From a Newcastle United perspective, football’s Profit and Sustainability Rules (PSR) haven’t just failed to improve competition, they have actively frozen it in a very legalistic, financially compliant and quietly suffocating manner.
PSR means that football clubs can only spend what they already earn, so it protects incumbents, and those clubs with already significant commercial revenues, built up over decades, can spend almost without impunity, locking in that historical advantage
For those wanting to gatecrash the party, it’s nigh on impossible.
In reality, clubs hoping to do just that need to spend first to earn later, and that contradiction is at the heart of Newcastle United’s PSR problem.
Why is that? Well, suppose PSR had existed in earlier eras. If it had, Manchester City wouldn’t have accelerated under Sheikh Mansour, Chelsea wouldn’t have exploded under Abramovich and Liverpool wouldn’t have been able to rebuild after seeing the back of Hicks and Gillett (ED: Even more importantly, back in the day there couldn’t have been the Moores family using their Football Pools riches to fund the rise of Liverpool in the 1960s and 1970s, that made them financially dominant and led to what they are now).
Newcastle United are being asked to do something historically unprecedented, to catch their opponents without ever running faster than them. That’s not honest competition, whichever way you cut it.
I think another difficulty that Newcastle United has encountered under PSR is that ‘success’ has come too early in the cycle, with unintended consequences.
When the takeover happened and the new Newcastle United owners were installed, there was an instant jump in expectations and when Eddie Howe accomplished a top four finish and Champions League qualification in his first full season.
And here’s the irony. This was achieved before revenues had time to grow and in a sense, given PSR judges clubs on historic income and not future potential, that early success delivered by Howe has become something of a millstone around his and the new owners’ necks.
Fallow transfer windows followed that success and the summer of 2024 saw the exit of Elliot Anderson and Yankubu Minteh, two promising players jettisoned to balance the PSR books.
Delaying squad refreshes, hesitating in windows where rivals acted decisively and being unable to offer competitive salaries have slowed progress and eroded momentum. A very good Newcastle United squad has become a tired squad and we have a pool of players who know that the club is being held back, just ask Alexander Isak if you want proof of that.
Eddie Howe of course, has gone on to deliver further success, a quite remarkable achievement all things considered.
That first domestic trophy in 70 years and another tilt at the Champions League gave everyone a warm glow at the end of the 2024/25 campaign, but further success ahead of schedule perpetuates the cycle, and one only needs to look at how difficult this season has been to understand that.
Newcastle United might be doing things the right way but sporting risk has been replaced by spreadsheet caution and upward mobility has been slowed to a crawl.
That’s competitive harm, even if it doesn’t show up in balance sheets, at least not in the way traditional football finance likes to admit.
When you make an attempt to account for these things, they also reveal something very damning; PSR protects accounting health whilst quietly eroding competitive value.
Under PSR, club accounts tend to look ‘healthier’ in a few headline ways; lower reported losses, tighter control over player amortisation, wage growth that is capped and transfer spending that is smoothed.
If you stop there, PSR looks like a success, but this is only the static picture.
International Financial Reporting Standards do not recognise opportunity costs such as missed Champions League qualification and lost commercial momentum. And what about that tired squad of ours? Players don’t just depreciate financially, they depreciate competitively, something that is invisible to an auditor.
If football used economic accounting instead of compliance accounting, you’d see this in terms of a negative assets representing revenue foregone and deferred competitive revenue, as well as liabilities that would reflect squad under-investment.
If Newcastle United published a true PSR impact set of accounts, it would show hidden opportunity losses that dwarf reported losses and a lack of competitive health that sure undermines strong financial compliance.
Put simply, PSR makes clubs look financially responsible whilst ignoring the cost of them being held back.
So whether it’s through what you observe first hand at St James’ Park, or what you don’t see in the club’s financial accounts, PSR is the real problem, not the fella that got Bournemouth relegated and who has brought unprecedented success to Newcastle United in the most difficult of circumstances since the birth of the beautiful game.