How Newcastle can spend £600MILLION on transfers and still not breach FFP rules as new owners target squad overhaul
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NEWCASTLE now boast the richest owners in world football and will be itching to throw some money at their struggling squad.
The Toon were taken over by Saudi Arabia's Public Investment Fund (PIF) in a £300million deal earlier this month.
Steve Bruce has been shown the door as the new owners look to rebuild the team from the ground up.
But first and foremost, Newcastle chiefs will just be keen to avoid relegation, with the club currently languishing in 19th with just four points and NO wins in 2021-22 so far.
There is good news, though.
Thanks to Mike Ashley's famously frugal workings in the transfer market, the club have been left in an incredibly strong position in relation to Financial Fair Play.
In fact, the club can spend £600MILLION in January without breaching FFP rules, according to .
But let's start at the beginning...
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FFP is a three-year rolling cycle, with clubs limited in their spending to avoid any major fines or even competition bans.
Over the last three years - up until the most-recently published accounts in 2020 - Newcastle have made a pre-tax PROFIT of £38m.
Clubs are allowed to make a £5m loss each year, which can be boosted to £35m with an equity injection.
That means, over three years, club are permitted to make losses of £105m.
Clubs are also allowed to make an adjustment of £30m based on 'good expenditure' - such as youth development and helping the local community.
If you add their £38m profit to that £30m and put it on top of the £105m permitted losses, that boosts Newcastle's spending allowance to £173m.
Clubs are now allowed to adjust these figures due to Covid - with Newcastle's figure in the 2019-20 season £17m.
That means the Toon's total permitted spending is exactly £200m.
However, that does NOT mean Newcastle are only allowed to spend £200m on new signings in any given season.
In fact, transfer fees are not fully expensed straight away - in FFP terms, anyway - but rather spread over the length of the player's contract.
For example, if Newcastle bought one superstar for £150m, that COULD only impact the club to the tune of £46m per year - not the full £150m.
If that player is signed to a five-year contract, the transfer fee would be reduced to just £30m per year.
If the star in question were to be paid £300,000 per week, that would equate to £16m per year.
Adding that to the annual transfer fee of £30m, that figure becomes £46m per year overall.
Therefore, Newcastle could in theory sign FOUR players for £150m, pay them £300,000 per week each and still only spend £182m of their allowed £200m annual cost.
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The only drawback of this scenario is it would leave the club unable to make many more signings in the subsequent two seasons - given it's a three-year rolling cycle.
However, Newcastle could sign four £50m stars on five-year deals worth £100,000 a week and spend just £61m of their £200m total budget - and still massively boost their squad.
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