Southampton are one of few clubs who will not be too concerned regarding a potential breach of the Premier League Profit and Sustainability Regulations (PSR) which are in place to support Financial Fair Play (FFP).
With Everton and Nottingham Forest both receiving points deductions last season as punishment for their own historic failures in complying with PSR, Premier League clubs now know there are tangible consequences of breaking the rules.
Following their relegation at the end of the 2022/23 season, Southampton made a number of sales and generated around £150 million as a result.
Given the loss of earnings associated with dropping out of the Premier League these departures were vital to ensure a sustainable financial future for the club.
Now, a football finance expert has explained Southampton’s financial situation this summer as they gear up for a return to the top flight.
Southampton should avoid PSR breach this summer
The deadline for PSR is 30th June, with numerous clubs such as Aston Villa, Everton and Leicester City frantically working to ensure they can meet the requirements before that time comes.
PSR works on a rolling three-year cycle, so the end of June deadline will cover the period between 2021 to now.
Southampton FC News have spoken exclusively to TBR’s Football Finance Expert Adam Williams who has explained the club’s financial situation as follows.
“Southampton have room to manoeuvre in terms of PSR.
“Their allowable loss for 2023-24 is £83m, which is tighter than the £105 million Premier League clubs are usually allowed to lose over a rolling three-year period.
“But the Saints’ single season in the Championship, where clubs are allowed to lose £13 million per season, means that their total figure is reduced.
“They posted combined losses of around £107 million in the two seasons leading up to 2023/24, meaning they needed to post a profit of around £24 million to meet the PSR threshold.
“This is a crude calculation, however, and PSR-deductible expenses such as infrastructure and women’s’ team investment will likely make the true figure slightly more modest.
“Their revenue will have shrunk dramatically in 2023/24 without the Premier League TV deal, although this is obviously subsidised by parachute payments.
“Their costs will have shrunk too, but you’d still anticipate that they will post a heavy operating loss for the season. It’s impossible to say exactly, but my guess would be somewhere between £60 and £80 million.
“That leaves them needing to generate a significant sum in player sale profit to make up that shortfall – and then some.
“But they ended the season with a net transfer profit in the region of £139 million, if reports are to be believed.
“So they will comfortably fall within the £83 million allowable loss threshold. That means they will be ready to invest this summer too. They have the capacity.”
Southampton benefitting from transfer strategy
Southampton are reaping the rewards from the transfer strategy which sees them buy talented young players from elite academies by providing a pathway to the first-team.
Whilst some may argue it is this reliance on youth that saw the club relegated, it has undoubtedly played a massive part in the club having secure finances currently despite a year in the Championship.
Southampton signed both Romeo Lavia and Tino Livramento for small fees from Manchester City and Chelsea respectively as part of this policy and ended up selling the pair for a combined fee of around £98 million.
It does not always work, of course, but it is a low-risk but potentially incredibly high-reward strategy that means Southampton can concentrate on bringing in players to improve their squad this summer whilst many will be making sales.