‘Questions will be asked’ after Newcastle United spend £20m on confirmed signing

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Newcastle United could come under scrutiny after spending £20m on a new signing, an expert has claimed.

The Magpies have posted financial losses of over £155m for the three seasons up to 2022-23, the last campaign for which accounts are publicly available.

The Premier League permits maximum losses of £105m over a rolling three-year period, but Newcastle came under that threshold with PSR-deductible costs were factored in.

Despite lucrative Champions League participation last season, it appears that Newcastle only narrowly swerved a PSR breach for the 2023-24 monitoring period too.

The club were one of several in the Premier League who were forced to get a number of PSR-busting, quasi-swap deals over the line before the 30th June cut-off in order to comply.

Essentially, these controversial – but legal, if conducted at ‘fair market value’ – deals involved clubs trading players in two separate transactions for roughly equivalent fees.

Incoming fees are received upfront, whereas the cost of new signings are amortised over a player’s contract length up to five years. This allowed clubs to book an immediate profit in PSR terms.

In the latest development, the fee Newcastle reportedly paid for one of those signings has raised a few eyebrows and could have a detrimental impact further down the line.

Newcastle spend £20m on Odysseas Vlachodimos

Newcastle sold 21-year-old midfielder prospect Elliot Anderson to Nottingham Forest for £35m in June, with reserve goalkeeper Odysseas Vlachodimos heading in the other direction.

As relayed by finance expert and Fair Game advisor Chris Weatherspoon via X, it has now been reported that Newcastle paid £20m for Vlachodimos.

Weatherspoon observes that, as far as their 2023-24 PSR calculation is concerned, the value of the transactions allowed both clubs to register a profit.

Forest booked a £16.6m profit, while Newcastle will record £35m.

In response, former Man City consultant Stefan Borson suggested that “questions would be asked” about the Vlachodimos fee and that it is the “first step of flagging something for review.

Borson was referring to the Premier League’s rules on fair market value, which are in place to prevent clubs from signing deals at inflated prices.

In any case, while quasi-swap deals do provide short-term relief, they are not a free hit – the full fee is eventually registered in a club’s PSR calculation, albeit on a spread out basis.

Newcastle’s PSR calculation over the next five years will therefore include an annual £4m amortisation charge for Vlachodimos.

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TBR Analysis: Why do Newcastle have PSR issues?

While Newcastle have been anchored by PSR, they have still spent heavily since the Saudi Public Investment Fund’s takeover in October 2021.

Speaking exclusively to TBR, Liverpool University football finance lecturer and Price of Football author Kieran Maguire said that more player sales will be necessary at St James’ Park going forward.

Their net spend in 2022-23 and 2023-24 was around £236m. And amortisation costs mean that they will be counting the costs of those signings for several years to come.

This is the reason that now former director Amanda Staveley made increasing commercial income her A1 priority, with revenue from sponsorship and merchandise sales more than doubling during her tenure.

Going forward, the club are still exploring plans to expand St James’ Park. The cost of that project will be exempt from PSR, but matchday income benefits will take years to materialise.