There has been an air of celebration at Arsenal over the past few days after the Gunners humiliated Tottenham Hotspur by signing Eberechi Eze from under Spurs’ noses.
Many Spurs fans were convinced that they were about to land Eberechi Eze at Arsenal’s expense – but they were proven wrong.
In the space of a few hours, the transfer rumour mill went from ‘Arsenal make approach for Eze‘ to ‘Arsenal have sealed Eze deal‘.
However, David Ornstein said something slightly worrying about Arsenal in the wake of the Eze deal, namely that the Gunners aren’t in a great position regarding FFP.
“Arsenal had a lot of headroom on Premier League PSR,” Ornstein said on The Athletic FC Podcast. “So that’s one thing in their favour.
“They did not have a lot of headroom on UEFA’s FFP, Financial Fair Play rules. They are tight on that. And so, some manoeuvring will need to be done.
“But right now, I’m not getting any sense that they’re in a panicked situation.”
GRV Media’s football finance expert Adam Williams has now spoken exclusively to Arsenal Insider about Arsenal’s current situation under UEFA’s financial rules.
“I have been wondering about Arsenal’s status under UEFA’s financial rules for a while,” said Williams.
“There are two components of the UEFA system. A) Football Earnings and B) Squad Cost.
“On the Football Earnings side of things, they are absolutely fine. The loss limit is about £75m over three seasons with the maximum allowance, which Arsenal will get.
“They lost £14m in the last financial year, but that will have swung back to a decent profit when you add back expenses like infrastructure and youth investment, which are exempt from FFP.
“For 2024-25, they are going to post a decent profit even before those allowable expenses, so they have – I would guess – the scope to lose something like £100m-plus before Football Earnings becomes a concern.
“They aren’t going to get close to that. Remember, transfer fees are amortised over up to five years, so £250m worth of deals this summer is only going to impact the bottom line by £50m this financial year, which is what FFP is based on. So they are fine there.
“The issue is the Squad Cost element of the rules. Under this system, you’re not allowed to spend more than 70 per cent of revenue plus player sale profits on player and manager wages, transfers and agents’ fees.
“The complicated thing with this test is that it’s based on calendar years, not seasons. That makes things harder to work out, because financial years are reported in alignment with football seasons, so we can’t delineate in terms of what revenue or costs arose at what date.
“But let’s take 2023-24 as an example. Their revenue was £613.5m and their profit on player sales was £70m, so their relevant turnover was £683.5m.
“If this was a calendar year, that would give them a limit of £429.5m for wages, transfers and agents’ fees.
“Their wages were £328m and their amortisation was £171m, which is £499m total. So if UEFA had been assessing them based on that financial year, they would have been over the limit.
“The good thing is that, in 2024, the limit was 80 per cent, so they weren’t close to breaching. But it shows you how things are going to get tough.”
In a nutshell, Arsenal would need to make sales now if they are sailing close to the wind, as the January transfer window would be too late for them due to the calendar-year nature of the Squad Cost element.
Williams continued: “UEFA has begun to bare its teeth with the squad cost rule. Chelsea, Villa and a handful of others have received fines. Most of the total amount, however, is suspended pending compliance with a financial settlement.
“So basically, as long as you aren’t repeat offenders, you aren’t going to get a sporting sanction. For that reason, some people I speak to are thinking about it more as a luxury task, a cost of doing business.
“That said, it’s a headache Arsenal could do without. The thing is, because it’s a calendar-year test, if Arsenal are close to the bone, then they would need to make sales now. The January window will be too late.
“In one sense, however, I think Stan Kroenke will be pleased… If UEFA are properly enforcing the rules, it means other clubs will be spending less.
“This means Arsenal have to spend less to compete with them, which means Kroenke doesn’t have to underwrite financial losses at the Emirates. That’s the dynamic at play here.”
