Nottingham Forest and Everton find themselves in hot water, Everton for the second time this season, as they await to hear of their fate after being charged with breaching the Premier League’s Profit & Sustainability Regulations (PSR). The PSR regulations, also known as Financial Fair Play (FFP), aim to ensure that clubs manage their finances responsibly and avoid unsustainable levels of debt.
In summary, PSR prohibits all clubs in the Premier League from accumulating losses in excess of £105 million over a three-year period. Not all club spending is captured by the £105 million limit: infrastructure, women’s football, investment in youth and community work costs are all deductible for PSR purposes. For a fuller explanation, see my recent blog on the first Everton case.
The threshold of £105 million set in 2013 has attracted criticism for not being increased in line with inflation. The cost of player transfers, wages and other associated costs have undoubtedly increased significantly over this time. It is estimated that if the figure set by the PSR rose in line with inflation, then Premier League clubs would be permitted to lose over £200 million – nearly double the current limit.
Nottingham Forest is a slightly different case to Everton as due to their promotion to the Premier League in 2022, they fall under the remit of the English Football League, whose threshold is a lot lower at £13 million per season, and the Premier League PSR rules. The club is in a hybrid position this year, with allowable losses over three years at £61 million having played in the Premier League for one season (ergo a £35 million permitted loss for that season), and in the EFL for the previous two seasons (a £26 million permitted loss for the previous two seasons in the EFL before their promotion).
In the last three transfer windows, Nottingham Forest are alleged to have spent £250 million on a staggering 43 new signings. Whilst this figure may seem high, the gap between clubs in the Premier League and EFL Championship is getting bigger, Nottingham Forest saw it necessary to spend an excessive amount on player recruitment to retain their top-flight status.
Forest sought to sell academy player Brennan Johnson to compensate for their losses. They rejected two bids from Brentford to sign him, for reported fees of £30 million and £35 million, respectively early in the 2023 summer transfer window. Instead, they sold him to Tottenham later in the transfer window for a reported figure of £47.5 million. However, this later sale meant that it could not be accounted for as it was some two months after the end of the period in question. They argue that the fact they later sold Johnson for a higher amount later in the window should be taken into account when deciding sanction, as it is indicative of there attempt to comply with PSR rules.
Everton face their second charge for breaching PSR following their 10-point deduction in November. Everton have appealed this finding, and the appeal must be heard by May.
It is unclear how Everton have breached the PSR as they have not released their accounts for the 2022-23 season. However, it has been reported that the accounts will show losses that are attributable to the loss of commercial contracts due to Russia’s invasion of Ukraine and the costs of building a new stadium. For a fuller explanation, see my previous blog on this subject.
In a statement released by the club, Everton said: “The Premier League does not have guidelines which prevent a club being sanctioned for alleged breaches in financial periods which have already been subject to punishment, unlike other governing bodies, including the EFL.” It is therefore expected that part of Everton’s defence will be that they ought not to be charged twice for effectively the same breach, arguing a form of double jeopardy.
Both cases have now been referred to the chair of the judicial panel, who will appoint separate, independent commissions to determine the appropriate sanction. Punishments could include a fine, points deduction or other sporting sanction.
A club has 14 days to respond to any PSR charges and a hearing will need to take place in due course. Should either club appeal, which is expected, this could mean that any punishments or points deductions will not apply in this season and instead apply from the start of the 2023/24 season.
The fact that there is no set sanctioning policy will trigger the interest of all member clubs: any punishment that an independent commission sees fit could be applied. The Premier League's sanctions for breaching PSR are not explicitly outlined in the league's official regulations.
Typically, the Premier League's approach to sanctions for PSR breaches involves a case-by-case assessment, and the league may consider various factors before determining the appropriate punishment. Common sanctions that could be imposed include:
Financial Penalties: Clubs found to be in breach of PSR rules may face fines. The amount of the fine can vary depending on the severity of the breach and the financial circumstances of the club.
Points Deduction: In more serious cases, a points deduction may be applied. This can impact a club's position in the league standings and potentially affect their ability to avoid relegation or qualify for competitions.
Transfer Bans: The Premier League may impose restrictions on a club's ability to sign new players, either temporarily or for a specific number of transfer windows.
Squad Size Restrictions: Another potential sanction could involve limitations on the size of the club's playing squad for domestic and/or European competitions.
Other Sporting Sanctions: The league may also consider other sporting sanctions tailored to the circumstances of the breach.
It's important to note that the specifics of sanctions can change, and the league may update its regulations over time. Additionally, individual cases are subject to the discretion of the league and any independent panels or commissions involved in the process.