Understanding PSR: A Full Breakdown and Explanation of Premier League’s Profitability and Sustainability Rules
The English Premier League has certainly changed a lot over the years and has grown significantly with several financial changes. While clubs used to spend a lot of money on high-profile transfers in the transfer window, the Premier League started the Profit and Sustainability Rules (PSR) to control the club’s finances and prevent huge losses in the transfer window.
While several clubs have criticized PSR as they are unable to spend a hefty amount of money in transfer windows, the Premier League aims to enforce several rules through a strict phase to regulate the finances of the club.
After having several controversies due to the PSR, the Premier League continues to stick with PSR for the next season of the league. It means the clubs will have to carefully examine their financial status before making any huge move in the next transfer window. Join us as we provide a full breakdown of the Premier League’s PSR and how it has changed the Premier League over the years. Here are details on Premier League rules.
What Does PSR Mean?
Premier League’s Profit and Sustainability Rules (PSR) was started back in the 2013-14 season and was implemented to regulate each team’s finances and avoid huge losses. They were a part of the Financial Fair Play (FFP) framework but over the years, PSR has evolved into a more strict and stiff model. To ensure long-term financial stability and develop fair competition, these rules were introduced to maintain a balance in the league.
It is found in Section E of the Premier League’s Handbook and has laid out several rules for each club and failing to provide the expected results may result in points deductions, fines, transfer restrictions, and other disciplinary actions to strengthen the club’s overall financial state.
How does PSR Work?
All the teams of the Premier League are required to submit their P&L account and Balance by March 31 of each year. Based on that, PSR Calculation takes place which shows the club’s finances over three years and only allows a maximum of £105 million loss to each club over three seasons. The club revenue which is calculated is divided into several types.
| Revenue Category | Sources of revenue |
| Football-related | Matchday rights Broadcasting rights Commercial and sponsorship deals |
| Non Football-related | Concerts Events |
| Owner Funding | Financial investments from Club owners |
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While PSR classifies several revenue categories, certain fundings are excluded from the calculation which include money invested in youth development, spending on women’s clubs, and community development expenditure. If the calculations result in a loss of over £105 million, there are several sanctions that a club can face.
Sanctions imposed by PSR
If a Premier League side exceeds an overall loss of £105 million in three seasons, they might get their points deducted from the Premier League table. The amount of points deducted depends on the intensity of the loss breached by the club. Clubs like Nottingham Forest and Everton have paid the price for breaching PSR as they faced points deduction which took them down to the Premier League table.
Apart from deducting points, clubs may receive huge fines if they fail to follow the PSR. Other sanctions include transfer restrictions which would disallow clubs from signing new players in the transfer window hence affecting their squad. If the case becomes too extreme, the club might be removed from the league.
Loopholes and Changes in PSR over the years
Associated Party Transactions (APTs)
Over the years, clubs have devised several techniques and methods to comply with the PSR while spending a hefty amount on transfer fees by managing to find some loopholes in the rules. To limit their losses, clubs started Associated Party Transactions (APTs). APTs were commercial deals between clubs and several companies linked to their owners. These include sponsorship and partnership deals which would inflate the club’s revenue which further allowed the clubs to spend more in transfers along with complying with the PSR.
While this practice was beneficial only for wealthy owner-led clubs, the Premier League introduced new rules to assess these transactions at fair market value. All the commercial deals are carefully reviewed independently to make sure that the value is not inflated.
Manchester City’s Etihad deal was also said to be overvalued and the club is currently under investigation for over 100 financial breaches which further poses a huge problem for the club.
Amortization
The cost of the transfer fee was distributed over the length of the contract which is called Amortization. Clubs used to do this to avoid huge losses and while selling a player, the entire transfer fee was counted as a profit in the financial account of the club.
Chelsea was seen performing this method by signing players with 8-year-long contracts to reduce their financial rate under PSR. The club balanced their account by selling youth academy talents like Mason Mount which generated pure profit in their balance sheet. This loophole allowed teams to spend excessively by remaining under the loss margin. However, this was easily dealt with by the Premier League and UEFA as they imposed a 5-year cap on amortization in 2024 to prevent clubs from stretching payments.
Academy Player swap deals
As PSR excludes financial expenditure on youth development, clubs took benefit of this loophole and swapped their youth talents with inflated value to generate profit on their balance sheet. Clubs agree to sell their homegrown academy players to each other for an inflated price to get a financial boost making sure the sheets comply with PSR.
However, the Premier League carefully reviewed such transfers and warned the clubs that in such situations, the selling club would return the amount in excess back to the buying club hence providing no inflation in profits.
Several clubs have used various other loopholes and techniques to comply with PSR like selling players just before the financial deadline to stay within the PSR limit. As it is another huge way to stay compliant, many clubs might also affect their squad by removing essential players.
Premier League’s PSR extended for another season
Despite having several issues with the rules, Premier League clubs have agreed to continue to Profitability and Sustainability rules for another season. Despite several clubs like Manchester United, Aston Villa, and Newcastle United criticizing the rules as it prevented them from signing new talents in the winter transfer window, the clubs agreed to extend the controversial set of rules for another season recently.
Clubs like Aston Villa would have to keep a check on their spending for another season as they were forced to sell huge players just before the deadline day last year to comply with the PSR.
Not only Aston Villa, but clubs like Newcastle and Man United might be in danger of breaching the PSR this season. As it seems to be controversial all around, clubs would have to face the onslaught of Premier League’s Profitability and Sustainability rules for another year. It remains to be seen that if the rules spark another string of controversies this year or not.