Arsenal given £180m PSR warning by finance insiders

Arsenal have raised their level of spending in recent years, which has correlated with a rise in commercial income.

Over the last decade, the Gunners’ revenue from sponsorship, merchandise, events and other commercial streams has risen by more than 100 per cent.

This has been the trend among so-called Big Six, whose commercial strategies are maturing across the board – some quicker than others.

While in isolation Arsenal’s commercial income of £173m at the last count is impressive, it is the smallest in the Big Six by quite a margin.

This is partly attributable to a lack of European football in recent years, with Arsenal‘s run to the Champions League quarter-finals last term being their first appearance in the competition since 2016-17.

However, despite being placed on a UEFA watchlist in 2021-22, the North London club have managed to avoid a Profit and Sustainability Rules (PSR) breach.

The Premier League’s PSR system limits clubs to losing £105m over a rolling three-year period, with costs such as youth investment, infrastructure and the women’s team exempt from the calculation.

UEFA have a lower but more flexible loss limit and are currently phasing in a squad cost control ratio that will eventually limit clubs to spending 70 per cent of turnover on wages, transfers and agent fees.

And while Arsenal remain compliant with plenty of headroom, one group of experts has given the wider football ecosystem an explicit warning about PSR.

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Knock-off merchandise costing clubs millions

Arsenal were the fifth biggest earners in terms of merchandise sales in the Premier League in 2022-23, the last season for which full financial data is available.

They banked approximately £76m in total.

However, a new study by brand and finance experts Corsearch have found that Arsenal and their peers in the Premier League are missing out on millions every season because of a growing counterfeit market.

It is estimated that £180m is lost to knock-off merchandise sales each and every year.

The research shows that searches for fake football shirts, of which Arsenal’s is among the most popular, is up 514 per cent compared to the summer of 2021.

“The loss of revenue from counterfeiting could also have an indirect effect on a club’s position in the League Table,” Corsearch explained.

“With clubs docked points under Profitability and Sustainability Rules (PSR) should they post losses over £105 million over three seasons.”

Do Arsenal have PSR issues?

When Arsenal signed David Raya with an obligation to buy last summer, it was suggested in some quarters that Arsenal were pushing his transfer fee into next year to avoid a PSR breach.

However, these claims were well wide of the mark.

In fact, analysis by legendary finance writer Swiss Ramble projected that Arsenal finished 2023-24 with nearly £100m of PSR headroom.

Similarly, when transfer journalist Fabrizio Romano relayed that Arsenal’s pursuit of Mikel Merino’s pursuit is dragging because of discussions of how to structure for the deal, this too was incorrect.

Returning to a commercial focus, Arsenal’s kit deal with Adidas is flourishing and is expected to yield greater sales this year, on which the club has negotiated a larger than normal commission.

Their new training ground naming rights deal with Sobha Realty, worth a reported £15m per season, is also set to kick in this season.

Long story short, Arsenal have a huge amount of grace before they start to encounter PSR problems – and the self-sufficient philosophy of the Kroenke regime means that is unlikely ever to happen.