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The Challenging Regulatory Landscape for Newcastle United’s Ambitious Owners
The brutal reality of the Premier League’s regulatory ecosystem is that it will be some time until Newcastle United’s dizzyingly ambitious owners are able to achieve their goals on Tyneside. When the Public Investment Fund (PIF) purchased the club in October 2021, many loyal Newcastle fans envisioned a future akin to Chelsea and Manchester City following the respective takeovers by Roman Abramovich and Sheikh Mansour.
However, the Saudi PIF has been unable to spend at the level they had hoped, primarily due to the Profit and Sustainability Rules (PSR) imposed by the league. Under the current PSR framework, clubs can only lose up to £105 million over a rolling three-year period. This simply isn’t enough flexibility for a club aiming to transition from mid-table obscurity to the pinnacle of European football.
The Impact of Profit and Sustainability Rules (PSR) on Newcastle United
That said, the PIF is well ahead of schedule in their masterplan for the North East, both in terms of the Premier League table and the club’s balance sheets. Eddie Howe’s brilliantly coached side has reached a second final of the PIF era and is in contention for Champions League qualification once again under Saudi ownership. Securing premium European football would significantly boost revenue and provide more headroom within the PSR constraints, allowing for greater flexibility in the transfer market.
The news from Premier League headquarters, where Newcastle’s owners are highly divisive, could potentially reshape the landscape in terms of the PIF’s ability to fund and spend at St. James’ Park. One of the biggest stories of 2024 in sports business circles was Manchester City’s challenge to the Premier League’s Associated Party Transaction (APT) rules in the arbitration courts.
Newcastle United’s Owners Challenge the Premier League’s APT Rules
City’s argument, which Newcastle provided evidence to support, was that the league’s rules on deals between clubs and owner-linked entities were anti-competitive. The APT rules were introduced in the wake of the Newcastle takeover in 2021, ostensibly to prevent owners from funding clubs via the backdoor through sponsorship deals.
Under the current system, which City’s partly successful challenge saw significantly revised, the Premier League must demonstrate that a transaction does not meet fair market value standards in order to block it. In a development that will be welcomed in the St. James’ Park boardroom, City has now launched a fresh challenge to the APT system, seeking to have the fair market value element of the rules declared null and void.
According to Kieran Maguire, a football finance lecturer at Liverpool University, even if the APT rules are abolished completely, UEFA’s regulations will serve as a backstop. “Even if it is abolished completely, you have still got UEFA’s rules and there is a fair market provision there,” the Price of Football author and industry insider explained. “At the same time, a relaxation of the fair market value provision, which has already been diluted, would be potentially beneficial for Newcastle.”
Maguire also noted that the PIF is taking a more cautious approach than many Newcastle fans had hoped for, as the reality of the PSR has tempered expectations. “They thought they were going to be showered with gifts. That hasn’t materialised and PSR has been the main driver of that. I can understand the frustration of Newcastle fans.”
Regarding how the Premier League would implement fair market value post-APT, Maguire suggested that they would likely continue to use similar processes as they do currently, potentially in alignment with UEFA to lend credibility to the approach.
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Stay tuned for further updates on the ever-evolving regulatory landscape surrounding Newcastle United’s ambitious owners and their quest to transform the club into a European powerhouse. The journey may have its challenges, but the long-term potential for the Magpies remains undeniably exciting.
