How the sales of academy products has facilitated the Premier League’s mass summer spending- and why it’s a problem

Manchester City’s £42.5m sale of academy product Cole Palmer to Chelsea sparked headlines for multiple reasons this summer, both about each club’s respective transfer strategies and what it means for the Premier League going forward. But most of all, it epitomized a key theme of the 2023/24 summer transfer window that has been somewhat overlooked-  Premier League club’s selling their academy products in order to facilitate their spending and comply with Financial Fair Play (FFP).

Firstly, a quick breakdown of some figures produced by Deloitte provides a brief overview of the astronomical spending of the English top flight this summer.

Premier League clubs accumulated a record-breaking gross spend of £2.36bn (€2.74bn), which accounts for 48% of the €5.68bn spent by Europe’s ‘big five leagues’ combined. Whilst their net spend (transfer fees paid – transfer fees received), totalled £1.01bn (€1.18bn)- with Ligue 1 the only other ‘big five’ league to not make a net profit on player sales, spending just €35m.

So, how are Premier League clubs able to spend this way sustainably whilst complying with the league’s FFP regulations?

Well, whilst the Saudi Pro League spending over €300m on their players and the league’s estimated revenue of £5.8bn for the 2023/24 season certainly helps, the sale of academy products is one key reason.

This is due to how players are accounted for in FFP regulations. In FFP clubs are assessed over a three-year period, during which they are allowed to make losses of up to £105m- meaning they should essentially aim to maintain losses of no more than £35m per season.  

When a club is accounting for players, the transfer fee that has been paid for a player is amortised in the club’s books, rather than being booked as a straight cash expense. Amortisation- a word that become more common in the footballing lexicon over the past year- is described as the process of gradually writing off a transfer fee paid for a player over their contract.

For example, let’s say a club signed a player for £50m on a five-year contract. Amortisation means that, rather than the player costing £50m in the year he was signed, they would cost the club £10m in the books each year, or in other words, an annual amortisation fee of £10m.

As for player sales, the profit or loss made on a sale is calculated by taking the subtracting the player’s book value (their remaining amortised value) at the time of the sale from the transfer fee that has been received. So, continuing on with the original example but three years later; the player has now cost the club £30m (£10m X 3 years) of the initial £50m fee meaning his book value is now £20m (£50m-£30m). Therefore, if the club sell the player for £25m, this allows them to book a £5m profit (£25m fee- £20m book value) on the deal for the player in that year’s accounts.  

Furthermore, and this is where academy graduates come into it, if a player has a book value of £0, this enables clubs to book a straight profit on a player sale, with the profit being the amount of the fee they have received (e.g. a £50m sale=£50m profit).

A player can have zero book value for multiple reasons, but the main instance is if they do not cost the club a transfer fee. Meaning that, and this is the key takeaway, academy graduates have zero book value, as they do not cost the clubs transfer fees.

For example, West Ham’s recent club record-sale of Declan Rice would be booked as a straight £100m profit. Meanwhile, the combined £100m fees The Hammers’ paid to purchase James-Ward-Prowse, Edson Álvarez, and Mohammed Kudus, would only cost the club £21.5m combined in this year’s books, as each fee would be spread over the length of the new player’s respective contracts.

However, sales such as Rice, or Harry Kane, were bound to go through regardless this summer, so this is not necessarily an instance in which a club have specifically used the sales of academy graduates to their advantage. Yet, there are other examples of this strategy being utilized from across the Premier League.

Nottingham Forest’s £55m sale of home-town hero Brennan Johnson aided their almost £100m spend, as did Manchester United’s offloading of Anthony Elanga and Dean Henderson, whilst Aston Villa saw three promising names depart for almost £40m combined- all of whom could have been valuable members in Unai Emery’s squad throughout their fixture-packed campaign.

It can also be useful lower down the table too, acting as a solution to solve potentially damaging FFP issues, as has been the case with Everton, who sold Ellis Simms to Coventry City for a reported £8m this summer and Anthony Gordon to Newcastle United for £40m last January.

Moreover, this strategy has most notably been used by Manchester City and Chelsea over the past three seasons, who also have two of the five highest gross transfer spends in Europe over that time- which is the same period the next FFP cycle will be assessed over.

Not including the £28m fee Chelsea are set to receive next summer from Newcastle’s loan-to-buy deal for 18-year-old Lewis Hall, The Blues have sold four Cobham academy graduates for a combined £87m in the most recent window; with Mason Mount’s £65m move to Manchester United the most significant.

These deals, along with the lucrative sales of other academy graduates since 2021/22, have all significantly contributed to the exorbitant expenditure at Stamford Bridge under owner Todd Boehly and BlueCo- which reached nearly £400m this summer alone and over £1bn in the American businessman’s 18 months at the club.

This £1bn has been spent on 26 permanent signings, 18 of which are aged 22 or younger and have been signed on at least six-year deals; a clever accounting practice which enables Chelsea to spread the cost of the transfer fee over more years and thus increase the impact of academy player sales on that year’s profits. Though, the discussion of this transfer strategy is a separate topic in itself.  

Moving on, one of these new arrivals was the aforementioned Palmer, who The Citizens decided to sell following their £55m acquisition of Jérémy Doku from Rennes. This was despite both players being 21-year-old wingers, and Palmer having developed as part of City’s Elite Development Squad (EDS) since he was eight.  

The move to Mauricio Pochettino’s side saw the Englishman become the ninth EDS graduate to have been sold by City over the past two seasons, and the only one to have made any senior appearances for Pep Guardiola’s side, whilst goalkeeper’s Gavin Bazunu and James Trafford were the only other two of nine with any senior experience elsewhere.

This demonstrates the wider point here, that academy players are ultimately being treated as assets before their careers have even begun.

They are being utilized as chess pieces to manoeuvre budgets and resolve financial difficulties or facilitate extortionate signings of some of the most highly touted, promising, and ready-made talent in world football.

Of course, there is another side to this, and it can be seen as high-level clubs making smart decisions and utilizing their top-tier academies, but, only time will tell whether this strategy will come to fruition or not.

Either way, it still carries a substantial risk. For the clubs, they risk sacrificing players who understand their ethos, environment and system, replacing them with often inexperienced entities with no guarantee of success. Whilst, in order to sustain their spending, they require the consistent production and lucrative sales of talent year after year.

All the while, the constant conveyer belt of youth and lack of certified pathways will only deter young players from joining their academies- with them instead focusing on building their careers at different sides with a more stable environment and reliable routes to senior football.  

Ultimately though, neither the clubs aren’t to blame here, they are simply applying the regulations in place which outweigh the sales of academy graduates in proportion to any other purchases, and therefore enable these sales to facilitate club’s mass spending.

Thus, the problem lies with the Premier League’s FFP regulations. As a post on ‘X’ by the Independent’s Chief football writer Miguel Delaney states “Something is wrong with FFP if it now incentivises selling academy products- when it should be encouraging the opposite.”

If football fans want to stop seeing their club’s academy products being treated as assets, and want to consistently see homegrown players play for their team, rather than a constant cycle of new club-record signings, it is the laws that will have to change.

Travis Levison | Get Football

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