The task for Sir Jim Ratcliffe at
Manchester United is how to turn around the fortunes on the field of a
Football club that has suffered from years of neglectful ownership. As far as minority owners go, it’s hard to think of too many who have had held the kind of sway that Ratcliffe does at Old Trafford . The deal to acquire 28 per cent of the club from the Glazer family in January handed the
British billionaire and INEOS founder oversight over football matters and the direction of the club when it comes to stadium redevelopment. United have been heavy spenders over the past decade, and any notions of not being financially supported to compete are hokum. However, what they haven’t had is any kind of football strategy, played out in a stadium that has been allowed to decline, almost as if representative of the way that the club has been run under the Glazers. READ MORE: United face expensive Old Trafford decision with Ratcliffe compromise inevitable READ MORE: Jason Wilcox can bring clarity to a United role that nobody understands Whether or not United choose to redevelop Old Trafford or build a new stadium on the land adjacent will be cause for discussion for some time yet, but for Ratcliffe part of the plan to return the club, which hasn’t won a
Premier League title since 2013, to the summit of the English game has already started. The landscape is different now, however. It is no longer a case of who can spend the most; it is about who can be smarter with what they have and how they use it. The Premier League’s Profit and Sustainability Rules (PSR) have come into sharp focus over the past 12 months, with Everton (twice), Nottingham Forest, and Leicester City all landed with charges for being in breach of PSR, which limits clubs to £105m worth of losses over a three-year period, with deductions allowed for such things as infrastructure investment, academy, the women’s game, and community initiatives. But even though the charges thus far have been levelled at clubs outside the so-called ‘Big Six’, the ever-increasing cost of being competitive through bumper transfer fees and wage bills meant that even the likes of United and
Arsenal had to be mindful when January came in order to remain compliant. United’s huge revenue streams have continued to grow over the years despite a lack of success, with the club remaining a commercial juggernaut. For the 2022/23 financial year the club saw an 11% rise in revenue, from £583m to £648m, with pre-tax losses reduced from £150m to £33m. Part of the Ratcliffe plan at United is to address sizeable club costs and work smarter, and his desire to make these changes arrives at a time when Premier League clubs are likely to vote around a new set of financial controls - potentially in time for next season - that will replace PSR, a model that is now deemed unfit for purpose. It is likely that the Premier League adopt a model in line with what UEFA already has, which is a squad cost ratio. Sign up to The Bottom Line newsletter Sign up to our new weekly newsletter, the Bottom Line , which will bring you exclusive reporting on the financial issues affecting the future of football. From the happenings at the biggest clubs, at home and abroad, interviews with the people who make the big decisions behind the scenes - Dave Powell, Chief Business of Football Writer for Reach Plc, will be keeping newsletter subscribers informed and doing deep dives into the business of Premier League clubs, the EFL pyramid, US sports and more. The Bottom Line is currently offering 50% off annual subscriptions. So, for the latest news on the finances of Premier League clubs from Dave Powell, subscribe here . UEFA’s current model works towards a 70% squad cost ratio limit, with the calculations made by taking wages, plus amortisation costs (the way transfer fees are accounted for), severance costs, and intermediary fees, and offsetting them against operating revenue and player trading profit (the best year of the last three to take into account the volatility of the transfer market). Nothing concrete has yet been presented, although various reports have suggested that the Premier League may impose a 70% threshold on clubs in regular European competition, with those outside of that revenue stream allowed an 85% squad cost ratio. But what might the adoption of squad cost ratio by the Premier League look like for United? Using the 2022/23 financials, United’s wage bill stood at £331m after wage drops resulting from a lack of
Champions League qualification kicked in. When assessing squad cost ratio, UEFA uses relevant wages, which are the wages attributed to playing staff and the head coach. According to figures presented by football finance expert Swiss Ramble, the relevant wage for United for squad cost ratio assessment purposes was £282m. Then comes amortisation costs. Amortisation is the guaranteed sum of a transfer fee to acquire a player divided by the years of the contract. Regardless of the payment schedule for the transfer, it is how transfers are accounted for by football clubs. For United, this amortisation figure stood at £170m for 2022/23, with that figure being the remaining book value of players. Adding together the £282m in relevant wages, and the £170m in amortised costs, acknowledging that the club had no severance payments to make for the sacking of managers during the financial year in question, gives a sum of £452m. Now, that £452m is then assessed against operating revenue and player trading performance. United’s revenue growth to £648m, allied with reduction in payroll, helps the squad cost ratio considerably. In terms of player trading, a sum of £21m has been achieved by United. The player trading profit is the profit that clubs have made on the sale of a player over and above their remaining book value. Adding together the operating revenue and player trading profit delivers a figure of £669m, with additional relevant income from player trading, such as loan fees, bringing in another £1m-plus to take the sum to around £671m. That £671m, against wage costs, amortisation costs, severance and intermediary fees, would see United at a 67% squad cost ratio; the fifth best in the Premier League, ahead of
Liverpool (68%) and Arsenal (74%), but trailing
Manchester City ’s 60%. That gives United a 3% head-start on being compliant with any new regulation. But with wages likely to increase when Champions League qualification does, and the requirement to keep adding in the transfer market, there is an obvious reason why Ratcliffe wants to get a firmer grip on costs now. United have the benefit of being a part of the 'Big Six', where revenues far outstrip the rest thanks to regular European competition and increasing commercial revenues through the global stature of the brand. The greater headroom that can be created ahead of new regulation through stricter cost control and spending money in the transfer market more wisely, the greater freedom United will have to act appropriately in the market when the time is right. Try MUFC Pro NOW for free Subscribe to our brilliant app for the best way to enjoy the M.E.N's unrivalled Manchester United coverage. No adverts, pop-ups or distractions - just our brilliant content presented in the best way possible. Comprehensive, round-the-clock coverage of the Reds, with agenda-setting
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