Under the Microscope. Which Other Clubs are at Risk of Points Deductions Due to PSR Breaches?

26.03.2024 17:58:42 Craig Simpkin
Football business deals

Of all of football’s myriad acronyms and abbreviations, PSR is the one most likely to make fans go cross-eyed at the minute.

You can barely engage in any football content these days without those three letters smashing their way into your consciousness, and yet ironically it’s those same three letters that could yet determine the Premier League relegation battle in 2023/24.

 

The Great Premier League PSR Shakedown

As you’re no doubt aware already, Everton have been docked six points for their failure to abide by the Premier League’s Profit & Sustainability Rules (PSR).

What you might not be so familiar with is that they face a second set of charges for more recent breaches. By April 8 at the latest, we’ll have heard if the Toffees are set to face another points deduction or not.

Nottingham Forest have also been charged with PSR breaches and docked four points. At the time of writing at least, that amount saw them sink into the Premier League relegation zone below Luton Town

Curiously, Forest’s PSR failing was considerably worse than Everton’s. The Tricky Trees went £34.5 million over the acceptable spending limit, whereas the Toffees were *only* at £19.5 million. Answers on a postcard about that particular set of sanctions.

Forest’s PSR calculation is made more complicated by the fact that they spent two years of the three-year accounting period, in which profit and sustainability are measured, in the Championship, where different PSR rules are in place. 

They have lodged an appeal against the Premier League’s decision, which may not be heard until the final weeks of the season, meaning that nobody will know the true state of the relegation battle until the appeal has been heard.

A third club, Leicester City, has also fallen foul of PSR rules from their time in the Premier League. They’ve not even officially submitted their accounts for the 2022/23 season yet, but the insinuation is that they made a significant loss. They may yet have a points deduction awaiting them….regardless of which division they are playing in next term.

The PSR rules are pretty straightforward: you can’t record a loss of £105 million or more over a three-year accounting period. So none of the clubs that have been charged thus far can feel aggrieved that they’ve been caught out. However, they might feel cheesed off about the inconsistency of the sanctions dished out and the fact that other clubs, who we’ll turn to shortly, have so far evaded punishment.

The most ironic twist in all of this? The Premier League is planning to get rid of their PSR regulation anyway!

By the summer of 2024, PSR could be no more, replaced by a new system that has got more in common with UEFA’s accounting standard, Financial Sustainability Regulations (FSR). In short, clubs will be allowed to spend up to 70% of their annual revenue on transfer fees, player salaries etc.

That will no doubt go down like a lead balloon with supporters of Everton, Nottingham Forest and Leicester City.

 

What is Happening with Man City’s Charges?

It’s quite possible that the points deductions handed out so far are a mere drop in the ocean compared to the potential punishment heading Manchester City’s way.

They have been charged with 115, yes, that’s not a typo, breaches of PSR and financial fair play rules following an investigation that took independent auditors more than four years to carry out.

Football fans up and down the land are wondering why the legal process is taking so long, but such is the scale and significance of the charges brought against City there’s no precedent. Lawyers and legal eagles on both sides will be preparing for a scenario that could, if all of the breaches are proven, see the club relegated several tiers down the English football pyramid.

We do know that their hearing will take place this year, however the actual date has not been revealed for legal reasons. But at some point in 2024, we expect Manchester City to be punished for their indiscretions….and punished royally. Their likely appeal could see the case rumble on until next year, all the same.

 

Chelsea Charges?

Can you remember when Chelsea were taken over by American businessman Todd Boehly, who set about spending the annual GDP of a medium-sized country on new players?

He was canny about it, using a tactic known as contract amortisation to ensure that his prolific chequebook would not draw the same PSR ire as other Premier League outfits.

However, his predecessor, Roman Abramovich was less tactful in the spending department, and legacy payments from his days in charge of the club could yet land Chelsea in hot water.

What will stand them in good stead is that Boehly and his backroom team voluntarily came forward to the Premier League, revealing accounting information that they discovered while conducting due diligence on the club’s books.

It’s possible that Chelsea have historically broken PSR rules, but as far as their punishment is concerned, they might get off relatively lightly given that these are legacy breaches by the previous ownership.

 

Cooking the Books

What’s interesting is that when you research the official accounts of some Premier League clubs year on year, they would appear to be in grave danger of PSR breaches.

Aston Villa, for example, have revealed that they lost £119 million during the 2022/23 season, bringing their losses for the three-year cycle over the £200 million mark. So they will, barring a miracle or the fire-sale of key players, be up the proverbial creek without a paddle soon enough.

For all Chelsea’s honesty about Abramovich’s past dealings, they still have to adhere PSR rules in this new era of the Boehly dynasty. A loss of £90.1 million for the period June 2022 to June 2023 suggests that they too are knocking on the door of disaster.

There may well be others too, but for now the Villains and the Blues appear to be the most at risk of points deductions.

And then there’s Man City, whose sheer existence in the Premier League appears to be under threat. 

 

 

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