Aston Villa FFP position explained as Douglas Luiz transfer speculation intensifies

Douglas Luiz looks on
-Credit: (Image: James Baylis - AMA/Getty Images)


Aston Villa’s issues with the Premier League’s profit and sustainability rules (PSR) came into focus once more this week.

Villa, who have lucrative Champions League football to look forward to next year that will net the club at least £30m without even factoring in any of the potential prize money that would accrete along the way, not the guaranteed sell-out four extra home games of walk-up income, were named as one of a number of clubs facing the prospect of selling players before June 30 in order to get under the PSR threshold and avoid potential sanctions.

For the current financial year, Villa opted to extend it to 13 months, with the year-end to be June 30 instead of the previous May 31. It was a move done to buy Villa a little more time to get their house in order following a 2022/23 financial year that saw heavy losses of £119.6m, losses which were largely attributed to investment in the on-field product at Villa Park. To exercise such an option to extend the financial year isn’t uncommon, and Villa’s year will run to June 30 for the long-term moving forward.

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Looking at the club’s exact PSR position isn’t an easy task, but a rough idea can be gleaned from the figures that are out there in the ether already. Villa’s loss for the 2022/23 season comes on the back of a small £400,000 profit that was recorded the year before, and the averaged two-year, pandemic-impacted 2019/20 and 2020/21 financial periods where the club lost some £68m before tax. Despite losses of around £187m, Villa are able to deduct significant sums from that loss, including as much as £56m from the impact of the pandemic across the two aggregated years.

The club also saw a capital investment into the club for infrastructure rise from £7.1m in 2021/22 to £13.4m in 2022/23, an allowable deduction. Add into that the investment in the women’s team and youth academy, including the building of the new academy building at Brookvale, and the losses reduce further still. Last year Villa spent some £19m, combined, on youth development, women’s football, and community projects. According to figures presented by football finance expert Swiss Ramble, and using the allowable deduction estimates from previous seasons, Villa were squarely at the £105m PSR threshold, meaning there was some work to do, albeit not drastic.

The headlines that were doing the rounds in relation to those clubs who may be sailing close to the wind when it comes to PSR, which Villa likely will be given that the rules allow for a £105m loss over a three-year period after allowable deductions, may have been a little misleading for some sides.

Player trading is a vital part of a football club’s ability to generate revenue, and given that PSR has been proven to be unfit for purpose in 2024, demonstrated by the fact it will be replaced by a new squad cost ratio rule from 2025, there are many clubs who are seeking to ease their PSR concerns and provide room to add new talent.

The suggestion of any kind of fire sale of top talent at Villa Park is erroneous. Every player has a price, and any interest would be judged on the strength of the deal on offer in the market against the outlay required to bring in a replacement. Villa are a Champions League side next season, and they will need a deeper squad to cope with the rigours of both campaigns. Every game has a lot riding on it, there won’t be any gimmes.

Moving players on will be a focus for Villa, and it will be to try and ease the PSR gap. But it doesn’t have to be Douglas Luiz or another star, it could be a couple of fringe players who have sizeable profit to be made due to low book value, or an academy product like Jacob Ramsey who would represent pure profit.

The focus isn’t just on who goes so as to make sure the club avoids punishment, it will be on how much there is to play with moving forward to bring in new talent. Raising revenues across the board will be key for Villa given that the wage bill will almost certainly rise owing to bonus payments due to the squad for Champions League qualification.

It also emerged earlier this week that Villa had failed in their attempt to raise the Premier League’s PSR threshold from £105m to £135m, potentially hinting at the kind of margins they are currently working with.

But was the request really that much to ask? The £105m PSR figure has been in place since the financial controls were introduced back in 2012. Football has changed a great deal since then, and while the money that has flowed into the Premier League has grown astronomically, so too have the wage bills, amortisation costs, and general administration costs of running clubs. It remains an unprofitable endeavour for owners in terms of annual dividends, it is instead all linked to value creation at the point of sale at a period in the future.

The £105m figure has not accounted for inflation. Using the Bank of England’s own inflation calculator, £105m in 2012 would be £146m now. Even looking back at 2017, the £105m now would be £135m, the figure Villa sought to raise it to for its final year of existence.

Villa won’t be ripping up the canvas this summer, they have made too much progress to do that. It will be about trying to grow while being bound by regulation. That means they will have to sell some players, but they aren’t on their own in that respect. Which players they have to sell is still very much up to them.