By Tony Attwood
It has hardly been reported anywhere much, but the salary cap (technically known as Short Term Cost Controls – STCC) will be running in the Premier League from the forthcoming season, and will in fact run for the duration of the new TV financial arrangements.
It will run alongside the Premier League Profit and Sustainability rules which state that clubs may not lose more than £105m over three consecutive seasons.
The aim of the STCC, is a sort of limited Financial Fair Play, and was introduced when attempts to bring in proper FFP were abandoned by the Premier League, following outright rejection by Chelsea and Manchester City. With Uefa in turmoil and no real will on their part to fight that fight, the notion has fallen apart.
All credit to the Daily Mail (now that’s not a phrase you will often see here) then for publishing an article on the subject back in March. They said, as part of their headline “mild restrictions won’t hit high earners at top clubs” which is just about right.
The STCC arrangements only affect the TV money, so commercial revenue and of course the money from sponsors is not part of the deal.
Under the arrangements, the restrictions for the coming three seasons apply to clubs with player wage bills in excess of £67m (rising by £7m for each of the following two seasons), which I think more or less includes everyone although except possibly Burnley, Middlesbrough and Hull. But those clubs can, if they wish, can increase their salary spend to £67m.
The average wages bill in the Championship is around £8 million a year. This can be compared to the PL regulation that stops clubs increasing wage bills by more than £7m from the previous year. (That shows the gap between the two leagues).
Or if they wish, they can show that their aggregate player wages bill has increased by less than £19m from a 2012-13 base season. (More on that below).
The point is that clubs can exceed the £7m wages limit if they generate increased revenue from commercial income, player trading and Match Day income. But, as we have seen with the case of Leicester in the past two years, the notion of “commercial income” can get a little murky where there seems to be a front organisation for goodness knows what behind it.
When Untold first started writing about Leicester’s interesting way of handling sponsorship we were, apart from the Guardian, pretty much on our own. But since then, interest in the Leicester approach to marketing has grown and not just in football circles. An article in Marketing Week mentioned the enquiry into the oddities of the matter.
Campaign, another major magazine in the marketing industry went further in its piece noting the key point that “under the rules, losses are not allowed to be reduced by sponsorship money, where the amount paid is above market value.”
One interpretation of all this interest is that no one really cared too much what deals Leicester got up to in the past – because all the focus was on the way they manipulated their declared income while in the Championship. That is only an issue they will have to account for as and when they are relegated back to the Championship. But in the past year the investigators began to dig a little further into the very strange world that exists behind Leicester’s facade.
However Leicester is now of interest, as following the fact that a number of clubs have been sniffing around Leicester players once they found that the players had very low buy out clauses in their contracts, Leicester have been bumping up salaries right left and centre. A very rough estimate suggests that the renegotiated salary bills by Leicester this summer come to around £20m additional salary – and that could be an issue.
Of course I don’t know the truth of the matter about Leicester, and Untold certainly doesn’t have the resources to investigate a PL club; all we can do is notice a little flurry of articles that began to appear from April on, and the reports of dramatic pay rises offered in order to keep players in place. How are Leicester going to stay inside the Short Term Cost Controls?
So to summarise thus far, the key issue is that PL clubs cannot increase the salary bill for players by more than £7m over last year unless the money comes from its own revenue streams. The difficulty is when the sponsorship stream of income (which is allowable) is paid at something that the market experts would consider to be over the odds (which is the allegation against Leicester, made because its marketing company is obscure and secretive).
The most notable example of excessive sponsorship deals came with Paris St-Germain’s who were paid a ludicrous £167m by the Qatar Tourism Authority as sponsorship money. As a result the club failed Uefa’s financial fair play rules – as did Manchester City. The question is whether Leicester has been engaged in similar sorts of arrangements. It’s marketing secrecy makes it hard to say.
Now what makes this world all the more murky is that The Premier League has a web site, and for a while these financial rules were explained on it, but now that page has vanished from its site. Even more odd, if you go onto the Premier League site and type in “short term cost controls” you get the message that “No results have matched your search.”
So we need to try another approach.
Returning for a moment to the amount spent by promoted clubs in their effort to stay up, I have now translated the cost of the players into pounds (it was in Euros last time we looked to ease comparison with other countries) and added the players’ salaries, where the club stands in a salary league table, and how far above or below their spending the club finished in the league.
If the amount spent on player transfers had a direct effect on league position Arsenal would have been in fifth position. If the salary spend had been a direct effect on league position Arsenal would have been fourth. So Arsenal over achieved in both cases. In fact all of the top three teams overachieved on both counts.
|Pos||Team||Cost £||Cost pos||Cost/Place||Salary||Salary pos||Sal/place|
|7||State Aid Utd||122m||9||+2||70m||11||+4|
By and large, clubs that over achieve in relation to their transfer dealings also over achieve in relation to their salaries. Eight clubs overachieved on both indexes (marked in brown).
So what makes clubs have lots of players on high wages, and yet underachieve? A hint as to the answer comes by looking at what marks out three of the clubs at the bottom is that they had more than one manager. Thus they were in a situation of having players on high wages bought by a previous manager but now no longer in favour. It is one of the benefits of managerial stability.
Some Premier League clubs are however allowed to increase their salary bill even more via another rule in the arrangements which allow clubs to increase salaries by up to £19m compared with 2012/13. This rule is obviously no use to clubs who are already paying more than £19m a year more in salaries than they were in 2012/13.
Arsenal is in this category, because in 2012/13 the new stadium was still hampering financial freedom. With the removal of that Arsenal increased salaries considerably (including of course the higher salaries for Ozil and Alexis). Indeed Arsenal has increased salaries more than any other Premier League club in the period between 2012/13 and 2015/16.
In fact Arsenal has increased its wages by more than any other club in the last three years.
|Club||2012/13 wages||2015/16 wages||Increase|
But there are always ways around regulations. Manchester City has shown the money it gave to Mancini as his pay off, not as a redundancy payment but as wages. This pushed up their wages at that time, and so has allowed them to increase their wages further now, if they wish. Add to this the massive increase in money from their sponsors (which as I noted, some suspicious people like me think is a deal akin to the PSG deal) and Man City are going to be able to run riot on the wages front for next season and thereafter.
- Proving that neither transfers nor buying a top goalscorer are the way to win the league
- Arsenal Squad 2016-17. We urgently need to loan or sell eight players
- Why are football’s administrators so utterly and totally inept?
Untold Arsenal has published five books on Arsenal – all are available as paperback and three are now available on Kindle. The books are
- The Arsenal Yankee by Danny Karbassiyoon with a foreword by Arsene Wenger.
- Arsenal: the long sleep 1953 – 1970; a view from the terrace. By John Sowman with an introduction by Bob Wilson.
- Woolwich Arsenal: The club that changed football. By Tony Attwood, Andy Kelly and Mark Andrews.
- Making the Arsenal: a novel by Tony Attwood.
- The Crowd at Woolwich Arsenal by Mark Andrews.
You can find details of all five on our new Arsenal Books page