July is almost upon us and some Newcastle United fans are, understandably, starting to get a little twitchy about the Magpies’ lack of summer signings.
Christian Atsu’s acquisition on a permanent deal is United’s only confirmed arrival so far this window, despite Rafa Benitez’s pleas for a significant portion of Newcastle’s transfer business to be completed early.
After missing out on Tammy Abraham and Willy Caballero - and with a deal for Florian Lejeune proving tortuous to complete - some fans have started to wonder why signings are proving difficult to secure.
Takeover talk has been cited as one potential reason, owner Mike Ashley’s frugal nature another - but it is talk of Financial Fair Play (FFP) regulations potentially affecting United’s dealings which is intriguing a significant number of supporters.
Here, NUFC Writer Chris Waugh investigates whether FFP really is hampering Newcastle’s summer transfer business...
What is FFP?
There are plenty of versions of FFP which govern all levels of the game - Newcastle would have faced alternative restrictions had they remained in the Championship for more than a solitary season, issues which Aston Villa are now struggling with - and the Premier League has rules of its own.
Essentially FFP provides financial regulation which, in theory, is intended to prevent clubs from spending beyond their means.
Since 2013, the Premier League have had FFP rules which - though complicated and split into two separate sections - are far less stringent than UEFA’s version, which governs clubs competing in European competitions.
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For Newcastle and other English top-flight clubs - or at least those who are not in the Champions League or Europa League - it is the Premier League’s regulations which they need to be concerned about.
There are two separate issues to consider: ‘Profitability and Sustainability’ rules, and Short-Term Cost Control (STCC) regulations.
What are the ‘Profitability and Sustainability’ rules?
Put simply, these regulations aim to ensure that a club is not operating well beyond its means by persistently recording significant losses.
Clubs such as Leeds United and Portsmouth have tumbled down the leagues after over-stretching themselves and the Premier League want to prevent this from happening again in the future.
As a result, the 20 top-flight clubs must submit their accounts to the League by March 1, and they must show that they have not sustained losses totalling £105million or more over three rolling seasons.
If clubs are found to have done so, they must commit to reduce their losses by £22m per season - and will likely face a significant fine or, in extreme circumstances, even further punishments such as points deductions or transfer embargoes.
Should Newcastle be worried that their potential summer transfer activity will leave the club in breach of these?
In a word: no.
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For a start, Newcastle did not make a loss in 2015/16 - their latest set of accounts - but rather they made an operating profit of £0.9m.
True, the Magpies almost certainly suffered a loss during their season in the Championship - managing director Lee Charnley has warned as such, though we will not discover the true extent until next April - but that will be swallowed somewhat this term.
United will plough money into transfers this summer, but remember they still have £30m profit from player sales a year ago and will look to bolster that by recouping further funds from outgoings in the coming weeks.
In theory, Newcastle’s losses over three seasons are only allowed to tally £83m rather than £105m, given that the Magpies were in the Championship last season rather than the Premier League.
As a result, unless Ashley surprised everyone and suddenly handed Benitez a £200m-plus transfer kitty this summer, Newcastle should have no concerns about recording a loss of more than £83m this season.
Remember, the Magpies will be able to use Premier League TV funds to help finance their spending, so that should help mitigate any losses sustained from the likely £70m-£110m outlay on players Benitez hopes for this summer.
And what about the STCC regulations? What are they?
It’s quite complicated once again, but in layman’s terms the Short-Term Cost Control regulations aim to prevent a club from massively increasing their wage bill over the course of a single transfer window using solely the central funds allocated by the Premier League.
Yet most clubs, particularly those who have just been promoted, are allowed to do so.
For a start, these rules only begin to get taken into consideration once a club has registered a wage bill in excess of £74m with the Premier League for the upcoming campaign (it was £67m in 2016/17 and will be raised to £81m for 2018/19).
If a club does have a wage bill totalling more than £74m for the 2017/18 season then they can choose to be assessed by the Premier League Board to determine whether or not they meet STCC regulations by one of two means: ‘Prior-Year Basis’, or ‘2012/13 Base-Year Basis’.
Should a club decide to refer to the ‘Prior-Year Basis’, then they must show that their wage bill has not increased by more than £7m year on year (or that they have only passed that threshold due to commitments and increases prearranged before the 2017/18 campaign). Alternatively, clubs move prove that any increase above and beyond £7m has been financed by a subsequent uplift in the club’s own revenue, or through player-trading profit.
Interestingly, there is a second fall-back options for clubs to avoid being in breach of STCC regulation.
A club can use the ‘2012/13 Base-Year Basis’ instead. Should a club’s wage bill be in excess of £74m for the 2017/18 campaign then they must show that it has not increased by more than £26m since 2012/13 (or by more than £33m by 2018/19). Again clubs can also illustrate that they have only passed that threshold due to commitments and increases prearranged before the current campaign.
Will Newcastle meet the STCC regulations for the 2017/18 campaign?
In a word: yes.
Again, there is always the unlikely event that Ashley suddenly decides to allow Benitez to recruit players on huge salaries to rapidly increase the wage bill, but realistically that is not going to happen.
In 2017/18, Newcastle are allowed a wage bill of up at least to £74m before any questions will be asked - and, realistically, up to as high as £87.7m.
Back in 2015/16, in the latest set of accounts, United’s wage bill totalled only £66.3m. What’s more, big earners such as Georginio Wijnaldum, Moussa Sissoko and Daryl Janmaat departed last summer.
As a result, the Magpies are likely to have around £12m-£15m breathing space in their wage budget to reach the £74m threshold. Factor in that Matz Sels’ wages are already off the books for the season, while other big earners will be moved on too, and that should free up further additional space.
Even if Newcastle’s wage bill did exceed £74m then, though United could not use ‘Prior-Year Basis’ as a defence, they could refer to their 2012/13 figures instead.
Back then, the Magpies’ wage bill was £61.7m - and, given that they are allowed to increase that by up to £26m, they would be allowed an outlay of £87.7m on salaries next term.
But, even if Newcastle’s wage bill did total more than £87.7m, the Magpies could point to their new sponsorship deal with Fun88 - which is believed to be worth £10m - as well as other increased revenues to justify such an increase.
So is FFP preventing Newcastle from making signings?
To summarise: no.
Perhaps the cynics among you may argue that the club could try and cite FFP as a potential justification for failing to spend money this summer, but they would not have a leg to stand on if they did.
Ashley would have to launch an unprecedented spending spree - or new investors would have to arrive very soon and do likewise - for FFP to in any way, shape or form affect Newcastle’s summer transfer activity.
FFP is not a concern for the Magpies - they just need to start finalising some transfer deals to calm everyone’s nerves.