Clubs across the Premier League including Arsenal are having to deal with financial regulations imposed on them, and these will have a major impact on the summer transfer window.
Profit and Sustainability Rules (PSR) dictate that clubs cannot make a loss of over £105m across a three-year period, and the Premier League handed points deductions to Everton and Nottingham Forest this season after they were found to be in breach of the rules.
Arsenal are not understood to be in any immediate danger of breaching these rules, despite heavy spending on Declan Rice and Kai Havertz last summer, and few hugely profitable sales, but they have a trick up their sleeves which can allow them to spend in this transfer window.
Mikel Arteta may now have to part ways with three homegrown stars in Reiss Nelson, Emile Smith Rowe and Eddie Nketiah, but they will all represent pure profit in terms of PSR rules, and Arsenal now have the opportunity to boost their finances significantly.
Why Eddie Nketiah sale will be beneficial to Arsenal for PSR regulations
Fulham are reportedly ready to offer £30m for Nketiah, and Arsenal value him higher than former Hale End product Folarin Balogun, who left for Monaco last year.
TBR Football finance expert Adam Williams has now told Arsenal Insider why Nketiah’s status as a homegrown product, makes his potential sale even more valuable to Arsenal in terms of PSR rules.
“If it goes through at the value reported, Nketiah’s sale will be £30m of pure profit in PSR terms for Arsenal due to him being a product of the Hale End Academy,” he explained.
“By contrast, a fee Arsenal would bank for a player they have paid to sign would be offset against that fee in their books and, by extension, their PSR calculation.
“To use a simple case, a player signed for £45m and sold for £50m would show up in the PSR calculation as a £5m profit.
“In accounting terms, this reflects the fact there was no initial outlay, so any sale fee is pure revenue. The sale of academy graduate Jack Grealish to Man City, for example, is why Aston Villa are still afloat in terms of PSR – it was £100m of pure profit.
“For bought players on the other hand, the sale fee needs to be balanced against the original transfer cost to determine the true profit or loss of the transaction.”
Arsenal pulled off masterstroke in handing Eddie Nketiah new contract in 2022
Nketiah almost departed Arsenal for free in the summer of 2022, but he signed a long-term contract on a substantial salary of £100k per week.
The striker has occasionally shone since, but has not started a single game in 2024 after falling down the pecking order. Whilst Nketiah may shine in a system that suits him at Fulham, it is clear that he is not in Arteta’s plans, with RB Leipzig attacker Benjamin Sesko now targeted.
The 25-year-old is now on the market as a Premier League-experienced attacker and an England International, and regardless of his performance levels, the decision to reward him with a new deal in 2022 has been a financial masterstroke.
“Going deeper, the £100k-a-week deal Arsenal gave Nketiah two years ago has cost them £10.4m over the course of the contract,” Williams continued.
“So, looked at through a different financial lens, the club have taken a £10.4m gamble which, when you factor in his mooted sale fee, will pay off to the tune of £19.6m.
“If he’s sold, the club will be able to deduct his £5.2m salary from their PSR calculation for 2024-25.
“Finding efficiencies in the wage bill has never been more important now that the introduction of a squad cost control ratio is imminent.”
How are PSR rules currently affecting Arsenal?
Arsenal do have some room to breathe when it comes to PSR rules, and do not need to urgently make sales before the end of June like some clubs need to now.
However, the rules essentially encourage the sales of homegrown talents as pure profit. A player like Smith Rowe, who is incredibly popular amongst the Arsenal fanbase, may now be one of the first on the chopping block given the financial benefits that would come with his sale.
“While Arsenal supporters might be reluctant to see home-grown talents leave, you can see why the top brass in the finance department might see it slightly differently,” Williams added.
READ MORE: All Mikel Arteta signings at Arsenal ranked from worst to best
Arsenal have been compliant with the rules as they are, with Arteta and Edu Gaspar’s superb squad building helping transform the club into title challengers again, but wider questions remain over whether they are fit for purpose, given that academy talents are now viewed as sellable assets, rather than future leaders of the team for the most part.