Editor’s note: This article has been updated to reflect Manchester United’s activity in the summer transfer window.
Going into this summer’s transfer window, the consensus was that Manchester United needed to spend. And spend they have.
The three major arrivals of Mason Mount, Andre Onana and Rasmus Hojlund came in at an initial total of £163million ($207m), potentially rising to £180m with add-ons. With only a few days of the window remaining, United may not be done yet.
Fenerbahce goalkeeper Altay Bayindir is expected to complete a €5m (£4.3m, $5.5m) move before the deadline, talks are ongoing for Marc Cucurella to provide emergency left-back cover, while a deal for long-term midfield target Sofyan Amrabat is also in the works.
United’s preference is for Amrabat to only join on loan, however, with an option to buy down the line.
An immediate permanent deal with Fiorentina has been made difficult owing to concerns over United’s compliance with European and Premier League financial fair play rules, which has appeared to put a cap on what the club are able to do in the market all summer.
Supporters might see that as an excuse for penny-pinching Glazernomics, but this issue is very real. In July, European governing body UEFA announced United had been fined €300,000 after reporting a “minor break-even deficit” for the 2022-23 season’s monitoring period.
The fine related to United’s spending from 2019 to 2022 and was based on UEFA’s previous version of FFP, with new rules now in force. United attributed it to a change in how clubs were allowed to adjust their losses for the effects of the Covid-19 pandemic.
Nevertheless, this is why FFP compliance has been mentioned practically every day among Old Trafford’s key decision-makers this summer, across multiple negotiations regarding incomings and outgoings.
Every prospective deal has had to go through what one club figure calls the “financial sausage machine”. “Everything is being calculated. ‘Is that OK on FFP? Does it leave us enough room to do what we want this summer on players?’.”
United support strong FFP rules as a principle — both within the Premier League and UEFA — and are trying to work within them, especially after suffering their first breach.
As the regulations and calculations involved are complex, picking out the club’s FFP position from their public accounts is not an exact science.
However, a trawl through the numbers suggests United have at least been skirting around the edges of FFP limits and the risk of another breach in the future is real enough for caution to be required in the transfer market.
So how have they been able to spend as much as they have?
The Premier League’s profitability and sustainability rules (P&S) came into effect during the 2015-16 campaign.
The rules allow clubs to make a £15m loss over a three-year monitoring period, with losses of up to £105m permitted so long as the £90m difference is covered by secure funding from a club’s owners — ie, by buying up more shares, not simply giving their club a loan.
Unfortunately for United, the Glazer family are not exactly known for putting their hands in their pockets.
United’s owners have invested none of their own money into the club since their leveraged buy-out in 2005. For the purposes of P&S, that means United’s losses have not been able to exceed the standard £15m limit.
Yet this only became an issue when a miserable 2021-22 season on the pitch was just as miserable off it. United posted a pre-tax loss of £150m — by far their biggest over the preceding decade.
Inside Manchester United’s ownership situation…
United nevertheless passed the Premier League’s P&S test that year as the three-year monitoring period included both a £27m pre-tax profit in 2019 and, more importantly, substantial adjustments for the effects of Covid-19.
Under P&S, due to the financial losses suffered across football during the 2019-20 and 2020-21 seasons, the corresponding fiscal years are combined and averaged out. Clubs can also write off losses suffered due to the pandemic during those two years.
As a result, United’s 2021-22 accounts confirmed the P&S “break-even test result submitted in March 2022 was positive”.
What about last season, though? Without 2019’s profit included in the monitoring period, United were always at risk of skirting closer to their limit than they did in 2021-22.
Judging by United’s recent third-quarter results, their pre-tax loss over the last three P&S years currently stands at £203m.
That figure comes with a health warning. It is not final and a strong end to the 2022-23 financial year might have helped bring it down by the June 30 cut-off, but it is clearly a long way off the £15m loss allowed.
Whether United will come in under that limit or not depends on the size of the deductions the club can claim back under the P&S rules, particularly the amount of Covid-related losses written off in 2019-20 and 2020-21.
United estimate the pandemic cost them £190m in 2019-20 and 2020-21 combined — which averages out to £95m over the two years for P&S purposes.
Further deductions can be made for investment in areas considered beneficial to the long-term benefit of the game — for example, youth development, women’s football and community work.
United do not disclose exact figures on academy spending but, as one of the biggest academies in the Premier League, it is significant. Together with the expenses included in accounts for the women’s team and the Manchester United Foundation, the club can deduct between £50m and £60m over the three-year period in these three areas.
In their latest set of financial results, the club also increased their projected revenue guidance for the full year to between £630m and £640m. If realised, that would be a club record and would further help ease FFP concerns.
These factors and more will help bring United’s three-year pre-tax loss closer to the £15m limit and perhaps safely under it.
Time will tell whether or not all this was enough to avoid exceeding a breach, with the publication of the club’s full-year accounts expected in the coming months, but United will already have a reasonable idea.
The club had to submit their most recent P&S assessment by the beginning of March this year, based on an average of the two Covid-hit seasons (2019-20 and 2020-21), full accounts for 2021-22 and projections for 2022-23.
The Premier League’s rules state that if a P&S assessment records a loss in excess of the £15m limit over three years, clubs must provide future financial information for the next two seasons by March 31, before submitting their evidence of secure funding to cover the losses.
If they were at risk of breaching the P&S rules, United would therefore have received an indication from the Premier League back in March.
But even if United have successfully avoided a breach for 2022-23, the club still faces a challenge to stay on the right side of the limit this season.
Crucially, the next three-year monitoring period will not include the Covid-19 adjustments, but United’s huge 2021-22 pre-tax loss will still be part of the equation. Hence the need to tread carefully in the market this summer.
As for potential punishments, clubs who exceed the lower £15m P&S limit without secure funding to cover their losses can have their budgets limited and transfer spending restricted by the league’s board to ensure they meet their financial obligations.
Only those who break the higher £105m limit — as Everton are alleged to have done — are referred to an independent commission, where more severe punishments, such as points deductions, can be administered.
The fine balance United need to strike is neatly reflected in the financial give-and-take that comes with their qualification for this season’s Champions League.
Returning to European football’s elite club competition will provide a renewed source of valuable revenue, but it is also likely to bring a hike in the club’s wage bill. Many players saw a 25 per cent reduction in their salary for failing to finish in the top four in 2021-22. That has now been lifted.
Competing in European competitions means United must comply with UEFA’s financial fair play regulations, too.
Introduced in 2009 to promote greater sustainability across European football, UEFA’s FFP rules were updated and strengthened last year. The new regulations have three key pillars: solvency, stability and cost control.
United fell foul of the old rules but fortunately, under these changes, 2021-22 will prove to have been a good year to have a bad year.
This season, there is no test to pass. Clubs will only be required to submit their full audited accounts for 2022-23. Assessments under the new ‘football earnings’ rule will start next season, based on the accounts for 2022-23 and 2023-24.
Therefore, United will not be burdened by that miserable 2021-22 under UEFA’s FFP in the future, but they still need to be careful going forward.
UEFA’s rules only allow for a loss of €5m (£4.2m, $5.4m) over three years, which is not covered by secure funding — an even tougher bar to clear than the Premier League’s.
Figures at Old Trafford also need to be wary of the new squad cost control rules, which have been gradually implemented to allow clubs time to get their finances in order.
This season, clubs can spend 90 per cent of their revenues and profits from player sales on men’s player and head coach wages, transfer fees and payments to agents. Next season, the limit will be 80 per cent. From 2025-26 and then onwards, it will be 70 per cent.
Estimating United’s squad cost ratio is not straightforward unless you are part of Old Trafford’s financial department, as UEFA will assess this on a calendar year basis (ie, 2023, 2024, etc) rather than against financial years running parallel to the standard European football season.
United are nevertheless confident their squad cost ratio will fall below the required threshold this season and claim it has done so historically due to their high revenues.
There is one simple trick United can do to improve their chances of complying with both sets of financial regulations in the future: they can start selling better.
Offloading players on the fringes of Ten Hag’s squad would offer them more flexibility under FFP and, therefore, in the transfer market. Traditionally, this has been something United have struggled to do, particularly when compared to their rivals.
There is an acceptance among key decision-makers that this has to change and, despite the noise surrounding incomings, United considered themselves sellers as much as buyers in this summer’s market.
With the deadline looming, United have recouped at least £52m, which could rise to £66m depending on add-ons. That is a lot better than last year’s £19m generated in initial fees, but also a long way off a positive net spend given their £163m outlay.
Anthony Elanga and Dean Henderson’s moves to Nottingham Forest and Crystal Palace have recouped £30m, potentially rising to £40m.
As with the €9m departure of Matej Kovar to Bayer Leverkusen, the fees for these three academy products can be accounted as pure profit in United’s 2023-24 books for amortisation purposes.
Moving on other players has proved more of a challenge, though. Fred departed for Fenerbahce in a deal worth up to £12.9m, a decent fee for a player whose value would have been higher if his contract had more than a year left to run.
Alex Telles also had a year remaining at Old Trafford but joined Al Nassr in a £4m deal. David de Gea’s departure on a free at least cleared his substantial wages off the books.
Most of those marked for sale have departed. Others United were willing to listen to offers for, and who could have recouped more substantial sums, remain in the building: the most obvious example being former captain Harry Maguire.
United accepted a £30m bid from West Ham for Maguire and may have used that money to bring in a permanent replacement in the shape of Benjamin Pavard or Jean-Clair Todibo, but talks broke down.
Scott McTominay was also of interest but West Ham were unwilling to meet United’s valuation of more than £40m. McTominay is now expected to stay and may struggle for minutes in a congested midfield, especially if Amrabat joins.
It remains to be seen if Donny van de Beek can secure an exit — either a permanent deal or another loan move — before Friday’s deadline, too, with Galatasaray interested.
United will end the summer generating more money from player sales than in any summer since 2019 when Romelu Lukaku’s time in Manchester came to an end in a £73m deal with Inter Milan. Will it be enough to help avoid landing in FFP hot water? Only time will tell.
(Top photo: Alessandro Sabattini/Getty Images)
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Mark Critchley is a football writer for The Athletic, covering Manchester United and Manchester City. Mark joined after five years as The Independent’s northern football correspondent. Follow Mark on Twitter @mjcritchley