The Premier League’s Profit and Sustainability Rules (PSR) are often characterised as the system that insulates elite clubs like Arsenal from failure but, in reality, their effects are far more nebulous.
For one, it’s a two-tier system. The Premier League PSR system is less stringent than UEFA’s, which in theory allows Arsenal’s rivals to sustain heavier financial losses to get them into Europe.
If and when they get into Europe, they then have to cut their cloth accordingly, which means – again, in theory – that investment is sustainable and isn’t going to leave them facing financial oblivion if their owner turns off the money hose.
PSR is also encouraging clubs to invest in infrastructure and grow as businesses in order to increase revenues and create more headroom under the spending rules.
Infographic explaining the PSR (Profit and Sustainability Rules, formerly known as FFP) for Premier League, Championship and UEFA clubs
PSR infographic. Credit: Adam Williams, GRV Media
Again, that means challenger clubs – the likes of Newcastle United and Aston Villa – can sustain their presence in the upper reaches of the Premier League table long term, even after their private equity and state-backed owners eventually cash out.
Meanwhile, investors like Arsenal owner Stan Kroenke don’t want to max out their PSR allowance anyway because to do so means they have to underwrite losses of £105m per year, or slightly less under UEFA’s system.
Photo by Stuart MacFarlane/Arsenal FC via Getty Images
Photo by Stuart MacFarlane/Arsenal FC via Getty Images
The future of PSR and Arsenal’s business model under Stan Kroenke
The Kroenkes aren’t in football for altruistic purposes. They want a return on their investment one day, either by taking dividends from profits or proving the viability of the business model to a potential buyer, which also means demonstrating profitability.
Unfortunately, that means Mikel Arteta and Andrea Berta can’t expect the maximum allowable transfer budget every summer.
Arsenal, who were recently valued at £3.4bn by one industry authority, are only as valuable as their future cash flows and ability to generate profit.
Rank Club Value Revenue (23-24)
1 Real Madrid $6.53 billion $1.13 billion
2 Manchester United $6.09 billion $834 million
3 FC Barcelona $5.71 billion $802 million
4 Liverpool $5.59 billion $773 million
5 Bayern Munich $5.21 billion $827 million
6 Manchester City $5.16 billion $901 million
7 Arsenal $4.49 billion $773 million
8 Paris Saint-Germain $4.26 billion $873 million
9 Tottenham Hotspur $3.68 billion $652 million
10 Chelsea $3.57 billion $590 million
Most valuable football clubs, per Sportico
That means they won’t spend to the limit of PSR in the long term. In fact, they don’t spend to anywhere near the PSR limit already.
Stan Kroenke has already sunk £324m into Arsenal plus about £800m to take 100 per cent control of the club. He wants the transfer market and wage space race to end ASAP so he isn’t forced to invest any more, thereby turning red ink into green in the accounts.
Chart showing the profit and loss account of Arsenal over the last 10 years, superimposed over a generic image of a football pitch
Arsenal profit and loss accounts Credit: Adam Williams/TBR Football/GRV Media
Even the likes of Chelsea who are investing big in the short term, will eventually reach this inflection point. Todd Boehly and Behdad Eghbali have shareholders to satisfy, after all.
That in turn means that player trading isn’t just for the bottom-feeder clubs anymore. Clubs like Arsenal need to think about the lucrative outdoor as much as they do glamorous new signings.
Arsenal’s revenue is rising, yes, but so too are their costs. As PSR matures, we will therefore likely see more player churn at the Emirates and the rest of the so-called Big Six, especially given that revenues are volatile depending on Champions League qualification and performance.
Infographic comparing Arsenal's squad cost - wages and amortisation - with their revenue in recent years with the TBR Football
Arsenal squad cost – wages and amortisation – compared to revenue Credit: Adam Williams/TBR Football/GRV Media
The exceptions are perhaps state-backed clubs. That is why Arsenal oppose Manchester City’s ownership model, which – unlike Newcastle United’s – was able to take advantage of an era before PSR.
But the principles that underlie PSR are sound, even if their application by the Premier League has been ham-fisted.
PSR needs reform – Arsenal to vote on financial rules at Premier League AGM
The system isn’t perfect. Unquestionably, it needs refining.
This year’s Premier League AGM isn’t likely to see any major changes to PSR because of the uncertainty around the Manchester City situation, but Arsenal will have the opportunity to propose amendments.
In 2026-27, we are likely to see a UEFA-style revenue-based element brought in. Clubs have been trialling a squad spending limit of 85 per cent of revenue plus profit on player trading this season.
Photo by Stuart MacFarlane/Arsenal FC via Getty Images
Photo by Stuart MacFarlane/Arsenal FC via Getty Images
The alternative, a PSR-free Wild West, is much worse than the existing system. State-backed clubs dominate and vulnerable clubs would lurch between boom and bust.
That said, there are bugs – or are they features? – of the PSR system that understandably frustrate fans.
Myles Lewis-Skelly and Ethan Nwaneri at risk of leaving for free but could generate huge PSR headroom
Last summer, clubs at risk of breaching PSR made some ostensibly bizarre transfer deals before 2023-24 officially ended on 30 June.
Many of these manoeuvres were designed to short-circuit the PSR system.
One such accountancy sleights of hand was the trading of academy graduates in separate fee-paying deals of roughly equivalent value.
Why? The explanation is three-fold:
Because amortisation (an accountancy technique used by clubs to account for transfer fees over a set period, which is distinct from paying in instalments) allows clubs to book sale profits immediately, whereas fees paid to other clubs are spread out over up to five years for the purposes of the profit-and-loss account and therefore PSR.
Because player sale profits are calculated based on their amortised book values (their initial transfer fee divided by the number of years on their initial contract, multiplied by the years remaining on said contract).
Because academy players have no amortised book value, so any sale proceeds are ‘pure profit’ for PSR and the profit-and-loss account
So clubs sold academy players, booked an instant ‘pure profit’ and, for PSR purposes, while only one-fifth of the equivalent fee they paid to sign an academy player from another club hit the balance sheet.
By extension, that also means clubs can theoretically reinvest said profit five times over with a net neutral impact on their PSR calculation.
In recent days, some doubt has emerged over the futures of two London Colney graduates who had breakout seasons for Arsenal in 2024-25.
Photo by David Price/Arsenal FC via Getty Images
Photo by David Price/Arsenal FC via Getty Images
Contract negotiations between the Gunners and Myles Lewis-Skelly are “not going well”, according to Guardian journalist Jonathan Wilson. His deal expires next summer.
TBR Football meanwhile exclusively revealed last week that there are concerns that Ethan Nwaneri may not sign a new Arsenal contract. His current iteration runs until 2026 too.
It would be a disaster to lose either Lewis-Skelly or Nwaneri at all, but to lose them for free would be even more cataclysmic.
If they were to sell either before the end of their contracts, however, they would count as ‘pure profit’.
Lewis-Skelly is currently valued at £23.5m on Transfermarkt, while Nwaneri is appraised at £46.5m.
Hypothetically, if Arsenal did sell both for a combined £70m, they could spend £350m on players in the same year without their player amortisation increasing, so effectively net neutral as far as PSR is concerned.
They wouldn’t be free hits, of course. Arsenal would still have to account for any paid transfer fees over the next four years. Then, there are the wages of the new signings.
The example is indicative, however, of how Arsenal could have a once-in-a-generation transfer window without worrying about PSR in the short term.
Cash flow is a different issue for Stan Kroenke in the transfer market
PSR and cold, hard cash are separate issues, however.
Any transfers Arsenal pay for need to be accounted for with real money, not just PSR capacity, which is essentially a regulatory construct.
Most clubs stagger transfer payments over a period of instalments, but only three clubs have higher total transfer debts than Arsenal, whose last accounts showed that they owed £268m to other clubs.
Club Transfer debt (£m)
Chelsea 498
Tottenham Hotspur 337
Manchester United 331
Arsenal 268
Manchester City 230
West Ham 191
Leeds United (2023) 190
Nottingham Forest 184
Newcastle United 160
Aston Villa 156
Wolves 135
Liverpool 128
Bournemouth 126
Brighton 104
Everton 74
Fulham 72
Crystal Palace 67
Brentford 61
Sheffield United 40
Luton Town 6
Premier League transfer debt 2023-24
By contrast, they were only owed £39m themselves.
They will have good cash reserves at present after receiving a tranche of Premier League and UEFA prize monies at the end of a season where they were relatively restrained in the transfer market.
However, Kroenke would still likely need to put more money into the club if Arsenal were to go on a signing spree of that magnitude this summer.
Whether it’s £100m or £350m, these are the factors that they will be considering as well as PSR behind the scenes.