Investment is vital if Magpies are to survive

DURING the season in which Newcastle United made an operating loss of £90.9million, every single Premier League club made a profit.

While the Magpies took the “financial gamble” – as managing director Lee Charnley referred to it as – of maintaining a mid-table Premier League budget in the Championship in a bid to return to the top flight at the first time of asking, the 20 Premier League clubs saw their collective revenue increase by 25% to a staggering £4.5billion.

What’s more, all 20 Premier League clubs also set their own annual revenue record during the 2016/17 campaign according to a Deloitte report, while Newcastle saw their turnover fall by more than £40m during the same season.

Being relegated at any point leads to significant financial ramifications, but without doubt the Magpies were demoted at the worst possible time.

However, the Premier League is only set to become richer over time. The value of the domestic TV rights may have fallen slightly, but overseas broadcast rights are likely to balloon – while the English top flight is also reportedly close to agreeing a new sponsorship deal with Coca Cola, and further lucrative commercial agreements are expected. Less than a decade ago, more than half of Premier League clubs were making an operating loss – yet two seasons ago every topflight side was profitable. This only further reinforces the need for Newcastle owner Mike Ashley to ensure United are not threatened by relegation again in the near future. The billionaire businessman has overseen two relegations – and two subsequent promotions – during his 11-year tenure as Magpies owner, yet his Premier League methods remained unchanged.

Ashley has been willing to place loans into the club in order to soak up losses during Newcastle’s spells in the second tier, but he has been reluctant to invest during United’s time in the Premier League.

Instead he wants the Magpies to ‘live within their means’ – and, even in his statement declaring his desire for Rafa Benitez to stay last month, he as good as reiterated that stance.

Just as he did 12 months previously, Ashley pledged that Benitez could have “every penny generated by the club” to spend on transfers this summer.

But, given the fact Newcastle made a £41.3m loss after tax in 2016/17, the liquid cash available – even after a year back in the Premier League – places United at a competitive disadvantage in a still-inflated transfer market this summer. Benitez has already warned Ashley, both publicly and privately, that Newcastle cannot allow themselves to repeat the mistakes of the past.

Whenever they have found themselves in a position of relative strength under Ashley, he has seemingly become complacent and they have subsequently regressed.

You need only look at the summer of 2012, when Vurnon Anita was the sole signing after United finished fifth, to see that. There is also the example of last year, and three successive disappointing transfer windows, to cite, too.

Yes, Newcastle may have finished 10th last season, but they will not be able to do likewise in 2018/19 without significant reinforcements being signed. What’s more, their 10thplaced finish was merely secured on the final day; they were not a comfortable top-half side, and the threat of relegation remained with them until the last six weeks of the campaign.

While 2015/16 may have been the worst year ever to be relegated from the Premier League, that will be eclipsed in 2018/19 given that the English top flight’s financial advantage over the second tier will increase further in two seasons’ time.

Ashley may be averse to putting greater funds into the club, but it is in his long-term interests to do so.

Investment now will help solidify Newcastle’s top-flight status and ensure they continue to receive their slice of Premier League revenue.

But failure to do so increases the risk of a third relegation – and then Ashley will either be forced to sink additional funds into Newcastle to “gamble” on promotion again, or he will see the club’s value plummet.

Newcastle’s approach to this summer window should therefore be a no-brainer but, with Ashley, things are never that simple.