Are Chelsea really in danger of PSR breaches?
The short answer: probably not. The longer answer: this financial year will be telling.
Chelsea declared an £89.8m loss for 2022/23. You might also read £90.1m. The former is the number to go with, even though they are both basically the same. The reason for the discrepancy is because £89.8m has tax credits deducted.
The numbers, taken out of context, look worrying. But remember, under PSR clubs can deduct all manner of things, including investment in the Academy and Chelsea Women.
The bottom line is Chelsea insist they are compliant with PSR, and also expect to be so at the end of 2023/24. By then, the three-year monitoring period will be all Clearlake-Boehly with the final year of Roman Abramovich’s tenure dropping off. The disappearing numbers from 2021/22 are Covid-adjusted giving Chelsea a bit more leeway in the current monitoring cycle.
The fact Chelsea haven’t been charged to date is encouraging and certainly backs up the club’s position and calmness.
Clearly, there are some concerning numbers in the latest accounts: £89.8m losses, a £404m wage bill, and £745.2m spent on new players (1 July, 2022- 30 June, 2023). Plus, there’s £454.1m after the financial year cutoff which is worth bearing in mind ahead of the next books. And Chelsea spent a Premier League-high £75.1m on agent fees.
Amortisation is also up from from £162.5m to £205m. It’s probably why Chelsea have triggered one-year extensions for Mykhailo Mudryk and Enzo Fernandez. The deals were done before rule changes restricting amortisation to a maximum of five years. As a result, Chelsea are now eligible to count the extra year, thus lowering the annual cost. The problem with amortisation of several transfers over long periods of time is fees ‘linger’ on the books and eventually all add up.
Arguably the most worrying number is the £249m operating loss, which is a Premier League high for 2022/23. Leicester (£152m) and Everton (£115m) are also in the top four operating losses and both got charged. But unlike Leicester and Everton, Chelsea raised £203m from player sales and made a net trading profit of £62.9m.
And crucially, the £76.3m sale of a hotel from Chelsea to their parent company, BlueCo 22, is understood to count as part of PSR calculations, even though it's excluded under EFL rules. It's worth noting, this won't help with UEFA's FFP.
The next set of books, for 2023/24, will reflect the £55m sale of Mason Mount to Manchester United.
Lewis Hall’s £28m obligation to buy has also been triggered, so that’s more incoming capital. Newcastle are expected to list Hall’s fee in 2024/25, by paying the money owed in July; but it’s permissible for buyer and seller to declare a transfer on different financial years under some circumstances. Chelsea could potentially include Hall in 2023/24 because the deal was agreed this season and/or because they argue July 2024 (when they are expected to receive payment) is a ‘near miss’ right after the 30 June financial year cut off.
Under a new incentive-driven structure, Chelsea's wage bill will also decrease when the next set of figures come out due to this season’s lack of European football. It's understood all new signings from January 2023 agreed to a salary cut if Champions League wasn't achieved. This won't entirely offset the lack of Champions League, though, which is still a big hit to the books.
Player sales between now and June 30 will provide us with a fuller picture. Sources still insist the desire to raise £100m+ in outgoings is primarily to help complete a four-window recruitment plan.
Overall, the 2022/23 numbers do look relatively bleak, but post tax, and with allowable deductions, they become slightly more palatable, hence why Chelsea have not been charged to date.
Chelsea also still have other assets they can sell to BlueCo22 in order to inject further capital into the club. Providing this is done at fair market value it’s a perfectly legal loophole. It’s basically just creative accounting.
In the longer term, 2024/25 (still two financial years away), could yet bring European football income. Chelsea can still qualify for the Europa League by either finishing sixth or winning the FA Cup.
Even if they fail, 2024/25 won’t as damaging as this season, financially speaking, because Chelsea will also have Club World Cup income. Even though the inaugural expanded tournament ends in July, it is accepted as part of next season. Chelsea will get a minimum of around £40m and potentially double that if they win the tournament.
Plus, by then, PSR may well have been replaced. It will definitely stay in place for the three-year monitoring cycle ending 2023/24. And even under new proposed rules, more aligned to UEFA’s squad cost control measures, points deductions are here to stay.
So the key is really how this season affects the club, both on the field and on the books. If they can clear the next monitoring cycle ending 2023/24 unscathed then there is arguably less cause for concern going forward.
And regardless of breaches, which again Chelsea sources stress they don’t fear, a valid question is simply, how much budget is currently available or can be raised in order to bring in 3-4 important signings this summer?
It’s one thing keeping within in the financial rules, it’s whole other challenge being able to find £250m+ to move in an inflated market, which Chelsea have clearly contributed to.