The issue of Chelsea’s aggressive transfer spending in recent seasons and their position when it comes to the Premier League’s profit and sustainability rules (PSR) has been a topic of much debate among football fans.
Having spent more than £1bn in the market since the arrival of Todd Boehly and Clearlake Capital as owners in 2022, breaking the British transfer record twice in a matter of months as part of that spree, Chelsea have built a young, talented squad that they feel is well positioned to be a dominant force in the coming seasons.
With revenue not at the levels of some of their rivals, with Chelsea trailing Liverpool’s revenue for 2023/24 by some £146m, with the Blues bringing in £468m, the club has had to make the most of the assets at their disposal, both tangible and intangible.
The club’s player trading has allowed them to bring in hundreds of millions thanks to the talent conveyor belt from the Cobham academy, while the sale of two hotels, effectively to themselves, has kept the wolf from the door when it comes to PSR, with the club avoiding a breach.
PSR allows for clubs to lose £105m over a three-year period, but there are allowable deductions for such things as investment in infrastructure, the academy, the women’s team and community initiatives. The sale of tangible assets has enabled them to create paper profits to aid their PSR position. It’s all legal and above board.
Chelsea’s financial year for 2024/25 runs until the end of this month, and the club booked the sale of its women’s team to a related party at a valuation of £200m in the 2023/24 accounting period, resulting in a £128m profit. Again, all legal and above board, with Premier League clubs recently choosing not to close that particular loophole due to other clubs potentially wanting to explore that avenue.
Chelsea want to be participants in the summer market once again, albeit at a lower level than they have been in previous summers. So, how close are they to the PSR threshold this time, and what might their future financial prospects look like?
The three-year cycle which Chelsea will be assessed for up to 2024/25 has now seen the £121m loss from 2021/22 drop off the assessment period, with the three years to be looked at being the £90m loss for 2022/23 and the £128m profit.
Over the past two years, Chelsea’s net PSR position is positive at £134m. When adding in the allowable deductions, which according to figures presented by football finance expert Swiss Ramble stood at £42m for 2022/23 and £53m for 2023/24, assuming the latter is the same for 2024/25, then the club could post losses of just shy of £300m for 2024/25 and remain PSR compliant.
The next financial cycle to be assessed for 2025/26 will see the £90m drop off from 2022/23, and that will mean that the club likely won’t have any concerns about breaching PSR moving forward, for however long the regulation remains in place.
Losses may occur for 2024/25, but the club can absorb them and may have them stemmed thanks to the money earned from the FIFA Club World Cup, which will deliver at least £50m for the Blues. The club will also take comfort in the knowledge that the 2025/26 season will include lucrative Champions League revenue that will drive up total revenue and reduce wage-to-turnover ratios, which are monitored as part of UEFA’s own set of financial regulations.
Driving down the high amortisation costs and transfer debt will likely be a course of action that the club takes in the coming 12 months, but they have managed to navigate some tricky financial waters, and the prospect of them being able to spend at a high level again has increased.
