TA: Due to high transfer debt, the Premier League s European team may touch UEFA s relevant financial regulations

"The Athletic" recently reported the overall financial situation of Premier League teams. Although the position of the Premier League as the leader in financial resources is unshakable, many clubs are facing future risks of greater pressure.

The most profitable event for European clubs - the Champions League is back. Despite the generous bonuses provided by the new Club World Cup, the highest honor for European clubs remains the Champions League trophy. This season, 36 Champions League teams will share a 2.437 billion euro bonus (about 2.1 billion pounds), while 6 Premier League teams will share a considerable portion of the bonus.

In addition, two Premier League teams will participate in the Europa League and one European Union team, which means that nine Premier League clubs will compete in European competitions this season, accounting for almost half of the total. This further demonstrates the improvement of Premier League dominance.

But at the same time, this also means that these nine teams - Arsenal, Villa, Chelsea, Crystal Palace, Liverpool, Manchester City, Newcastle, Nottingham Forest and Tottenham Hotspur must abide by financial rules that are different from the remaining 11 Premier League clubs.

At present, European football clubs are facing pressure from new financial rules. UEFA's two main financial regulations: football income rules and team cost rules have been clarified. The former is similar to the Premier League’s PSR rules; the latter is more directly restricting spending. Although Premier League teams have long been studying this team’s cost rule, it has actually been in a “shadow” execution state within England for two consecutive years.

UEFA's football income rules stipulate that clubs' losses in three years shall not exceed 60 million euros (about 51.9 million pounds). But if UEFA believes that the club meets the four conditions that indicate good financial situation, the limit can be increased by 10 million euros per year (total not exceeding 90 million euros).

These 4 conditions are: positive net assets, current ratio (current assets minus inventory divided by current liabilities) reach or exceed 1, sustainable debt ratio, and the club is in a "continuing operation" state (i.e., it will not go bankrupt immediately).

Most Premier League clubs perform well in terms of conditions 1, 3 and 4, but they did not meet the standards in terms of the second condition - the current ratio. The main reason is that high transfer debts cause current liabilities to exceed current assets. This happened in 8 of the 9 clubs mentioned above in the 22-23 and 23-24 seasons, with the only exception being Manchester City in the 23-24 season.

That is, no club is eligible for an additional €30 million loss limit. Manchester City's loss limit is 70 million euros (about £60 million), while other clubs' maximum loss limit for the period 2022-2025 is 60 million euros (about £52 million).

When considering the club's losses, estimates and assumptions are required, as we have not yet obtained their accounts for 24-25 years. Furthermore, we often have no idea what expenses can be deducted as “good” expenses. Therefore, any number or prediction mentioned here is merely a prediction and should not be considered a statement of fact.

This is particularly evident when it comes to the club's team cost ratio (SCR). UEFA's SCR is calculated annually, not in accounting cycles, which makes it more difficult to determine standards. Clubs also tend to publish only total salary figures and not subdivided to the player level, which also increases the difficulty of external predictions.

Judging from the proportion of club wages and amortized costs to income, although it is indicative, it still cannot fully represent their position in UEFA SCR. According to statistics, in the 23-24 season, only Tottenham's wages and amortized costs account for less than 70% of revenue, which means that the other eight clubs may touch this limit in the future.

The situation in each club is special, and these data are estimated. For SCR, these estimates must exist because the club won't know exactly where they are until the end of 2025. We have contacted each club and shared our findings that for those responding, their feedback has been included in our analysis.