The Premier League will vote on the 85% spending cap and 5x hard cap on Friday, which will determine the future of the league.

Hupu, November 20th The AthleticUK sports and financial reporters analyzed this Friday’s Premier League 20 team meeting, which will have a profound impact on the future Premier League and even European football patterns.

What is an anchoring mechanism?

First of all, this name is worthy of its name.

The top-down anchoring mechanism (TBA) will impose a cap on club spending on wages and transfer fee amortization (including agent commissions), linked to the financial position of a club with the lowest revenue.

The TBA is anchored by the central broadcasting and sponsorship revenue allocated to clubs by the Premier League, with the proposed cap set at five times the amount allocated to the poorest clubs.

In the 2024-25 season, Southampton will earn £109.2 million while finishing at the bottom of the league, which means that if the anchoring mechanism is implemented at that time, the cap will be set at £546 million.

It is predicted that if the anchoring mechanism is implemented in the current 2025-26 season, as the new TV broadcast contract cycle begins, the revenue allocated to clubs is expected to increase, and the anchoring cap will be increased to 600 million pounds.

In theory, the introduction of an anchoring mechanism would further limit spending, as clubs can only increase team spending based on increases in league television revenue. Other proposals, such as the team costs rules (see SCR below), are linked to clubs' income, whereas the anchoring mechanism applies to all clubs - hence its name as a 'salary cap'.

The monies allocated to clubs have also been net of various Premier League costs. In this sense, if the anchoring mechanism is adopted on Friday and legal action is then triggered, as some quarters have threatened, the costs incurred by the league in responding to the litigation will result in the anchoring limit being lower than it would otherwise be.

What does "anchoring" mean to every Premier League club?

For the vast majority of clubs, at least it won't change anything directly. While we don't know how the cap will be adjusted in future seasons, according to the latest figures, only four Premier League clubs have revenues above the £600m reference cap mentioned above. This remains true even when adding in the average of player earnings over the past three seasons (which counts towards the club's "relevant turnover" for the purpose of calculating SCR, see below).

If the anchoring mechanism is passed, the following six clubs will have to pay close attention to its impact immediately. These six clubs - Arsenal, Chelsea, Liverpool, Manchester United and Tottenham Hotspur - usually compete regularly in European competitions (Manchester United being the only exception this season).

Therefore, according to UEFA’s team cost control (SCR) system, their expenditure on team costs has been limited to 70% of relevant revenue, but the hard upper limit stipulated by the anchoring mechanism may be lower than the 70% upper limit that needs to be observed in the European competition.

The broader impact of setting a hard cap on spending is difficult to determine. What can reasonably be expected is that even if this increases the likelihood of some players moving to overseas clubs with higher spending caps, it will also slow down the growth of player wages.

If a club breaches the fixed cap, it will only be penalized on the second breach. The penalty is an immediate deduction of 6 points, followed by an additional deduction of 1 point for every £6.5 million of overspending.

What is SCR?

For Premier League clubs, the Team Cost Rules (SCR) are no strangers, mainly because the SCR was originally introduced by UEFA a few years ago and has been quietly implemented this season and last season.

The SCR limits the club's expenditures on players and managers. These expenditures include wages paid to players and managers, related amortization costs (i.e., the cost of introducing or renewing players) and any agent fees incurred during the introduction or renewal process.

Unlike UEFA, the Premier League version of the spending cap will be calculated based on the season (that is, 8-6), rather than based on the natural year.

Whether the 85% cap will cause compliance issues for the 11 clubs that have not participated in the European competition this season will naturally vary depending on the specific circumstances. Some clubs, such as Brighton and Brentford, have less to worry about due to their already low ratios of wage and transfer fee amortization to revenue.

This is not the case for some other clubs with higher ratios.

According to the latest statistics, in the 2023-24 season, the total wages and amortization costs of Aston Villa, Bournemouth and Nottingham Forest all exceeded 120% of turnover.

This includes the full wage costs of these clubs (the SCR will only consider player and manager fees), but obviously direct restrictions on team spending will have an impact. Everton, Fulham and Wolves have also shown higher wage-plus-amortization ratios in their recent financial reports.

Who supports these proposals and who opposes them?

Let’s first take a look at the staunchly opposed party. Although they will not have a vote at tomorrow's shareholders' meeting, the Professional Footballers' Association (PFA)'s position has been made clear: imposing a salary cap will face legal action.

PFA chief executive Mahta Molango, who held talks with Premier League captains earlier this week, said litigation would be "inevitable" if clubs are asked to implement what the union considers to be a hard salary cap. The UK's three largest agencies - CAABase, Stellar and Wasserman - have made similar threats to the Premier League.

The prospect of further legal challenges may have affected the judgment of all parties last week, but ultimately the key decision will be made by representatives of the 20 Premier League clubs in a closed meeting in the conference room tomorrow.

This is not a simple shareholders' meeting, and the result is not clear at a glance. These three proposals are independent of each other, so there will be clubs supporting one and opposing the other..

Any proposal requires 14 votes to pass, and all three proposals will receive support. The question is whether this is enough. Clubs including Liverpool, Aston Villa, Everton, Sunderland and Burnley are expected to back Anchor, SCR and SSR, with others leaning towards following suit after lengthy consultations.

However, anchoring rules are expected to encounter the greatest resistance. Industry insiders expect clubs including Manchester City and Arsenal to be prepared to reject the system, which has been on trial for 15 months, but may also support SCR if the anchoring rules are rejected.

It is said that Arsenal's position is also more uncertain than Manchester City's.

Lobbying activities over the past few weeks also show that PSR still enjoys continued support. Some established middle-class clubs in the Premier League, such as Bournemouth and Brentford, believe this system best suits their strategy.

These clubs, as well as the likes of Crystal Palace, typically make profits from player transactions, and the PSR (Player Remuneration Rules) makes it possible to spread these profits evenly over three years. They are very familiar with PSR and are willing to accept it, so they have no motivation to introduce SCR and new evaluation methods.

SSR, meanwhile, has not attracted nearly the same controversy. Some clubs believe it is unnecessary, but with the introduction of English football's first independent regulator this year, the opposition is not enough to present a united front. This actually shows that the football world is undergoing a change that will hopefully improve financial governance.

All clubs received detailed reports on the three proposals last week and were informed that a vote on each would be held on Friday. There are suspicions that a vote on the "anchoring mechanism" may not take place due to the resistance, but this will depend on the discussions that take place when all clubs come together. No one can be sure how things will ultimately turn out.