Nottingham Forest have been referred to an independent commission over an alleged breach of the Premier League’s profitability and sustainability regulations (PSR).
The league have instigated the next step in the process to decide what punishment the club will face, which could include a points deduction and/or fines.
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Under PSR, clubs are allowed to lose a maximum of £105million ($134m) or £35m per season over a rolling three-year reporting cycle.
Forest’s permitted losses are lower than the £105m limit because they were in the Football League during a portion of the accounting period. Their top figure instead amounts to £61m, which breaks down as £13m for the 2020-21 and 2021-22 seasons when they were in the Championship, plus £35m for last season, their first back in the top flight.
This could form part of Forest’s argument: that the system as it stands works against newly promoted clubs as they have less room in which to manoeuvre, financially, in comparison to their rivals.
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Why are Forest being punished?
Forest were always at risk having spent around £250m on new signings since securing promotion. The club have signed 42 players during the last three transfer windows, including 13 last summer, as they seek to establish themselves in the Premier League.
They have been in regular contact with the Premier League in recent months about the sale of Brennan Johnson. The club argues that had they sold their academy graduate before the accounting deadline of June 30, they would have done so at a significantly lower sum.
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Brentford had been interested in the forward but had only tabled offers worth up to £30million. Forest always felt that, if they waited until closer to the end of the window, they would be able to command a more realistic fee for the Wales international — and so it proved, with Tottenham eventually paying £47.5million to sign him on deadline day.
But Forest’s argument that this sale should count towards this current three-year cycle of PSR assessment has not been accepted as a mitigating factor.
They did not have a huge amount of wriggle room given the scale of their investment since promotion. It is not as straightforward as just saying ‘Forest have spent £250million in the transfer market’ as, for PSR purposes, the transfer fee of a player is spread across the course of their contract.
Danilo, for example, cost £17.8million when he signed from Palmeiras in January last year. He signed a contract that runs until 2029. That transfer fee spread throughout his contract would have an impact of roughly £2.5million per year on the PSR loss limits, rather than £17.8m in one go.
Selling Johnson was always a key part of the plan for Forest. Because he is an academy product, Forest did not spend a transfer fee on the Wales international to sign him. Any sale is ‘pure profit’. For Forest, it meant they felt they could invest in the transfer market again.
But the issue is that the financial year for which Forest is being assessed ends on June 30 — and Johnson was not sold until September 1.
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The club, throughout the summer months, were in conversation with the Premier League, briefing them on the situation and pointing out that it made financial sense.
Those outside the club could point to what could be perceived as some haphazard recruitment over the previous three transfer windows — and there have been successes and failures when it comes to the players brought in. With the benefit of hindsight, it is possible to draw up a lengthy list of players who are yet to be seen as wise investments.
Omar Richards was signed with a fracture in his lower leg and is yet to properly regain match fitness after joining Olympiacos on loan in the summer. Jonjo Shelvey arrived from Newcastle on massive wages and departed within six months. Hwang Ui-jo and Josh Bowler have never played a first-team game for Forest, nor has Andrew Omobamidele, although he is a slightly different case as he is still considered a bright prospect.
There are others beyond those.
Forest have been ambitious: they have been well supported financially by owner Evangelos Marinakis, but some of their decisions along the way could return to haunt them.
They have hired Nick De Marco KC, one of the most respected barristers in sports law, to help argue their case.
What are the broader rules across the EPL and what could they mean for Forest?
New guidelines aimed at fast-tracking PSR decisions have been introduced to avoid a situation such as Everton’s 10-point deduction being imposed in the season after the club was charged with a breach.
All clubs had to submit their accounts for 2022-23 by December 31 — rather than in March as they had previously — with any breaches and subsequent charges set to be confirmed 14 days later, which is what has happened today.
Clubs have a fortnight to respond to charges before an independent commission will hear their case. That process must be completed by early April, with any appeal process to follow subsequently. The change of system is designed to ensure any basic breaches of the regulations are dealt with in time for punishments, such as points deductions, to be levied in the same season as the charge is brought.
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But this is a situation that could drag on for Forest.
They are not expected to discover what their punishment will be until April, after which the league have pencilled in May 24 as a backstop date for any appeal which comes after the end of the season on May 19. This date comes ahead of the league’s annual general meeting.
This could end with a chaotic finale to the Premier League season — one in which the teams, including Forest, who appeal against potential points deductions, could complete the campaign without knowing what their final league position is or, more significantly, what division they will be playing in next season.
Is this impacting any other clubs?
Everton are also facing a second round of potential sanctions having already been docked 10 points this season.
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The club’s highly publicised financial issues under owner Farhad Moshiri, as well as a £760m new stadium, have left them vulnerable to a second charge.
What is Forest’s response?
A Forest statement read: “Nottingham Forest acknowledges the statement from the Premier League confirming that the club has today been charged with a breach of the league’s Profitability and Sustainability Rules.
“The club intends to continue to cooperate fully with the Premier League on this matter and are confident of a speedy and fair resolution.”
How damaging is this news to Forest’s hopes of staying in the Premier League?
The short — and far from ideal — answer is that we will not know until April, when Forest’s exact punishment will be confirmed.
Forest’s challenge is to amass sufficient points between now and April to ensure any possible points deduction would not leave them in the relegation zone; there is currently a four-point buffer between them and the bottom three.
How has this PRS situation impacted Forest’s January business?
Forest are yet to make any new additions during the January window as they take a cautious stance over their financial position.
Forest had been suggesting for several months that they would make only two or three additions at the most during the winter window and that position has not changed. Any new additions will be secured on a limited budget.
(Top photo by Visionhaus/Getty Images))
