Once upon a time, a football club would move heaven and earth to keep their academy graduates and youth team prospects on their books. These players are the DNA of a club, and generally have a deeper connection with the fans given that they’ve come through the ranks – as a consequence, they are often cut some slack if their performances on the pitch dip.
But these days, with Premier League outfits having to abide by such strict financial rules, more and more are sacrificing their young players to generate revenue from their sale. And a loophole in the transfer rules means that, unfortunately, these fledgling stars are more worth far more to a club as sellable assets than players on the pitch.
Balancing the Books
Ian Maatsen has left Chelsea and completed a permanent transfer to Aston Villa. All the best, Ian! pic.twitter.com/cZ0952zPR2
— Chelsea FC (@ChelseaFC) June 28, 2024
When a club buys a player, the cost of the transfer fee is spread out across the duration of the individual’s contract in a process known as ‘amortisation’. So, a player acquired for £50 million on a five-year contract gets filed on the balance sheet for each season at £10 million.
However, the sale of ‘homegrown’ players is considered to be pure profit from a financial reporting standpoint – creating a bizarre loophole in which clubs are able to offset the purchase of an expensive player by selling one academy graduate per year. It’s a scheme that Aston Villa and Chelsea joined forces in during the summer transfer window of 2024. The Villains signed the Blues’ Ian Maatsen for £37.5 million, which when amortised over five years would be £7.5 million.
To counteract that outlay, Villa agreed to sell youth graduate, Omari Kellyman, to Chelsea for £19 million. The outcome? The West Midlands side, when delivering their accounts as per Profit & Sustainability Rules (PSR), show a net profit of £11.5 million from that transfer activity – Kellyman’s £19 million minus Maatsen’s £7.5 million year one amortisation.
Chelsea, meanwhile, may well have snapped up a bargain if Kellyman goes on to fulfil his potential. Villa and Everton were then united in a brazen act of PSR tomfoolery. They essentially swapped academy graduates – Lewis Dobbin moving to Birmingham and Tim Iroegbunam heading north to Merseyside. A fee of £9 million was agreed for both, so the balance sheet would show the amortised fee paid (probably around £1.5-£2 million) against the £9 million of pure profit – a net gain, as far as PSR is concerned, in the region of £7 million.
It’s no coincidence that these deals all happened late in June – to satisfy Profit and Sustainability Rules, full accounts have to be submitted by the close of play on June 30. It should be said that none of the deals mentioned above have broken any rules – the clubs involved have manipulated the system, for sure, but they haven’t done anything wrong. However, that could all change as the Premier League seeks up to update its transfer rulebook.
Fair Value
With clubs now seeking brazen ways to creatively add profit to their yearly accounts, the Premier League has been forced to act in order to stamp out what could have become something of a plague, with young players used as pawns in the transfer deals of more established, recognisable names.
EPL chiefs have been forced to remind their member clubs of the importance of ‘fair valuation’ when selling players, and even went as far to say that they will step in and force the repayment of part of an ‘inflated’ transfer fee where it appears that a youngster has been over-valued as part of a ruse to fiddle PSR.
Kellyman, for example, has played only 150 minutes of first-team football, and was sold by Derby County to Aston Villa for just £600,000 in 2022. Is the £19 million paid by Chelsea ‘fair value’ then? On the flipside, the Blues paid £42 million for Cole Palmer in 2023 despite him playing very few minutes for Manchester City – but he blasted 22 goals during the 2023/24 season, and is now a full international with England. However, back in September, his transfer fee almost certainly appeared inflated.
The Premier League’s head of governance has also intimated that he is wise to the possibility of collusion between clubs struggling to meet PSR requirements – clubs may be ‘….requested to provide information and evidence to assist determination of whether the transaction should be considered as being conducted at arm’s length’, which refers to transfers not being completed in an appropriate, official way.
Cooking the Books
Loophole encouraging sale of academy talent is ‘nonsensical’, says PFA’s Maheta Molango. “Fans want to see their academy players, those are the ones who make you dream that create that bond with the club.” https://t.co/0ZSDoWAy0W
— Ed Aarons (@ed_aarons) June 28, 2024
As per PSR rules, a Premier League club is allowed to lose up to £105 million during a three-year reporting window. By inflating the price of an academy graduate, an outfit can bank instant profit that offsets a decent chunk of that £105 million allowance. What’s more, it gives clubs that are in a safe position, from a PSR perspective, carte blanche to pick off their rivals’ finest youth prospects – creating a competitive imbalance in the transfer market.
Everton have breached PSR rules twice and been deducted points for it – had their performances on the pitch not been so reliable, the Toffees could have faced relegation to the Championship for the first time since the Premier League’s rebrand in 1992.
Not a club with a huge commercial appeal around the globe – such revenue from merchandise sales and sponsorship can also be used to barter down PSR accounts, Everton simply have to game the system if they are to remain competitive in the top flight. They’re not the only ones, of course, although the true victims in this are the teenagers being forced to move hundreds of miles, in some cases, to a new club while being used as chess pieces in the increasingly-bizarre realm of football finance.
The chief executive of the Professional Footballers’ Association, Maheta Molango, has hit out at the trend for cashing in on youth teamers. “How can it make sense that due to the rules you end up selling an academy player?” he pondered. “It doesn’t make sense for the club either because this is part of your identity, part of what makes the club what it is.” But in a sport where winning, at any cost, is key, is anybody going to listen?
