Barclays Premier League clubs agreed Thursday to restrain spiraling player salaries and rapid spending through financial controls that will see rule breakers face heavy point deductions.
The move, which is designed to ensure that the expected $8 billion being generated by a new television rights deal isn’t frittered away, comes days after UEFA warned that escalating player costs were jeopardizing the future of clubs in Europe.
Teams with wage bills exceeding 52 million pounds ($82 million) will only be able to increase them by 4 million pounds ($6 million) per season for the next three years if the rise is funded through TV revenue.
And clubs will only be able to record a loss of 105 million pounds ($165 million) from 2013-16 – a rule Chelsea, Manchester City and Liverpool would have breached recently if it was already in place.
The regulations are more lax than UEFA’s Financial Fair Play rules, which are forcing teams entering European competitions to eventually make teams break even on their football-related business.
”The clubs understand that if people break the 105 million pounds we will be looking for the top-end ultimate sanction range, a points deduction,” Premier League chief executive Richard Scudamore said.
Scudamore said the regulations will prevent teams emulating Chelsea and Manchester City by embarking on turbo-charged spending sprees under new ownerships to quickly win silverware.
”You can still build a very decent club with substantial owner funding that over time can challenge anybody but … it’s just going to mean doing that is going to take a few years longer, which is not at all a bad thing,” Scudamore said.
Scudamore believes that the spending by Chelsea and City has contributed to wages rising across the league.
Player costs at City hit 200 million pounds ($315 million) last season as the team won the English title for the first time in 44 years after investment of about $1 billion since being taken over by Abu Dhabi owner Sheikh Mansour bin Zayed bin Sultan Al Nahyan three years earlier.
Chelsea owner Roman Abramovich had to fork out 171 million pounds ($269 million) last season on salaries as the team won the Champions League. The west London club won the Premier League in 2005, two years after Abramovich’s took over and started spending heavily to strengthen the squad.
Such rapid spending will be curtailed by the new regulations approved by at least 14 of the 20 Premier League clubs on Thursday.
”If a new owner or even an existing owner with a change in attitude or a change in fortunes … what they aren’t going to be doing is throwing 100s of millions at it in a very short period of time,” Scudamore said.
”If that’s going to be done in future, it’s going to have to be done in a slightly longer term, slightly more controlled way without the huge losses being made.”
But Scudamore said it is ”harder and harder to envisage (someone) buying a club that is not currently successful and making them title contenders.”
”The fact Chelsea and Man City have done what they have done makes it harder and harder for anyone else to come in,” he added. ”Because you’ve got to come in and climb over far more clubs than you used to have to climb over a couple of years ago.”
The rules are designed to prevent a repeat of the financial meltdown at Portsmouth, which became the first Premier League club to enter bankruptcy protection in 2010.
British Sports Minister Hugh Robertson hopes the new rules will ensure clubs are run on a ”more sustainable basis.”
”The Government has been clear that we want clubs to be on a secure financial footing for the long-term health of the game,” Robertson said. ”This is a welcome and positive move.”