Newcastle United's £20m PSR loophole has now backfired

PSR is complicated and nobody understands that better than Newcastle United and their owners, the Saudi Public Investment Fund.

Since taking over Newcastle three years ago, PIF have been deeply frustrated by the Premier League’s Profit and Sustainability Rules.

The Magpies have avoided the points deductions and fines that PSR breaches have led to for Everton and Nottingham Forest, but the system has been an anchor on the Saudis’ ambitions at St James’ Park.

On paper, Newcastle United are the richest club in the world. In practice, they are limited to losing £105m over a rolling three-year period, massively restricting their power in the transfer market.

Yes, PIF have invested hundreds of millions on new signings since the takeover.

But the legacy of their lavish spending in recent years is that the chief financial officer Simon Capper now needs to account for every penny they spent.

Newcastle are trying everything to raise revenue and fortify the budget available to Eddie Howe and Paul Mitchell and have had major success in hiking commercial income.

But with the Premier League’s fair market value rules likely to remain in situ whatever the outcome of Man City’s recent legal challenge, the rate of their growth in that department is set to slow.

Newcastle’s plans to redevelop St James’ Park meanwhile will be enormously lucrative in the long term but that project will take years to complete.

Other clubs are in a similar position and have turned to accounting sleights of hands to escape the clutches of the Premier League’s PSR enforcers.

As well as intra-company player sales and ultra-long contracts to spread the amortisation burden, clubs have also used quasi-swap deals to give themselves more breathing space.

Newcastle use the tactic in the summer, but the latest news on Tyneside suggests it may now have backfired.

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Odysseas Vlachodimos: PSR makeweight could leave Newcastle

Eyebrows were raised when Odysseas Vlachodimos signed for Newcastle for £20m in the summer.

Questions about the goalkeeper’s fee appear to have been justified, with Vlachodimos having turned out just once – in the League Cup – since his move from Nottingham Forest.

Christos Sotirakopoulos, a well-known journalist in the 30-year-old’s homeland of Greece, said Vlachodimos’ signing for Newcastle was “clearly a mistake”.

Now, iNews are among the outlets reporting that Newcastle are considering a shake-up of their bloated, five-man goalkeeper department and that Vlachodimos could be moved on, potentially on loan.

The transfer was one of several that happened shortly before the 30th June PSR cut-off that saw two players traded in separate deals of roughly equivalent value.

In this case, highly-rated youngster Elliot Anderson went the other way and is now enjoying a stellar start to life at Forest.

These quasi-swap deals allow the selling club to book an immediate profit, while the fee paid for the player they are buying is amortised over five years.

But with Newcastle already straining to meet the PSR threshold, Vlachodimos £20m fee will be registered on their balance sheet at £5m per year until 2028-29.

That is unless they can move him on for a profit, which seems wildly unlikely.

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Do Newcastle United have the PSR headroom for January signings?

Eddie Howe’s Newcastle side have had a relatively insipid start to 2024-25, although three wins in a row heading into the international break has made a world of difference.

The squad have jetted out to Riyadh where they will train at Al Awwal Park, the base used by Saudi Pro League side Al-Nassr.

Unlike Newcastle, the lack of spending restrictions in the Pro League have allowed PIF-owned Al-Nassr to spend freely, with Cristiano Ronaldo and Sadio Mane among the big names lured by the rewards on offer.

Newcastle would love to have the same freedom in the Premier League.

They will have some wriggle room in January, however.

The £71m they lost in 2021-22 is now no longer part of their PSR calculation.

Their losses for 2023-24 meanwhile are expected to have reduced thanks to several new commercial deals and participation in the Champions League.

This season, the lucrative partnership with Adidas also hits the books.

So while there is recognition within Newcastle that they need to move to a player trading model, there is scope for them to spend in January without any immediate anxieties about PSR.