Premier League clubs agree in principle to spending cap ahead of June's annual general meeting

Premier League clubs have agreed in principle to a spending cap that will see sides anchor their expenditure to the TV revenue of the bottom club each season. The deal will have to be ratified at the league's annual general meeting in June with the backing of 16 clubs. Three -- Manchester City, Manchester United and Aston Villa -- are understood to have voted against the proposals while Chelsea abstained.

The specific mechanics of the "anchoring" system have not yet been confirmed by the Premier League, but are expected to limit clubs to spending five times more on their squad costs than the total television revenue of the 20th placed team. This will not be quite as simple as the salary cap familiar to fans of American sports with the "squad costs" calculation expected to be in line with UEFA's, which includes the wage bill of the first team, agent payments and, significantly for the likes of Chelsea, amortized transfer fees. 

Should this new approach receive the backing of 14 clubs in the summer then they would succeed the Premier League's Profit and Sustainability Regulations (PSR) for the 2025-26 season. PSR has become perhaps English Football's most high profile acronym (non-VAR category) over recent months with Everton and Nottingham Forest both receiving points deductions that remain the subject of appeals with the end of the season only three Games away. The current regulations -- which limit clubs to losses of £105 million over a rolling three-season term -- have received widespread criticism in recent months, particularly from clubs lower down the table who say the system favors those with the highest revenue.

Anchoring top level expenditure is aimed at evening the playing field; had the system been in place at the end of the 2021-22 season then no club in the Premier League would have been permitted to have a squad cost greater than £468.9 million, five times the payment made to bottom side Norwich City. Most in the top flight would not run afoul of that number but the mere act of implementing an upper threshold could be a more radical change for the English Game than had initially been supposed.

One of the issues those clubs pushing for a PSR replacement had with the current system was the possibility of it triggering the sort of downward spiral that Everton are battling. Pressure to steer clear of the £105 million limit could force clubs into sales they do not want to make (the Toffees pointed to the example of Richarlison in their defense, Forest to Brennan Johnson), the sort that may lead to worse performances on the pitch and with it a potential decline in revenue, both prize money and commercial, that compels more sales.

Capping expenditure rather than losses brings with it different complications. Upwardly mobile teams in the vein of Arsenal and Aston Villa may rise up with young talent on below market salaries but when the time comes to renew those players and the squad costs grow, will they have to grit their teeth and lose a star? The many Premier League owners with stakes in NBA or NFL franchises are well aware that the answer is often yes.

There is another significant group of stakeholders who will be impacted by the new spending cap, one implemented by owners out of a desire to curb the growth in wage spending across the league. A spokesperson for the PFA, the player's trade union, said: "We will obviously wait to see further details of these specific proposals, but we have always been clear that we would oppose any measure that would place a 'hard' cap on player wages.

"There is an established process in place to ensure that proposals like this, which would directly impact our members, must be properly consulted on." The Premier League's proposals will have to be addressed by the Professional Football Negotiating and Consultative Committee, a body which includes the PFA, Football Association, EFL and the top flight.