Nottingham Forest have been charged by the Premier League for breaking financial rules, leaving them awaiting a potential points deduction. How did they break those rules and why are the league so out of touch?
Nottingham Forest have broken the rules. In black and white, they are guilty. But in football, things are very rarely that simple, so why are the Premier League treating it that way?
Profit and Sustainability Rules (PSR) are designed to help clubs stay afloat and decrease the risk of financial difficulties. In practice, they limit ambitious owners, arguably protecting the big six from being displaced by those below them.
Nottingham Forest were promoted unexpectedly. Five loanees featured in their playoff final victory over Huddersfield in 2022 and they also lost their number one, Brice Samba, after the season. They had two choices: stay stringently within the rules and go back down with a whimper or show ambition and make a promised attempt at top-flight football. They were up against two sides who were promoted with parachute payments and 17 other reasonably established Premier League sides, yet they could spend the least of any.
They didn’t break any PSR regulations in the rolling three-year period (which is the period PSR is measured over) at the end of the promotion season, after three years in the Championship. They made losses of £15.5m in the 2019/20 season and £45m in losses in the 2020/21 promotion season.
So, because of how the rules work, in their first Premier League season, they were allowed to make less than £1m of losses because of their previous two seasons in the championship, as the rules would only allow a £61m loss over the rolling three-year period at the end of last season. This is compared to £105m of allowed losses for a side who have been in the Premier League for 3 years. For perspective, you can make (on average) £13m of losses per season in the Championship compared to £35m in the PL.
Surely then it makes sense for the EFL to handle teams in the Championship, and then the Premier League to handle Premier League sides, only considering seasons spent in those divisions rather than the current overlap that punishes teams who might decide to go for it for a season in the Championship.
There was no chance of Forest survival last season had they stuck to these rules, although the 30+ signings they made may have been excessive and only perhaps half of them actually worked out. Nevertheless, Forest could have saved themselves by selling Brennan Johnson to Brentford in June, as this sale would have meant they fell within the allowed permitted losses for those sets of accounts.
The Reds held out until August and earned an extra £12.5m from Tottenham than they would have selling to Brentford, making more ‘profit’, surely a positive in the eyes of PSR rules. However, the fact the regulations aren’t flexible mean the Reds are guilty and by the letter of the law, there is seemingly no way out.
Forest’s case shows how out of touch the rules are, emphasised further by the fact that Everton seem set to be punished for the same offence for the second time.
It’s clear that they need changing. Oh, wait, they are being changed! The Premier League is set to change its rules to mirror UEFA regulations from the start of next season; even they see the issue. It seems that Forest and Everton have been used as Guinea Pigs and now there is a clear issue, change is being made, but not before the clubs are punished.
The Premier League and its hierarchy have shown no emotion to the sides on the end of the allegations. First, their statement describing how Forest and Everton had "confirmed they are in breach of the Premier League's PSR." Then yesterday, Richard Masters referring to the sides as "small clubs."
Forest sit four points outside the relegation zone, so any deduction would have to be significant to push them down into the drop zone, and that's before any potential deduction for Everton, who are three points behind the Reds.
It's also worth noting that points deductions are a very serious punishment. It's not an automatic penalty for breaches of PSR.
But adversity unites football clubs like little else does. Everton fought and picked up four consecutive victories following their last deduction and Forest’s unity has been the basis of their success over the past few years.
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