Nottingham Forest and Everton find themselves in hot water as they await to hear of their fate after being charged with breaching the Premier League’s Profit & Sustainability Regulations.
PSR prohibit all clubs in the Premier League from accumulating losses in excess of £105 million in 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.
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. It is estimated that if the figure set by the PSR rose in line with inflation, Premier League clubs would be permitted to lose over £200 million – nearly double the current limit.
Nottingham Forest falls under the remit of the English Football League, whose threshold is a lot lower at £13 million per season.
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, and in the EFL for the previous two seasons.
In the last three transfer windows, Nottingham Forest are alleged to have spent £250 million on 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 in order to retain their top-flight status.
Forest sought to sell academy player Brennan Johnson to compensate their losses. They rejected two bids from Brentford to sign him, for reported fees of £30 million and £35 million, respectively. Instead, they sold him to Tottenham Hotspurs 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.
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.
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.
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.
If you require any advice on general sports law or the PSR, please contact our sports team.