UEFA’s proposed limiting of club spending on wages and transfers to a percentage of their revenue in a given season could actually hinder competition.
The European governing body have put forward proposals for a 70% cap on spending in these areas, slated to come into force in 2025, and various club owners, including Liverpool’s John W. Henry have supported the concept, if not the specific percentage cap.
Henry said: “We’ve thought for some time there should be limits on spending so that the league doesn’t go the way of European leagues where one or two clubs annually have little competition.”
To gauge the impact such a rule could have, we analysed the most recent available financial records for all Premier League clubs (those from the 2020/21 season), which suggest that none of the 20 clubs spent below the proposed 70% threshold on wages and transfers combined.
Revenue figures and wage bills from Deloitte show that only seven of the 20 sides spent less than 70% on wages alone. The club to spend the least on wages was Sheffield United, at 49%, whilst Fulham and Everton spent the most, at 98 and 95% respectively.
Supporters of the proposal claim it will increase the competitiveness of the league, as it will prevent clubs spending ‘beyond their means’, however its detractors point to the fact that the huge discrepancy between the revenues generated across the division will simply become enshrined with limited opportunity for smaller clubs to grow their revenue under current financial rules.
This would also do little to address the imbalance across leagues in Europe. The Premier League’s combined revenue massively outstrips any of its rivals, so a cap across all leagues would only slightly rein in the spending of Premier League clubs compared to those in La Liga, the Bundesliga and Serie A.
Others also point out that the profits that this would generate may not be reinvested into the club and may instead go to the owners themselves, which does little to aid sustainability, another stated goal of those proposing the change.
In the 2020/21 Premier League season, Manchester City’s revenue was the highest in the league, at £571m in 2020/21, whereas West Bromwich Albion’s revenue was less than 20% of that season’s Premier League champions, generating just £107m. If the 70% rule applied to both clubs, then Manchester City would be able to spend upto £400m on wages and transfers, whilst the Baggies would be capped at £75m.
We have therefore grouped the clubs by revenue to take a more in-depth look at how such a change would impact their spending power.
The Big Six: £250m or more
The gulf between the ‘Big Six’ English clubs and the rest of the division is stark. Arsenal had the lowest revenue of any of these clubs, yet their £325m was still just under £100m greater than the next closest side, Leicester City at £226m.
Of the seven clubs which spent less than 70% on just wages, four of them are in this group, with only Arsenal and Chelsea going over that mark, spending 75% and 76% respectively. Their wage bills were much larger than those of their competitors in the Premier League, but when taken proportionally, as a percentage of their revenue, they were generally amongst the lowest spenders in the division
Their amortised transfer spending in the 2020/21 season saw all six sides land in the top seven, with Everton slightly outspending Tottenham to go into sixth place. Again though, for the most part the spending was within a comfortable range for the club.
Arsenal and Chelsea were the only two sides to spend more on wages and transfer fees than they earned in the 2020/21 season. Tottenham came closest to remaining within the 70% rule, at 77.4%, whilst Man City, Man United and Liverpool all fell between 86-89%.
For the Big Six, some wage cuts or player sales would be needed, but their vast wealth means fans are likely to notice very little difference, should this proposal come into force. Their revenue continues to grow year-on-year and with an incremental adoption near-certain, they should be able to carry on more or less as expected.
The next group of clubs features a variety of situations. Clubs like Leicester, West Ham and Wolves have all seen European football in recent years, whilst Everton and Southampton are established top-flight clubs who have years of Premier League gate receipts and broadcast revenues. Meanwhile, Leeds and Aston Villa are traditionally well-supported clubs who have recently returned to the top-flight after spells in the lower leagues in recent years.
All of these clubs earned between £150m-£250m in 2020/21. Two clubs, West Ham and Leeds spent less than 70% of their revenue on wages, and whilst West Ham have invested more heavily in transfers, Leeds, meanwhile are a good example of the disparities that such a rule would invariably highlight. Despite being promoted for the 2020/21 season, they earned more revenue than eight other clubs, and spent more than all of them.
Leicester also provide something of a cautionary tale, having clearly gambled heavily on making the leap into the Champions League spots. The club spent well over their revenue on wages and transfers, the fourth-highest percentage in the division, but just missed out, finishing fifth. The extra revenue from Europe’s elite club competition would have made up for this shortfall, but after missing out they have reined in their spending and this season have found themselves embroiled in a relegation dogfight.
Everton are also another example, having spent the second-highest proportion of revenue in the league, at 137% of their revenue for the season. They have struggled immensely, both last season and again this season, and have had to rely on low-cost and free transfers to burnish their squad.
The gulf in revenues does encourage teams in this area to spend beyond their means, usually with long-term negative consequences, but there is little in this data to suggest a cap on spending would do anything other than lock in the pre-existing disparity between clubs in this range and those in the ‘Big Six’.
£150m and below
The final seven teams in the division generated the lowest revenues, sitting between £140m and £107m. The seven teams here finished no higher than 12th, and comprised all three relegated sides, plus the two sides above them in 16th and 17th.
All of the clubs bar Sheffield United spent at least 90% of their revenue on wages and transfers, with the Blades opting to stick with the squad that took them to the verge of European football in their first season back in the top-flight in 2019/20. They came very close to staying within the 70% range, their combined spend of £82.8m representing 71.4% of their revenue. However, this financial prudence saw them relegated in 20th position.
Fulham by contrast spent more, proportionally, than any other Premier League side, their £170.5m spend being 147% of their revenue, the highest total by over 10%. They were also relegated this season, but their overspending had little consequence, with the club spending just one season in the Championship before being promoted back to the top-flight where they have been comfortable in the top-half of the table.
You might assume Sheffield United’s frugal approach would serve them well in making a fast return, but they fell in the play-offs to Nottingham Forest, whereas big spending Fulham were able to quickly regroup and cruise to the Championship title.
The variety of approaches here led to very similar results in the Premier League, with all seven clubs struggling. The main takeaway here appears to be that financial disparities at this end of the table may well be too great to overcome, and there is no strong evidence to suggest that forcing clubs to spend less will do anything to redress the competitive imbalance.
More likely, clubs will become even more firmly entrenched in these brackets of revenue, and the competitiveness of the middle and bottom-end of the Premier League will be reduced to the same six or seven sides swapping positions, season in and season out.
UEFA’s proposals may well have some success in allowing the cream of the crop in Europe to keep up with the Premier League, to an extent, but the effect on domestic leagues could be devastating. Most of Europe’s leagues suffer from dominance, be it from one or a group of teams, but financial fair play rules, and percentage-based spending caps would not increase competition, it may well be the final nail in the coffin.
If competitiveness really is the name of the game, the spending cap must be set at a fixed amount, not adjusted in percentage terms for each club. This would create an artificial level playing field and certainly increase competitiveness, but would open its own can of worms. Is there any legitimacy in holding clubs to an artificial limit, where they cannot spend money they have earned? Perhaps all club revenues should go into a central pot that is more fairly distributed, but it is hard to imagine owners of the ‘Big Six’ being supportive of this idea.
The issue of competitive imbalance in football is unlikely to go away anytime soon, and this latest UEFA proposal suggests an inability on the part of the governing body to make the kind of sweeping changes needed to reverse the current trajectory of the sport. Instead, this looks to be yet another sticking plaster measure, ill-thought through and likely to have an extremely limited impact.