Everything you need to know about Profit and Sustainability Rules (PSR) and how they relate to Manchester United.
What are the Premier League’s PSR rules?
The Profit and Sustainability Rules system (PSR) was originally called Financial Fair Play, or FFP.
That term fell out of formal usage several years ago and that is now beginning to be reflected in most
fans’ vocabulary.
The fundamental pillars of the system remain the same, however.
Manchester United and their Premier League peers are allowed to post maximum financial losses of £105m over a rolling three-year period.
Of that figure, £90m must be guaranteed by an owner. That isn’t an issue for United, whose owners
have the capital to bankroll losses.
When is the Premier League’s PSR deadline?
The three-year monitoring period comes to an end at a club’s year-end accounting date.
For United and indeed most clubs, that is 30th June. That’s why we saw a flurry of trades from a
handful of clubs ahead of that date from clubs who were flirting with the upper limit of the PSR
threshold this summer.
After that date, the three-year monitoring period rolls over. From 1 July this year, the new monitoring
period covers the 2022/23, 2023/24 and 2024/25 seasons.
Which clubs have broken PSR rules?
Everton and Nottingham Forest are the only clubs to have officially been found to have breached
PSR.
Man City have been charged with a number of offences, some of which relate to their PSR calculation
itself and others to do with alleged obfuscation and inaccuracies in their financial reporting.
Chelsea meanwhile have been charged with historic offences dating back to the Roman Abramovich
era.
To date, United have never been charged with a PSR or FFP breach.
What is the punishment for breaking PSR rules?
The punishment for breaching PSR is somewhat subjective, and we don’t have a huge depth of
precedent to go off.
From the cases of Everton and Forest, we know that a points deduction and a fine are standard.
However, while the severity of the punishment typically reflects the extent of the breach, other less
tangible factors also influence the outcome, such as the level of cooperation with the investigation.
Additionally, the appeals process, as demonstrated in Everton’s case, can mitigate or even eliminate
the penalties.
How will PSR impact Man United?
Some analysts suggest that United were very close to the PSR limit for the three-year period up to the
end of 2023/24.
Others suggest that it is possible that they may actually have exceeded the threshold. That will depend on which costs the Premier League deems to be PSR-deductible.
Ultimately, PSR places and upper limit on what United can spend on player wages, transfer fees and
agents, as well as other operating expenses.
Which costs aren’t involved in PSR?
On paper, United’s losses over the last three financial years exceed the £105m threshold by quite a
margin.
However, infrastructure costs, youth development and community spending do not count towards a
club’s PSR calculation, nor does depreciation and impairment on tangible assets (i.e. not players, who
are classified as intangible assets).
For United, that means that the cost of, for example, upgrades at Old Trafford or Carrington will not
affect how much they can spend in the transfer market.
Additionally, there is some ambiguity about whether exceptional costs such as the £40m related to
Ratcliffe’s part-takeover earlier this year are PSR-deductible. In short, it isn’t an exact science.
What is amortisation?
PSR is based on amortisation as opposed to the headline transfer fees you see in the media.
Amortisation in football refers to the process of spreading the cost of a player’s transfer fee over the
length of their contract for accounting purposes.
To use a real-world example, Jadon Sancho signed for United for £73m on a five-year deal in 2021.
Let’s call it £70m for simplicity.
At the start of his contract, his book value was £70m but decreases incrementally over the course of
his contract – by £14m in each year.
He is now into the fourth year of that deal, meaning his book value has decreased by three-times
£14m. That’s £42m, so his current book value is £28m.
For PSR purposes, if United sold him for £30m tomorrow, their PSR calculation would register a £2m
profit.
If they sold him for £26m, however, it would show a £2m loss.
So, in PSR terms, it can actually be more effective to keep a player rather than sell them. Although
you obviously have to balance that with the player’s wage bill.
United’s amortisation bill was £173m in the last financial year. It is that figure that the Premier League
and UEFA take into account when determining their compliance with PSR.
- READ MORE: Manchester United Player Wages 2023/24
UEFA financial rules
UEFA are in the process of phasing in a new squad cost control ratio system that will eventually limit
clubs to spending 70 per cent of turnover on wages, transfers and agent fees.
United’s revenue was £648m at the last count, so they would have a limit of £453.6m.
Their wage bill was £331m, which would leave them with £122.6m to spend on amortisation. So, you can see they would have some adjustments to make.
For 2024/25, the squad cost control ratio is set at 80 per cent. There is also an allowable loss limit of
around £50m, although there is more flexibility here than in the Premier League system so long as the
club in question are deemed to be in good financial health.
Premier League squad cost control
The Premier League is currently trialling a UEFA-style cost control system on a shadow basis.
Essentially, this means the rule is not being enforced and Man United won’t be punished if they fall
outside the limit.
Instead, clubs are monitoring their spending to gauge future compliance and assess the advantages and
disadvantages of the system. The limit is expected to be set at a more lenient 85 per cent.
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