By Far The Greatest Team

The football blog for fans of all clubs

Premier League Anchoring System: Will it hold back acquiring stars like Erling Håland?

Premier League anchoring system: how will it work?

By Andy PymontPosted on Posted in Premier League

Top English football clubs have agreed in principle to replace Profit and Sustainability rules with a new Premier League anchoring system. Whilst not all the details are yet clear, it’s no surprise to see things changing. The previous financial rules have been one of the big stories of this season.

Let’s take a look at what is happening and what it could mean for the league.

Big News after Shareholder Meeting

A number of outlets reported on anchoring yesterday after this tweet from Martyn Ziegler, the chief sports reporter for The Times:

The Current System: PSR

The Premier League currently regulates club finances via a set of rules called the Profit & Sustainability Regulations (PSR). These rules judge clubs on the amount of profit or loss that they make on their football operations.

Under PSR, each club may lose up to £5m per season. Owners can make investments covering a further £30m of losses each year. This is all assessed over three-year rolling periods, so the maximum a club can lose in any three-year period is £105m.

The Premier League has imposed points deductions on Everton and Nottingham Forest this season for breaching these limits. Everton successfully appealed for a reduction in their points deductions. An independent panel will hear Forest’s appeal in the next week.

Problems with PSR

The spotlight on PSR this season has highlighted a number of issues:

  • An unclear tariff for punishments. Whilst the rules on losses are reasonably clear, the tariff of penalties for breaching them is not. Everton highlighted this after their appeal on their second points deduction. The club highlighted the inconsistency of four different commissions issuing four different points deductions to the club this season.
  • The perception of unfair treatment. The Premier League announced 115 charges against Manchester City for breaches between 2009 and 2018 over a year ago. They have yet to announce any punishment. Meanwhile, the Premier League has quickly punished both Everton and Forest for more recent breaches. The Premier League insists they are working on the Man City case. However, many fans perceive the current system as unfair.
  • Unclear intent and impact on competitiveness. Less of a problem with PSR specifically, the discussion this season has highlighted the rules and what their intent is. The name “profit and sustainability” suggests it’s about stopping clubs getting into financial difficulty that risks the future of the club. However, no Premier League club is really in danger of that.

    Reports that Aston Villa and Newcastle may have to sell players to comply with PSR have highlighted that the rules might actually limit the competitiveness of the league. Established clubs with big revenues are difficult to challenge and perhaps PSR could be entrenching a “Big Six” at the expense of other clubs that want to challenge them.

With criticism growing, it’s no surprise to see the Premier League exploring a change.

The Future: Anchoring

At the shareholder meeting the Premier League clubs have indicated their intent to change the system in the future. Clubs authorised the league to carry out an analysis and create a proposal for a new system with a spending limit linked to TV revenues.

The proposed system is a spending cap linked to the lowest TV revenue of any club in the league. This is where the term “anchoring” has come from. The League will update the cap each year to reflect TV revenues. Therefore the cap can grow in the future if, as it has done consistently over the past 32 years, the Premier League is able to increase the amount of TV revenues that the league and clubs receive.

Will Anchoring be a Hard Cap like the 🏈 NFL?

The idea of a hard cap on spending is not new. The NFL, one of the other biggest sports leagues on the planet, uses such a system.

The NFL salary cap for 2024 is $255 million per team. Clubs breaching the cap be fined, lose draft picks, or even have the contracts of star players terminated or assigned to other teams. With this effective deterrent in place, only a handful of clubs have ever breached the rules.

Here’s an example of reporting on a team’s NFL salary cap situation:

The NFL is currently in its off-season. Here, the reporter is looking ahead to the 2024 season and what the club needs to do to maximise its options within the salary cap. Perhaps we’ll see more of this in English football with the Premier League anchoring system coming in.

NFL clubs don’t pay transfer fees – there aren’t really any rival leagues to buy players from, and clubs in the NFL trade players and picks with one another instead. But a Premier League system which has a hard cap for the total of transfer and wage spending probably makes sense as an NFL equivalent. The salary cap works and it contributes, along with other rules, to a very dynamic and exciting league.

Or will Anchoring be a Soft Cap like in ⚾ MLB?

Another intriguing option for the Premier League is to introduce a “soft cap”, as used in Major League Baseball.

Baseball teams work within a total spending cap. Unlike in the NFL, however, top clubs often breach the cap. It’s an accepted part of the league’s operation. The clubs that spend more than the limit make a Competitive Balance payment to the clubs that didn’t breach. The balance payment, often called a “luxury tax” in reporting, increases as you exceed various thresholds of over-spending.

This can mean that big-spending, ambitious new owners like Steve Cohen of the New York Mets can end up handing out a lot of money to competitors:

This model might be attractive to the Premier League. Baseball is more like football than the other American sports. It has a history going back to the late 1800s. Most clubs have been successful at some point in their history, but there are definitely top, “big” clubs who are very well-supported and make and spend large amounts. This might make their model a better fit for the Premier League.

The Premier League could also be clever with how it uses the “luxury tax” payments in this type of system. The League recently failed to agree a new funding deal with the EFL. If it agreed to distribute luxury tax payments to lower-league clubs, it could solve two of its major headaches at once.

When does Anchoring come in?

We’ll know more about the Premier League anchoring system after the league’s Annual General Meeting in June. The clubs will review and approve the new rules at that meeting. The Premier League will then release more details to the public.

The existing PSR system will remain in effect for the upcoming 2024/25 season. The season after, 2025/26, is when we’ll all see how the Premier League anchoring system works in practice.

Scroll to top