Newcastle United Amortisation and Alchemy | OneFootball

Rights, I said I’d follow up on my PSR blether from the other day, and I’ve been inundated with people asking for this keenly anticipated sequel, so here we go. Strap in.

Basically, the very high level gist of my PSR piece was that Newcastle United are about to emerge from a period of necessary frugality, having walked a tightrope of financial fair play for the past few years. Remember, allowable losses are £105m over a three year period.

United’s losses in the last three published accounts are:

This totals 153.1m, but not all losses count towards PSR, so we can assume that at least 48.1m went on the allowable losses of infrastructure, women’s team, youth investment etc. Given there have been no colossal spends on any of the above, it’s a fair assumption that not much over and above that 48m fits into this category, as the eleventh hour sales of Anderson and Minteh were needed to avoid a dreaded points penalty.

Whichever way you slice it, things are looking up. The 21/22 loss of 68.6m was removed from the new three season calculation (unknown until its release next March), with the outgoings on Lewis Hall (approx 28m) and Will Osula (15m) offset by the sale of Almiron (11m). This will then be assisted by the reportable element of a huge 73.4m loss falling off for the period starting on 1st July 2025. None of these numbers are possible to confirm as absolutely accurate but the nature of this whole conversation involves some estimation.

Not only does no one really know exact transfer fees, people will also be unaware of amounts of increased commercial income, bonuses/severance and anything else that moves the financial dial. This is the reason why there have been some conflicting stories about how much United may have to spend this summer, with that familiar old figure of £100m bandied about quite a lot. But even then, this is open to interpretation, because of amortisation.

Amy who? Bet everyone has heard the term somewhere but it’s part of that modern football parlance. If any accountants are out there, don’t be coming at me with fine print, this is me trying to summarise, so in a nutshell, amortisation is spreading the value of a transfer across the length of a contract for accounting purposes.

Tonali is the best example of this. Signed in 2023 on a 5 year contract for approx £50m. Instead of that £50m going into the loss column of that years accounts, it goes in as £10m for the next 5 years. It’s not possible to go beyond 5 years amortisation as a certain club from the Kings Road were using it as yet another loophole, dishing out 8 and 9 year contracts to cook the books, so a rule was introduced to cap it off at 5.

This is good, because it means a £50m transfer goes down as £10m so in theory, you could buy £250m worth of players if you had £50m headroom. There’s also a downside, in that you’re eating up £10m of each subsequent years allowance with each of those transfers.

This is something that will doubtless hamper Man Utd, who have wasted a hideous amount of money over recent years on players that if anything, have decreased in worth. It should also hit Chelsea, but their wheeler dealing means they have decent turnover coming back in from selling (mostly) younger players. The state Ashley left Newcastle in means we’ve had to manage despite having very little to sell from the back end to increase the allowance.

This is where the truly incredible job being done here comes into focus.

The biggest problem for Newcastle United in terms of being competitive is that we just don’t make anything like the money our rivals do. Much has been written about recent success from ourselves and Villa disrupting the ‘big six’, but until we catch them on the finances, this cartel is still very much in control (table via Matchday Finance).

The difference between Newcastle United and the next closest club is £148m overall, and a whopping £395m to Man City at the top. The killer in this is the commercial income, destroyed by the previous owner to favour his own enterprises, with our declared £86m lagging £139m behind Chelsea and £259m behind Man City. Now amortise that.

That is the deficit Eddie Howe has been up against and that is the gap he’s bridged on the pitch, beating some of these sides to Champions League places and lifting a trophy despite this colossal disadvantage.

This has been helped by the fact Howe and his team haven’t put a foot wrong with incoming transfers, so can we all please stop wringing our hankies out at the thought of them being in charge of it these next 3 months. We are seriously punching above our weight and when yootoobers and plastics suggest we should upgrade to an “elite” manager like Ancelotti or Guardiola, they would do well to note that they become elite by spending the amounts of money at the top of this list. Eddie Howe is an absolute alchemist.

As I said, amortisation is again our friend here, as those clubs as the top will have front loaded most of that profit with money accountable for their already expensive squads. Newcastle can win enormously if we could increase commercial further despite not having chucked nearly as much at players over recent years. This is where there is a very valid gripe, in that the snail’s pace of sponsorship for things like the stadium and training kit is costing a lot in lost ground when you’d expect the Saudi PIF to be able to sort deals very easily. Even the Sela sponsorship feels a bit undercooked at £25m p/a for cup-winning Champions League regulars.

So, you might say this is as close to an even shot as United have had in a good while. I’d expect there to be funds available for a spend of £100-150m that can be boosted by the sale of peripheral players as opposed to promising ones. Four players for the first team squad is doable and should happen, along with a couple of project players in the Osula mould.

Champions League income offers a considerable boost and it’s just a bit of a shame that five of the erstwhile septic six will be accompanying us into the competition this year. The problem is, it’s unreliable and you can’t fall into the trap of banking on that wedge each year. Something very funny could be about to happen at Old Trafford because they seem to have assumed they’ll have a permanent seat at the top table, and they’re about two more wrong moves away from disaster. A cautionary tale for the likes of us to never bank on the highly competitive top four qualification.

Hey, maybe I’ll write another bit about that…