Uefa coefficient is a Super League hangover – Villa should not have to entertain Ollie Watkins offers

Could Liverpool sign Ollie Watkins? A piece of tantalising summer transfer news in one respect, although also representative of the debate that will go right to the heart of the Premier League annual general meeting this week.

Profit and sustainability rules [PSR] have dominated season 2023-2024 – and as the summer window opens, it is still live. Aston Villa, the Premier League’s new representative in the Champions League, are at the centre of the question and by extension leading players at the club like Watkins – Villa’s 27-goal striker last season. In any other circumstances, selling Watkins would be unthinkable ahead of this, Villa’s first European Cup season since 1983. What makes it plausible is the PSR factor.

The losses Villa posted in March for last season, £119.6 million, place them in PSR breach danger. Not all that loss figure will represent a PSR loss. Nevertheless it is not hard to see why the club have proposed on the AGM agenda raising the permitted losses under PSR from £105 million to £135 million for this final three year monitoring period under the current rules. Without player sales this summer perhaps Villa could breach and the first whispers of Liverpool’s interest in Watkins – real or otherwise – surfaced this week.

Whether that is accurate or not is one question – the very fact that selling Watkins is a scenario Villa might have to entertain is another which the Premier League will be forced to deal with.

This is the great problem Premier League PSR faces: not all the models of distributing the great wealth of football are under the Premier League’s control. The biggest clubs are paid by Uefa for their participation in the Champions League and that system is weighted in favour of the clubs who qualify every year. Until Uefa gets rid of that bias – historic performance, known as the Uefa coefficient – then the biggest, wealthiest clubs will always have an advantage.

Clubs are, in short, given a greater share of the Uefa rights income based on historic performance. It has skewed Newcastle United’s earnings this season in the Champions League because their coefficient, after ten years outside any kind of Uefa competition, was non-existent. Even though the formula for calculating broadcast income is changing next season, it is likely to have a similar effect on the earnings of Villa, another newcomer to the Champions League.

The football finance analyst Kieron O’Connor has estimated that on the current formula for calculating revenue, Manchester United will earn £60 million in Uefa distributions for the Champions League this season, almost twice that of Newcastle, around £34 million. That is despite both clubs going out at the group stage in which Newcastle earned one point more from six games than the team from Manchester. Of the €2 billion Uefa will distribute this season to Champions League clubs, €600 million will be divided according to a team’s coefficient – performance over the last ten years.

From next season, the weighting of Uefa Champions League payments via coefficient is woven into a more complex formula. It will in part be combined with the revenue Uefa earns from the broadcast territory of each club in question. Nevertheless historic performance of clubs – over five years and ten years according to the pertinent part of the calculation – will still play a part.

It is an old hangover from a time when Uefa lost a grip of the biggest clubs, after the scandal that felled its former president Michel Platini in 2016. The coefficient is an anti-competitive pill for the competition. One that ensures new entrants to the Champions League like Villa or Newcastle cannot make major strides in revenue in their first season, and may struggle to have an impact or indeed qualify again the following season.

As Newcastle fell away last season from fourth in 2022-23 to seventh this season, so may Villa. Changing the PSR top limit of permitted losses from £105 million to £135 million just imports the inequalities of Uefa to the Premier League and potentially damages the league’s competitive balance. Crystal Palace have proposed a leveling mechanism to Uefa’s established club bias. One in which owners like those at Villa would be able to make additional equity investments based on the average income the Premier League’s Champions League clubs earn from their Uefa coefficient payments.

It is a difficult problem to solve. For the 2024-2027 three season Champions League cycle, Uefa will distribute a total of €2.5 billion, 25 per cent up from the last cycle, to 36 clubs in the new format. Of that a third, €853 million, what Uefa calls the “value pillar” will in part be calculated on a club’s coefficient rating – historic performance.

Changing the Premier League’s PSR permitted losses limit is a fraught question given what has happened to Everton and Nottingham Forest over the last 12 months, and with Leicester City now facing potentially even greater sanctions over historic breaches. PSR is there to protect the Premier League and the competitive balance of the competition. But it is fighting against the measures that mean established Champions League clubs earn more in Europe regardless of performance.

The Uefa payments based on historic performance are the bad politics of an era that tried and failed to stop the original Super League breakaway – and have been allowed to remain as a compromise solution. They are the shadow of the attempt to create a Super League of permanent members. They are permitted by Uefa to survive in order to keep at bay subsequent proposals by the same lobby for a European league structure in which a newcomer like Villa would go into the third tier rather than the elite.

The problem for clubs like Villa is that they prevent them from investing anew when they reach the promised land of the Champions League. The €2.5 billion it generates should be distributed by Uefa as part equal share and part performance-related – and nothing in between.