The Premier League announced yesterday that Everton and Nottingham Forest have “each confirmed to the Premier League that they are in breach of the League’s Profitability and Sustainability Rules (PSR)”. They will each be referred to an independent commission to determine potential sanctions for the alleged breaches. Everton are presently appealing a ten-point deduction imposed by an independent commission for breaches of PSR. Most football fans will also be aware of the ongoing investigation by the Premier League into Manchester City’s 115 alleged breaches of PSR. The PSR (commonly referred to as Financial Fair Play) exist to serve a legitimate purpose, namely to ensure that clubs spend within their limits to ensure their sustainability.
What are the rules?
The rules themselves are a complicated set of accounting rules (for some of us at least), with many nuances and exceptions. Sky Sports provides a detailed breakdown of how the rules operate here. They can be relatively simplified as follows:
- The maximum allowable loss by a club over a three year period is £15 million.
- This figure can be increased by up to £90 million through secure funding from a club’s owners. This results in a maximum allowable loss of £105 million over a three year period.
- Losses resulting from investing in certain areas deemed beneficial to the game at large are not included, such as investment in youth football or in the community.
- Clubs are permitted to write off certain losses resulting from the Covid-19 pandemic and so these do not count towards the maximum loss figure.
- The process in the event of a breach
There was a recent tweak to the regulations meaning clubs are obliged to submit their accounts for the previous season by 31 December. Following this, the Premier League will review these accounts and announce any breaches by 15 January. These breaches are then referred to an independent commission for a ruling which must be delivered by 12 April. Any subsequent appeal of the independent commission’s decision must be concluded by 24 May at the latest (five days after the current Premier League season will conclude on 19 May). This change was implemented following criticism of the previous system where a sanction could be imposed relating to a breach committed by the club a number of seasons earlier. The aim of the new process is to conclude the decision as quickly as possible so that any potential sanctions can be imposed during the same season that the alleged breach is announced by the Premier League.
Increasing uncertainty
The ultimate deadline of 24 May could potentially cast a shadow over the remaining fixtures in a season. For example in the present case, Everton and Nottingham Forest may not receive their decisions and any sanctions until 12 April. If they appeal the decision (as Everton have already done in relation to their ten-point deduction), they could plausibly receive a points deduction resulting in relegation days after the season has concluded. These cases also create uncertainty for the clubs battling relegation alongside them. For example, this uncertainty could affect the spending habits of other clubs in the January transfer window if they believe their competitors may be subject to point deductions.
In spite of these flaws, any fixed timeline is an improvement. For example, there is increasing frustration surrounding the delays in the Manchester City case. Manchester City were charged with 115 offences in February of last year. Richard Masters, CEO of the Premier League, noted today that a date for the hearing of the Manchester City charges had been set, but stated that he could not reveal when this will take place. Understandably it takes time to resolve a case of that magnitude but the lack of transparency and the absence of a timeline for the case are problematic and only add to the frustrations of Everton and Nottingham Forest fans.
The growing uncertainty around the PSR is not helped by the fact that the rules are due to change again before next season, as reported by The Times.
Lack of clear communication
I believe most agree that these rules are in place for a valid reason, namely to ensure clubs spend within their means and remain sustainable in the long run. The issues arising from this episode are not necessarily with the existence of the rules themselves, but rather with the lack of transparency and clear communication surrounding them. For example, the Premier League statement released yesterday that Everton “confirmed to the Premier League that they are in breach” appears to suggest an admission of guilt and is in contrast with the statement released by the club which states that “The Club takes the view that this [breach] results from a clear deficiency in the Premier League’s rules.”
It remains to be seen what changes may be made to the PSR before next season and whether these changes might lead to increased clarity around certain issues. For example, at present the independent commission is given carte blanche to impose punishment on clubs as they see fit. This once again leads to some ambiguity around the extent of sanctions and how they are imposed. In the case of Everton’s ten-point deduction, it must be said that the written reasons of the independent commission provided a good analysis of the basis for the penalty imposed. In spite of this, some firmer parameters expressly outlined in the rules would provide some more certainty around what the potential sanctions may be. I understand the need for a certain degree of flexibility given how complicated this issues can be, but some form of sanctioning guidelines would allow all clubs affected by any potential point deductions to plan for the rest of their season with a greater amount of clarity.
Another wrinkle in this saga is the UK Government’s announcement that an independent regulator for football will be introduced later this year. The form and extent of the regulator’s remit has not yet been confirmed but it could have a major impact on rules such as the PSR moving forward. Many in football have been calling for an independent regulator for years and hopefully this could address some of the issues discussed above. Time will tell.