In the past week Everton have been handed their second points deduction of the season. This penalty has been given both times relating to breaching Profit and Sustainability Rules set by the English FA. Nottingham Forest have also been penalised for the same offence in the past month. Both have submitted appeals, but the outcome is yet to come out.
In recent years there has been an increased focus on new regulations and laws that will help teams in divisions governed by the FA stay afloat and avoid mismanagement of club finances and help steer them away from administration .The clubs in recent years who have proved to be an example of why this is so important are: Birmingham City Football Club, Wigan Athletic, Portsmouth and Derby all suffered from poor management of finances and exorbitant debts. This led to Derby suffering a 21 points deduction in 2021 for entering administration which eventually led the once championship promotion-favoured side to be relegated into the English 3rd tier of football.
The regulation in question is the Profit and Sustainability Rules, these rules state that clubs are allowed an upper limit of losses of up to £105 million across a three-year assessment period. This takes into account any years spent in the Championship where the limit is reduced by £22 million for every year spent in the 2nd tier. There is a further £15 million in losses that can be deemed ‘allowable’ in the same three-year period. The cost of transfer was spread out across the length of the contract however this was changed recently to a maximum of five years. Anything exceeding the £105 million in losses across this three-year period must be guaranteed by the owners by ‘securing funding’. As a part of this rule, clubs must provide their financial plan for the next two seasons to show how they will avoid breaching these rules.
First round of point deductions
The first of these points deductions to occur this season in the Premier League was handed out in November to Everton and was a hefty 10 points causing them to drop several places in the League. Upon a successful appeal this was then reduced to a 6-point deduction. The significance of this is due to Everton’s relatively poor season leaving them languishing in and around the relegation zone. Every point proves crucial as relegation would not only be a huge disappointment for the fanbase as the club has never experienced relegation but city rivals Liverpool enjoying great success with the frugal yet controversial owners in FSG. Relegation from the Premier League to the Championship would cause further financial difficulties as the 2nd division offers less money to be generated than the behemoth Premier League which is widely regarded as the most money-endowed league in the world thanks to sponsorship deals and TV licenses among other things. This initial deduction was reportedly down to the calculations they handed in for the 2021/22 season where Everton stated they had amounted £87.1 million in losses whilst the authorities argued in total it was £124.5 million which is £19.5 million over the allowed amount. Despite their appeal they were still dealt a points deduction which went from 10 points to 6 points after the appeal on the basis that the initial punishment was too harsh in comparison to other English Football League clubs who had similar offences.
Second round of point deductions
The second round of points deductions involved Everton and Nottingham Forest relating to the 2022/23 season. Both clubs are set to appeal, but the final decision is set to be released by 15th of April. Everton’s appeal stands on the grounds they have already been punished this season for breaching the same rule but that some of the spending that caused the breaches is repeated and should only stand for one of the breaches not both. Nottingham Forest had itself admitted to the breaches of exceeding the threshold set in the Profit and Sustainability Rules in January of this year as they had spent £95.5 million, this goes beyond the £61 million they were allowed due to spending 2 of the last 3 years in the Championship. Their stance regarding the appeal is that the club had a narrow window to sell one of their players (Brennan Johnson), it is reported that one of the players they intended to sell within this window declined a potential move however moved to a different club later in the summer transfer window but to no avail as this was considered after the designated time. The stance of the commission is that the club ignored financial advice to close a deal to sell one of their players in the January transfer window it left them in a position where they had to sell within the first 2 weeks of the next window opening and this in in of itself should be punished or pushing the boundaries of the integrity of the Premier League. As of the latest points deduction Everton now sit 16th only two points out of the relegation zone with a game in hand and Nottingham Forest sit 17th level on points with Luton Town in the relegation zone but only ahead by 4 in goal difference.
Final thoughts
Ultimately these rules have been implemented for the greater good of the game and to protect football clubs from falling down the pecking order due to poor ownership, financial management and other factors outside of footballing. In the cases talked about in this article one similarity between them is that both clubs affected have had relatively new owners with Everton being acquired by the billionaire Farhad Moshiri in 2016 and Nottingham Forest being bought in 2017 by Evangelos Marinakis. Both of which have come under criticism for their financial handling of their respective clubs, Everton have overspent and underperformed whilst Nottingham Forest have been flush with investment signing over 34 players with little outgoings making it difficult to balance the books. All clubs should investigate their financial standings and act appropriately whilst making appropriate assumptions for the coming seasons to avoid financial difficulties and punishments for breaching regulations that help them avoid financial difficulties.