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How Newcastle can spend £600m in just one year without breaking FFP

Amanda Staveley

Newcastle taken over

It was of course 

com/NUFC/status/1446149626801889281?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1446149626801889281%7Ctwgr%5E%7Ctwcon%5Es1_&” target=”_blank” rel=”noopener noreferrer”>announced

 recently that the Magpies have been bought out by the SAPIF, PCP Capital Partners and RB Sports & Media.

This means that Newcastle United now have the richest owners in world football.

As a result, Newcastle United are now expected to be one of the bigger spenders in the Premier League going forward as they look to match the ambitions of top clubs like Manchester City and Chelsea.

Fans of other clubs may have been hoping that Financial Fair Play rules will limit the Magpies’ spending. However, football finance expert Swiss Ramble has, on Monday, explained how Newcastle could, in theory, spend £600m in one year without breaking FFP.

How Newcastle can spend £600m without breaking FFP

As per the Swiss Ramble, Newcastle’s spending ability will be limited by the Premier League Profitability and Sustainability rules, which allows for a £5m loss a year. But this can be boosted by a £30m equity injection, giving allowable losses of £35m a year, which works out to £105m over the three-year monitoring period.

Ramble then explains that the Magpies made a £38m pre-tax profit over three years up to 2020, but they can make a £30m adjustment for ‘good’ expenditure, which would give them a total of £68m.

Adding the £68m to the £105m allowable loss gives Newcastle a £173m possible spend. However, it is added that clubs are allowed to adjust for the financial impact of the Covid-19 pandemic, which was, according to Ramble, £27m for Newcastle. Meaning that the North East outfit’s total potential spend rises from £173m to £200m.

But how then, would £200m become £600m? Well, as Ramble explains, transfer fees are not paid in full during the year a player signs. Instead, they are generally paid off evenly over the length of a player’s contract.

So, if a player is purchased for £30m and signs a five-year deal, the purchasing club would pay £6m a year for him.

This, in turn, means that Newcastle could, in theory, spend £600m in just one year by, as the example given by the Swiss Ramble explains, signing four players for £150m each in one year and then paying their fees off at £120m a year for the next five years. This would of course require Newcastle to sign said players on five-year deals, but the point still stands.

As the Swiss Ramble points out, however, this would see Newcastle use up their entire FFP limit in one year unless they grow their revenue.

So, though it is technically possible for Newcastle to spend £600m in one year, it is probably not the best idea.

What it does show, however, is that Newcastle will still be able to spend a very large sum next summer without coming close to breaching FFP.

For more details on how Newcastle can do this, check out the full piece from the Swiss Ramble here.

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This article was edited by Ben Browning.

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Newcastle 11/4 9/4
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# Team MP D P
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James, Reece Chelsea FC 4
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