Nottingham Forest must sell players before the end of June to comply with profitability and sustainability rules, avoiding overspending limits and the risk of a points deduction next season.
With the summer transfer window opening on June 14, they have a narrow two-week window to finalize sales. Although deals can be agreed upon before the window opens, they cannot be completed until then.
Last season, Forest were penalized four points for exceeding spending limits and failed in their appeal. They narrowly avoided relegation by six points.
Clubs must submit their 2023/24 accounts by June 30, and Premier League auditors will review the three-year period leading up to that date. Under PSR, clubs can lose a maximum of £105m over three years, or £35m per season.
It has been revealed that Forest will need to sell players to avoid another breach.
In last year’s hearing, Forest’s lawyers argued that the £47.5m sale of Brennan Johnson to Tottenham Hotspur should have been included in the previous accounts, despite missing the timeframe. They claimed the delay was to maximize his value.
An independent panel rejected this argument. Although Forest initially faced a six-point deduction, it was reduced by two points due to an early plea and cooperation.
Football finance expert Kieran Maguire explained, “The Brennan Johnson sale is now included in this year’s figures. They’ve received a financial boost and have offloaded some high earners.”
However, this boost is insufficient. After being promoted to the Premier League via the Championship play-offs in May 2022, Forest spent over £100m to build a competitive squad. High-wage players like Jesse Lingard and Jonjo Shelvey have since moved on.
Maguire added, “Their wage bill for a club in their first Premier League season was absurd, averaging £67,000 per week. Many players were on substantial contracts.”
Forest declined to comment.
Why is the deadline so important?
Thought there couldn’t possibly be any more dates added to the football calendar? Think again.
This one could have a significant impact on your football club, according to football finance experts. After it, Manchester United will have much more spending power, while Aston Villa might have much less.
The date in question is June 30 – the PSR deadline day. Well, around that date.
In reality, it’s not as clear-cut as that. June 30 is the profitability and sustainability rules deadline, but some clubs have already submitted their spending. Liverpool, for instance, completes their accounts by May 31.
“They are so well run,” says Maguire. “FSG are meticulous in analyzing their accounts. They are exceptionally good at managing the numbers they present to the world. They adjust their spending and income to reflect that.”
“There are other clubs who operate more haphazardly and are less organized. This often reflects the owner’s volatility.”
There are also savvy accountants who can shift the accounting period to July 31 and adjust numbers in spreadsheets to make them more favorable, a practice known as “pro-rating”.
“It’s perfectly legal,” Maguire explains. “It’s a simple workaround that surprisingly few clubs adopt. It’s a one-time adjustment, but it works.”
Last season’s points deductions for Everton and Forest shocked chief executives and finance directors, as both clubs were docked points for minor overspending.
Under PSR, clubs can lose a maximum of £35m per season, or £105m over three seasons. Costs can be deducted for infrastructure, community work, and youth and women’s teams. Clubs could also deduct money during the Covid-impacted 2021/22 season.
After June 30, when the new period begins, the 2021/22 season will no longer be included in the financial assessment. For United, this will be a huge relief, as their £150m loss in the 2021/22 season has been a significant burden over the past three years.
Erik ten Hag complained about the lack of business in the January window due to financial constraints, with no players signed despite a mediocre season start. United’s COO Collette Roche had warned in December that they had to be “very careful” as financial rules “have real teeth.”
The reality for clubs now is that significant summer spending – United spent over £200m on Mason Mount, Andre Onana, and Rasmus Hojlund last summer – can leave no budget for January, with accountants closely watching the June cut-off.
Villa face a contrasting challenge. Their PSR budgets have benefited from the £100m Manchester City paid for Jack Grealish in August 2021 – pure profit for an academy player. This advantage will disappear next season. Is it a coincidence they are lobbying to increase the £105m limit next year?
Maguire notes that Everton “aren’t in a great position.” While their substantial £121m loss from 2020/21 will drop off, they still lost £45m and £89m in the following two seasons.
“They have to box very cleverly,” he says. “Goodison Park doesn’t generate enough revenue for a club of Everton’s size. It earns less than £1m per match in ticket sales. Don’t be surprised if they sell.”
Everton believe they won’t breach spending limits again.
Newly promoted Leicester City are “one to watch,” Maguire adds. They’ve tried to navigate between Premier League and EFL auditors after last season’s relegation, but they lost £182m in the two seasons up to 2023 and may need to sell players to avoid a points deduction.
Newcastle, with almost limitless funds since the Saudi Arabian takeover, are striving to balance financial limitations to break into the top four. They signed a front-of-shirt deal with Saudi events company Sela for about £25m per year and a shirt-sleeve deal with Noon for around £7.5m per season. Additionally, they have the financial boost from playing in the Champions League.
“But looking back, despite all the criticism of former owner Mike Ashley, he ran Newcastle sustainably. The £14m loss from 2021 is gone, but they made £73m losses in both 2022 and 2023, totaling £146m – well over the £105m limit.”
Meanwhile, Chelsea co-owner Todd Boehly has pushed amortization limits so far that new rules were introduced to limit the spread of transfer fees and wages over five years. They also sold Chelsea hotels to themselves to boost accounts.
Chelsea would have lost £166.4m in the 2022/23 accounts without selling two hotels for £76.5m to a company owned by their owners. It’s still unclear if the Premier League has signed off on this as “fair market value.”
“They’re selling the family silver to themselves,” Maguire says. “I don’t think Chelsea will be in too problematic a position.”
GET MORE NEWS HERE
Leave a Reply