January might be a relatively quiet month for the Premier League on the field but the English top flight rarely goes long without some sort of major plot twist. This week that came in the form of charges levied at Everton and Nottingham Forest over their breaching of Profit and Sustainability Regulations (PSR), which limit clubs to making losses of no more than £105 million over a three year period.
The result of the cases against these two clubs could have ructions across the entire English game. Certainly the relegation battle would take an almighty further twist if either were handed a points deduction, Everton already finding themselves hovering above the trap door due to the 10 point sanction they were handed -- and are appealing -- for a previous PSR breach. Here is what you need to know about the financial face off that could be as impactful on the 2023-24 season as any game:
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What are PSR regulations?
Following UEFA's introduction of Financial Fair Play (FFP) regulations in the 2011-12 season, the 20 clubs that made up the Premier League introduced its own financial rule book, designed to ensure that clubs do not fall into the sort of untenable situation that bedevilled Leeds earlier in the century. Limiting losses would also lessen the ability of the wealthiest to effectively buy the league, though there are those who would argue that the status quo was effectively entrenched by blocking those who are prepared to gamble in pursuit of glory. From the outset, no specific punishment criteria were set, but Premier League chief executive Richard Scudamore made clear that a points deduction was among the potential sanctions.
In the simplest terms, Premier League clubs are permitted to lose £105 million over a three year cycle. However clubs can lose only £15 million of their own money, anything beyond that has to be covered by ownership. In response to the financial damage wrought by the COVID-19 pandemic, clubs were allowed to combine losses for those two seasons into one while also writing off any direct impact from COVID-19 in the calculations. Further wiggle room in PSR comes from what clubs can remove from calculations; spending on women's teams, infrastructure, community work and youth development can all be taken out of the equation when clubs submit accounts to the Premier League.
For the first time this year, that had to be done before the end of the year, allowing an expedited process that ensures any sanctions ought to be in place before the season is completed. Prior to the start of this week only two clubs had previously received PSR charges. Everton were sanctioned earlier in the campaign, dropping 10 points as a result subject to appeal, while Manchester City were hit with 115 charges in February 2023.
How have Everton and Forest responded?
Everton's second charge in as many months brought with it a clear response from the Toffees, who judge it to be unfair that they are sanctioned twice for the same crimes. "Everton Football Club acknowledges the Premier League's decision to refer a breach of [PSR] for the assessment period ending with the 2022-23 season to an independent Premier League commission.
"This relates to a period which covers seasons 2019-20, 2020-21, 2021-22 and 2022-23. It therefore includes financial periods (2019/20, 2020/21 and 2021/22) for which the club has already received a 10-point sanction. The club is currently appealing that sanction."
Everton's statement further noted that Premier League guidelines do not prevent clubs from being sanctioned twice for the same breaches, in marked contrast with the EFL among others, describing this as a "clear deficiency" within the rules.
Nottingham Forest were not as publicly rambunctious in their response, stating that they will "continue to cooperate fully with the Premier League on this matter and are confident of a speedy and fair resolution". Sources within the game, however, note that a significant issue for the club, who were promoted from the Championship in 2022, was that they were unable to get what they viewed as a commensurate transfer fee for Brennan Johnson before the end of the financial year. The Welsh international would ultimately move to Tottenham in September for £47.5 million, significantly more than the fees on offer in May and June.
Under the ownership of the ambitious Greek shipping magnate Evangelos Marinakis, Forest have spent over £200 million since their promotion to the Premier League. In the time period for which they have provided accounts the club has signed, among other players, four different goalkeepers on permanent or loan contracts, five center backs and six fullbacks.
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When will a decision be made?
Following the announcement of the charges on Monday, Everton and Forest were given two weeks to prepare and submit their responses. Two separate independent commissions will be set up and will be tasked with reaching a verdict by April 12. That should ensure the process is complete by the end of the season, giving every club certainty of what they should prepare for in 2024-25.
The potential complication would come if either club were to appeal the commission's decision. That process would have to be concluded by May 24, five days after the conclusion of the season. Might either side simply accept the punishment handed to them? That could well be determined by the state of the Premier League table.
Could either side survive with a points deduction?
It was said when Everton were handed their first punishment that this season might be a good one to have an asterisk against your name. The newly promoted trio of Burnley, Sheffield United and Luton Town all looked bound for the drop and frankly they still do. The 17th best expected goal difference (xGD) in the Premier League belongs to Fulham at -11.5. The 18th, Burnley's, is -17.8 with Sheffield United and Luton a fair way further back.
Burnley might look easy on the eye but there is a naivety to them that the best of the top flight have ruthlessly exposed. Appointing Chris Wilder gave Sheffield United something of a bounce but perhaps only the sort that might turn a contender for the worst Premier League team ever into merely a quite bad side.
The most intriguing of the trio might be Luton. Nothing about their underlying metrics suggests they should stay up and even the seven points they picked up since December have been the product of a finishing hot streak. However, the biggest names in England seem to struggle at Kenilworth Road, even if the end result for Rob Edward's side is just defeats by the odd goal. Their direct play can befuddle teams used to a stylistically consistent Premier League. There might be the odd surprise result between now and May that gives them a puncher's chance, especially if there are further points deductions handed out.
There is reason to believe that Everton might actually be able to survive another sanction. Maybe a 20 point penalty would be too much but Sean Dyche has built a really good team who in a normal year might be in the mix for the European places. Right now they hover a point above the relegation zone but if they were given 10 points back it still would be a disappointing haul for the Toffees, according to Understat's expected points model their xG is worth 31.5 points. Keep Dominic Calvert-Lewin and Abdoulaye Doucoure fit, avoid selling bright young things Amadou Onana and Jarrad Branthwaite: that is all that should be required for Everton to be fine.
It is harder to make quite as bullish an assessment of Forest, although wins for new manager Nuno Espirito Santo against Newcastle and Manchester United augur well. Before those games the Reds had as good a case as anyone to be the worst of those clubs still standing from last year. Neither Matt Turner nor Odysseas Vlachodimos looked the part of Premier League goalkeepers, while ahead of them the attack lacked cutting edge when Taiwo Awoniyi was sidelined. The Nigerian striker could return next month, if he hits the ground running the Forest might have the goals in them for survival even with a deduction.
What impact is PSR having elsewhere?
It does not take much searching to see the chilling impact of Everton's initial penalty across the rest of the Premier League. Almost as soon as news dropped in November then the tenor of conversations around the January transfer window changed with even some of the richest clubs -- Arsenal and Manchester United among them -- looking to keep some distance between themselves and that dreaded £105 million figure.
With well over a fortnight passed this month, there have only been two permanent signings, Radu Dragusin arriving at Tottenham from Genoa for around £26.7 million and Brentford picking up Turkish youngster Yunus Emre Konuk for just £4 million. Even high profile loans are relatively few and far between. Most clubs are simply inclined to stick with what they have.
Even before January, however, there were those preparing for the worst. Wolves sold 17 players in the summer of 2023 for a total of £140 million to ensure that they did not find the Premier League knocking on their door. That approach drew widespread criticism at the time and brought with it many predictions of relegation. It even cost them Julen Lopetegui, the man who had kept them up last season with the help of big spending in the midseason window. Ultimately, however, their approach has been vindicated with Gary O'Neil guiding the club through what ought to be a pleasing quiet campaign.
"Of course it could have gone wrong – we could have been sat on 12 points at the moment and everyone would have been moaning around the players we have lost and we have been left short," said O'Neill on Thursday. "We are delighted the club managed to correct things and we are not involved in any of those sorts of uncertainties and charges and risk of losing points."
What about Manchester City?
There were other clubs facing questions as Monday loomed large, though Chelsea's confidence that big money sales would balance the books was vindicated. Existential questions remain about what two or more seasons out of Europe might mean -- would that compel the Blues to make sales they do not want to? -- but that is a matter for next January.
Between now and then we might expect progress, but perhaps not a conclusion, in the altogether greater challenge of what to do over Manchester City's 115 alleged breaches of PSR. Six years into the investigation, Premier League CEO Richard Masters said on Tuesday that he could understand the frustration felt by supporters at Goodison Park and the City Ground. He added, "The volume and character of the charges laid against City, which I obviously cannot talk about at all, are being heard in a completely different environment. There is a date set for that proceeding. Unfortunately, I can't tell you when that is but that is progressing."
