage their allowances now, or how much they gamble, to try to get the edge over one another.

Maguire said: “I think that the average losses are over £400k-a-week in the Championship is indicative that an awful lot of club owners have been gambling on a year-on-year basis.

“For me, it’s not how much you spend, it’s how smart you spend. Brentford came from League One with a ground capacity of about 11,000 at Griffin Park – I know they’ve got a new stadium now but that’s on the back of the Premier League.

“They said they weren’t going to try to compete, they got rid of the academy, they started playing B team matches. They were in a strong position because they could pick up players at the ages of 16, 17, 18 who had been released by clubs in London, a city of eight million. That was smart. It was saying, ‘If we have an academy, Chelsea or Arsenal will take our kids at the age of 12 or 13 so let’s do the reverse and deal with their lads who have not got through the system but we think they’ve got prospects.’

“They have gone to the second division in France or Belgium or elsewhere and they’ve used their computers and algorithms to be smarter rather than bigger. They’ve now achieved five years in the Premier League without looking like going down.

“It shows they’ve got a strategy. As fans you have to buy into that and it can be really frustrating because we want promotion next year, we’re incredibly impatient as football fans. Given a choice between gambling £20m on this exciting 19-year-old from Portugal or signing three or four players from bigger clubs’ academies and giving them 12 or 18 months to bed in, we’d take the first. It feels good, instantly you feel that buzz of excitement.”

It is one thing to try to replicate the Brentford model and another thing to replicate it.

Maguire said: “Everybody is using Opta and Statsbomb so how do you get an edge? If you give me a piano it doesn’t make me a piano player. It comes down to having the staff at the club who can understand the data. It’s a glib thing to say but do you sign players who fit in? You might find a fantastic left-back but he doesn’t work next to a right-footed centre-half. It’s a case of asking about integration and how does he complement. It’s the back office work which is spectacularly dull but does reap the rewards.

“There’s a really good book by Ian Graham, a Liverpool fan who became Liverpool’s director of research 13 or 14 years ago. It was him who wanted Klopp to be manager and to sign a certain type of player. If you like that type of stuff, I think his book is absolutely brilliant. If shows that even the bigger clubs are prepared to invest in this and it’s all about getting the edge.”

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