February 21, 2024

Many questioned why Chelsea wasn’t penalized along with Everton and Nottingham Forest on Monday for breaking Premier League spending regulations.

The Blues have been known to have spent more than £1 billion on new players after Todd Boehly and Clearlake Capital acquired the team in May 2022.

Chelsea hasn’t broken any of the Premier League’s financial fair play regulations, known as the Profit and Sustainability Rules (PSR), even though their player spending has dwarfed that of its competitors.

Chelsea was therefore comfortably inside the bounds, but Everton—who had already lost 10 points this season—were slammed with a new charge and Forest also awaited their destiny.

It doesn’t all boil down to spending money on players, as we clarify here. In order to comply with PSR, Premier League clubs cannot lose more than £105million over a three-year period.

Everton were handed their 10-point deduction earlier this season because they recorded a loss of £124.5m over the previous accounting period. The Toffees are in the process of appealing their sanction.

So £105m is the magic number Chelsea – and all top-flight clubs – need to come in below with their accounts.

But Chelsea’s spending has come in at 10 times that!

Yes, and that’s not even including arrivals in the 2023 summer window – including an initial £100m for Moises Caicedo, £53m for Romeo Lavia, £52m for Christopher Nkunku and £40m for Cole Palmer – which pushed the Boehly-era spend above £1bn.

For the purposes of the latest PSR assessment, only the two transfer windows in 2022-23 are counted.

Nine players were signed in the summer of 2022, including Wesley Fofana for £75m, Marc Cucurella for £60m and Raheem Sterling for £47.5m.

Chelsea then laid out for eight more players in January 2023, including Enzo Fernandez for £106.7m, Mykhailo Mudryk for £62m and Benoit Badiashile for £35m.

It is difficult to pin down a precise figure because of add-ons and loan fees, but their 2022-23 spending was roughly £550m.

However, that enormous sum isn’t the relevant calculation for PSR.

Why’s that?

Because of the one term all football fans have become increasingly familiar with – amortisation.

Call it an accounting trick, but Chelsea committed their signings to unusually long contracts so they could spread those big transfer fees over a longer period of time on the books.

Take Ukrainian winger Mudryk, for example. He signed on an eight-and-a-half year deal, meaning his £62m is amortised at £7.3m per year.

Although UEFA and the Premier League later moved to close the amortisation loophole – restricting amortisation to five years regardless of contract length – this came in after Chelsea’s 2022-23 deals, which aren’t affected.

So taking amortisation into consideration, the estimated cost of Chelsea’s 15 new signings in 2022-23 (plus the loan fees for Denis Zakaria and Joao Felix) is around £100m.

It goes without saying that’s considerably rosier than £550m when it comes to PSR.

But sailing close to the wind nonetheless…

Well, we haven’t taken into account Chelsea’s player sales yet – and it’s fair to say they’re pretty good at getting decent returns.

In fact, this pre-dates Boehly to the Roman Abramovich era. Chelsea have been smart when it comes to raising money from player sales, especially those who’ve emerged from the academy.

Football finance expert Kieran Maguire told i last month: ‘Chelsea have been the most successful club in the Premier League when it comes to player sales.

‘Over the last decade player sale profits – which is the figure used for Financial Fair Play/PSR calculations – were £706m, newly twice as much as the second most successful ‘Big Six’ club Liverpool at £387m, and Manchester United have only generated £133m.’

That has continued under Boehly. 11 were sold during 2022-23, with Kai Havertz the headline departure when he moved to Arsenal for £62m.

Others included the sale of Mateo Kovacic to Manchester City for £25m and the departures of Kalidou Koulibaly and Edouard Mendy to Saudi Arabia.

Because the cut-off date is regarded as June 30, 2023, the £55m sale of Mason Mount to Manchester United on July 5 doesn’t count.

In total, Chelsea generated around £202.5m but the figure recorded on the account subtracts the player’s remaining book value.

Havertz, for instance, had two years remaining on his five-year contract, meaning his book value was about £24.8m. Arsenal paid £62m, the same Chelsea bought him for in 2020, so the remaining £37.2m is recorded as profit on the accounts.

In total, for the 11 players sold it comes to roughly £100m for 2022-23, therefore offsetting the amortised transfer fees.

So despite Boehly’s mad spending, Chelsea’s strong player sales ensure they remain in a good place to meet PSR.

What about the two managers Boehly had to pay off?

Yes, it’s fair to say 2022-23 was a turbulent one in the Chelsea dug-out.

Thomas Tuchel only lasted until September 7 and received a £10m pay-off. Graham Potter came in from Brighton but was dismissed on April 2 after just 31 games in charge. Boehly not only had to pay £21.5m to compensate Brighton but £13m when he was sacked.

What are the other factors at play?

One of the complications with PSR is that while income form part of the financial rules, not all spending counts.

Clubs are allowed to spend money on infrastructure, women’s teams and their academies and that will not go towards the £105m figure.

That has been a bone of contention with Everton, who took out loans the club said related to the building of their new stadium but which the Premier League included in their calculations.

Let’s not forget with Chelsea they did play in the Champions League in 2022-23, pocketing tens of millions in prize money and broadcast revenue as they reached the quarter-finals.

The new international Premier League television deal also kicked in, boosting club coffers even though the Blues finished a miserable 12th in the table.

The revenue streams at Chelsea were healthy enough last season, helping them fall within the £105m PSR limit.


Chelsea lost out to Real Madrid in the Champions League quarter-finals last season but they can't count on cash from Europe's leading competition in the current campaign

Less good, it’s fair to say. In order to allow for the Covid-19 pandemic, which saw matchday income practically disappear, the Premier League combined the 2019-20 and 2020-21 seasons in its three-year rolling PSR calculation.

In those two combined seasons, Chelsea posted an average pre-tax loss of £60m, while in the 2021-22 season the figure was a loss of £121.4m.

That tops £180m even before the 2022-23 season is considered and, of course, the maximum loss allowed is £105m.

Football finance analyst Swiss Ramble projected a £70m loss for Chelsea in 2022-23, making them even more likely to miss the target.

However, and we don’t know the exact figures here, but allowances made for the pandemic and those deductions made for expenditure on infrastructure, the women’s team and the academy, have got Chelsea within the limit.

Factor in the contract amortisation, strong Champions League revenues and money made from player sales, and Chelsea have avoided the same fate as Everton and Forest. For now anyway.

So is a reckoning coming for Chelsea?

While Chelsea have seemingly escaped this time, the next three-year calculation of PSR isn’t as likely to spare them and punishments could lie on the horizon.

They aren’t playing Champions League football this season and aren’t likely to be in it next season either. Broadcast income alone would have been worth £80m-a-season to them.

Then we have another enormous round of player spending from the summer of 2023 to account for, without the amortisation fall-back.

Although the wage bill has been reduced under Boehly, with younger players on more incentivised contracts replacing older, higher earners, Chelsea are still on the financial tightrope.

They can’t spend much this month – and definitely not as much as last January – even though manager Mauricio Pochettino insisted last week PSR isn’t a consideration.

Swiss Ramble projects that Chelsea will record a pre-tax loss of £132m for this season and £201m overall, almost double the permitted limit.

There was a £140m cash injection from Boehly and Clearlake just before Christmas, which will count, but Chelsea are probably going to have to offload some players for good money in the summer and watch what they spend.

They may have escaped this time around but it could be very different in 12 months’ time.

Another cloud looming over Chelsea relates to reports of payments connected to former owner Abramovich, which could bring further Premier League scrutiny.

The Guardian and the Bureau of Investigative Journalism reported in November that leaked files showed Abramovich may have used offshore companies to make payments for the club worth tens of millions of pounds.

The Premier League said it would look closely at the information reported.

A Chelsea spokesperson said at the time: ‘These allegations pre-date the club’s current ownership. They are based on documents which the club has not been shown and do not relate to any individual who is presently at the club.’

Chelsea were fined £8.6m by UEFA in July last year as part of a settlement for breaking their FFP rules by ‘submitting incomplete financial information’ between 2012 and 2019.

The new Boehly regime reported the breaches after they took over.

Some are already forecasting that Chelsea – and Manchester City, who face 115 charges of breaching Premier League financial rules – could ultimately face very severe sanctions, potentially including relegation.

Stefan Borson, a lawyer who has advised City on such matters, tweeted after Everton were deducted 10 points in November: ‘Without seeing the judgement/award -10 points for Everton feels harsh for a straightforward FFP breach to me.

‘But reinforces that sanctions against City [if proven] and now Chelsea [if charged and admitted on the off-the-books payments] will be potentially relegation inducing.’

Borson added: ‘One thing is for sure, given the scale of this sporting sanction, Chelsea’s calculus [in my opinion] that they could breach PL P&S [Profit and Sustainability] and just take a fine as a cost of doing business, must be in urgent and immediate reconsideration.

‘The January window may be interesting. Even in the best case, they can no longer rely on being able to convince an Independent Commission to accept their Covid and Sanctions allowances as exceptional adjustments [to the extent that was the plan].’

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