Under the new rules reached by the 20 shareholders of the Premier League, Premier League teams must submit details of commercial transactions for approval by their rivals.
The rules are a direct response to The Saudi Arabian-led £305 million acquisition of Newcastle United and will curb the potential spending capacity of a state-owned (or partially owned) team like the Magpies.
Following the acquisition of Newcastle United by an 80% consortium owned by saudi national public investment funds (PIF), the Premier League began developing rules in October. The aim is to prevent team owners from exaggerating the team's finances by obtaining sponsors from "related parties" at exorbitant prices, thereby increasing the amount of money available for acquisitions under the Financial Fair Play (FFP) provisions.
The Premier League's major clubs are concerned that PIF may seek favourable stadium, training ground or shirt sponsorship deals from Saudi companies. They fear this could significantly strengthen the Magpies' position in the transfer market, putting the rest of the Premier League at a disadvantage.
Premier League teams have now voted on these "related party deals" to ensure they are settled at a "fair market value". More than 14 of the 20 teams voted. Newcastle United voted against it, while Manchester City abstained.
Newcastle United, funded by a Saudi consortium, threatens all teams in the Premier League. A large cash injection in the short term may cause opponents to decline in performance, and in the long run, they will become a threat to the other six giants.
Mechanisms for monitoring the value of commercial transactions will involve the evaluation of independent appraisers, the team's own appraisal and the establishment of a database that will contain anonymous information about previous top league transactions. The establishment of the system will enable Premier League boards to decide on deals without knowledge of sensitive commercial information.
Currently, the FFP stipulates that the team will lose £105 million in three years before being sanctioned. By increasing revenue, the team can expand the scope of the FFP, giving it more strength in the transfer market.
As reported by Sports Post, Spurs have the greatest potential for transfers after years of rigorous financial management. Expert Kieran Maguire, a lecturer in football finance at the University of Liverpool, has analysed that Spurs can spend up to £400 million and remain within FFP rules as they have had safe profits and revenues in previous years.
The chart above shows that Newcastle United have been pushed into the ranks of the Big Spenders in the Premier League. The team will be able to spend £166 million over a three-year rolling period and will still operate within the limits of a financial fair play. With Saudi support, the team is now capable of realising its spending potential. However, analysts expect the club to quickly strike new business deals worth up to £100 million, which will allow for more than £200 million in allowed spending, allowing it to compete with Arsenal, Chelsea and Manchester United. At the same time, Tottenham's profitability over the past decade means they have the potential to spend more than any team. (Source: University of Liverpool)
Newcastle United can currently spend £166 million, but analysts believe there is a lot of potential to quickly increase their commercial revenues, for example, by securing a stadium sponsor.