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Premier League unveils cost control measures

Premier League unveils cost control measures

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English Premier League clubs have reached an agreement on financial control measures to be implemented ahead of the competition’s huge new TV deal, with the threat of points penalties for those that do not comply with the new rules.

English Premier League clubs have reached an agreement on financial control measures to be implemented ahead of the competition’s huge new TV deal, with the threat of points penalties for those that do not comply with the new rules.

The new regulations include a sustainability clause that will require clubs to work towards break-even, while allowing a degree of owner investment going in as equity. A short-term cost control protocol was also agreed, which would limit the amount clubs could raise their player costs by above an agreed floor from centrally distributed revenue. The League’s 20 member clubs have been debating the makeup of the rules since May 2012, but on Thursday the regulations narrowly gained the two-thirds majority needed to be approved. Six clubs – in the shape of Manchester City, Fulham, West Bromwich Albion, Southampton, Swansea City and Aston Villa – reportedly voted against any restrictions, while Reading is believed to have abstained from the vote. Clubs have been seeking to determine how best to utilise the huge increase in revenues from the League’s new TV deals and ensure funds aren’t solely diverted to the transfer market and player wages. The Premier League is expected to break through the £5 billion barrier in rights fees per three-year cycle for the first time as it wraps up its overseas sales process for the 2013-14 to 2015-16 seasons. The League has already completed its domestic rights sales, having struck deals in June with pay-television broadcaster BSkyB and telecommunications company BT worth a combined £3.018 billion from 2013-14 to 2015-16, marking a 70% increase on the previous three-year cycle.

The new regulations revolve around the two key tenets of long-term sustainability and short-term cost control. From the 2013-14 season Premier League clubs cannot make a loss in excess of £105 million aggregated across the three seasons of the new TV deal. The League said any club that makes a loss up to that limit will be subject to a tighter regulatory regime that includes secure owner funding for three years ahead and increased future financial information over the next three seasons. However, money invested in youth development or infrastructure can be discounted from the calculations – in line with UEFA’s financial fair play regulations. Under the short-term measure, clubs will be restricted in terms of the amount of increased funds from the centralised TV deal, which can be used to increase current player wage costs. This will move from £4 million in 2013-14 to £12 million, but will only affect those clubs with a wage bill in excess of £52 million in 2013-14, rising to £60 million in 2015-16. However, further increases to a club’s wage bill would be permitted in-line with an increase in that team’s commercial or matchday revenues.

Speaking after the announcement, Premier League chairman Richard Scudamore said the rules will prevent new owners from making an initial huge investment to transform a club’s fortunes, as has been seen recently under the stewardships of Roman Abramovich at Chelsea and Sheikh Mansour at Manchester City. “A new owner or even an existing owner with a change in attitude or a change in fortunes can invest proportionally a decent amount of money to improve their club,” he said, according to The Guardian. “But what they aren’t going to be doing is throwing hundreds of millions at it in a very short period of time. I’m not criticising that; I’ve been supportive of them, supportive of what they have done to make it a more competitive league.” However, Scudamore said that if new rich owners wanted to come into the League in the future “it’s going to have to be done in a slightly longer-term way without the huge losses being made”. Although the exact nature of punishments for breaches of the rules were not disclosed, Scudamore was clear about the weight of sanctions facing clubs who do not comply. “Clubs I think understand if people break the £105 million (loss) we will be looking at the top end of our sanction range,” he said, referring to points deductions. “There is an absolute prohibition on losing more than £105 million over three years,” he added, according to Reuters.