What Manchester United £130m loss says about Newcastle United PSR struggle


The Premier League’s profit and sustainability rules (PSR) have been a thorny issue for Newcastle United. A club with arguably the wealthiest owners in football in the Saudi Arabian Public Investment Fund (PIF), the Magpies have been stymied in their attempts to break up the cosy nature of the so-called ‘big six’ due to financial controls that limit their ability to spend.

The PIF have major ambitions for Newcastle, and qualification for the Champions League in 2022/23 after finishing fourth seemingly had them ahead of the curve. But a drop-off last season, a campaign where they also had to fight on both fronts in England and at European football’s top table, made it difficult for Eddie Howe’s men to repeat the feat.

Newcastle are restricted due to historical performance. While rivals have been able to spend, qualify for Europe, spend some more, and qualify for Europe again, thus building up revenues and aiding their ability to leverage their wider appeal into greater commercial deals, Newcastle haven’t had the benefit of that over a prolonged period of time.

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Manchester United are one of those who have. The Old Trafford side, while without a Premier League title to their name since 2013, have remained a commercial juggernaut.

On Wednesday they posted their quarter-four financial results for the 2023/24 reporting period. As a publicly traded company on the New York Stock Exchange, they must provide quarterly reports for shareholders, and that means that they are the first club to have shown their hand for the 2023/24 financial year.

Despite ‘record-breaking’ revenues of £661.8m, Man United made a net loss of £113.2m, meaning that for five consecutive years, they have posted losses. The pre-tax loss, which is used to assess PSR, actually stood at £130.7m.

Manchester United have posted losses of more than £92m for three of the last four years and have now recorded total losses of £372.8m over the previous five years and £257.4m across the last three years, but insist they are compliant with the financial rules set out by the Premier League and UEFA.

Newcastle, on the flip side, have seen pre-tax losses of £160m combined over the most recent three-year period up to 2022/23, and were forced to player trade their way out of a PSR tight spot before the 2024 financial year end, which was June 30. That meant that recruitment was significantly impacted in terms of who they may have wanted to get in this summer.

Man United had to player trade too, but they were able to operate with more freedom.

For Man United, PSR had become an issue they had to be mindful of at the end of the most recent financial year, although there was confidence that they had done enough in terms of player trading to avoid any issues. That is likely the case.

But the challenge is that the club has needed to invest in new talent this summer in order to kick start the Sir Jim Ratcliffe grand plan, and that very much centres on a return to Champions League football.

Additions this summer, including the arrival of Manuel Ugarte from Paris Saint-Germain for around £42m, mean that Man United have spent around £181m in terms of outlay, not including add-ons that may arise in the coming seasons. That, based on five-year deals, amounts to an annual amortised cost on the books of £36.3m.

But the club’s revenues remain strong and continued growth has arrived. Allied with the fact that they have managed to pull in some £67.7m in terms of pure profit from the sales of academy products Scott McTominay (presumed), Willy Kambwala, Mason Greenwood, Facundo Pellistri, and Hannibal Mejbri, that is money that can be accounted for in its entirety for the 2024/25 financial year, as well as the profit now realised on Aaron Wan-Bissaka through his £15m move to West Ham United, with Man U having already cleared his £45m guaranteed sum from when he arrived in 2019, means that the club is likely compliant.

Man United’s confidence in PSR compliance comes from the allowable deductions that they feel will be permitted, including a £47.8m sum to complete a strategic review to enable the purchase of the minority stake in the club by British billionaire Sir Jim Ratcliffe at the turn of the year.

Investment into the women’s team, the academy, community initiatives and infrastructure are all allowable deductions when it comes to PSR assessment. During the financial year in question, Manchester United had investments in Old Trafford that included new hospitality facilities, expansion of rail seating and kiosk refurbishments to support continued growth and enhance fan engagement and atmosphere, they also saw construction commence on the main building at the club’s Carrington Training Complex, all of which are allowable deductions when it comes to PSR.

That £257.4m across the three years doesn’t factor in allowable deductions, of which there is expected to be a considerable amount, meaning that the actual figure in terms of PSR losses would be far lower, albeit sailing fairly close to the threshold.

Much of the club’s business this summer was accelerated after the end of the last financial year and when the club ticked over into a new one.

Manchesster United continue to be able to rely on major revenues, something that will continue next year, although likely to be pegged back a little from this year due to the finances required to undergo the restructuring of the business, where a significant number of jobs have been affected.

Newcastle have to work harder to grow revenues and commercial income, particularly given that their access to the Gulf market and the lucrative nature of it due to ownership ties have been fiercely scrutinised by the Premier League, and new associated party transaction and fair market rules have been drawn up in the last couple of years to stop effectively put a cap on what Newcastle can glean from such commercial deals.

The ladder was pulled up between the ‘big six’ and the rest some time ago, and only punching above your financial weight for several seasons in a row can truly address that problem, but in being unable to strengthen to the levels of your rivals means the club is hamstrung in terms of what it can do without effective player trading.