English Premier League soccer club Nottingham Forest have been hit with a four-point deduction for breaching the competition’s rules surrounding profitability and sustainability (PSRs) across the cycle covering the 2020-21 to 2022-23 seasons.
Forest were judged by an independent commission to have breached the rules after reporting losses over the period above the threshold allowed by the Premier League and the second-tier EFL Championship.
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The side spent the 2020-21 and 2021-22 seasons in the Championship, where teams are allowed to make a £13 million ($16.5 million) loss per season, and the 2022-23 season in the Premier League where the loss threshold is higher (£35 million per season).
In total, Forest’s loss threshold sat at £61 million, which the club exceeded by £34.5 million, something it admitted, meaning it made a total loss of £95.5 million.
This would have been permissible had the club been in the Premier League for the full three seasons, however, the more stringent Championship restrictions hampered Forest, and the club argued that its unexpected promotion to the top tier had equally caused it to incur unwanted costs that it had not budgeted for in its March 2022 PSR submission, effectively punishing the club for its success.
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A core tenet of Forest’s argument against the four-point sanction came from its attempts to mitigate its breach. This was mainly founded on the mishap surrounding the sale of Wales international Brennan Johnson.
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By GlobalDataAs a homegrown player, Johnson’s sale would have been listed as pure profit on Forest’s earnings sheet, and the club had budgeted to be within restrictions specifically through his sale.
To comply, Forest would have had to have sold him in the first two weeks of the league’s June 14-September 1, 2023 transfer window, as the club did look to do, but a sale only came the following September following a protracted bidding process.
Forest were initially awarded a six-point deduction, with three points for the breach itself and a further three for the scale of the breach, but two points were removed from the deduction due to the attempts at mitigation.
Despite this, the commission stated that Forest was irresponsibly “leaving all its eggs in one basket” in its financial strategy by relying so heavily on the sale of Johnson within the first two weeks of the transfer window, a deadline it eventually missed.
In its decision, the independent commission stated: “When a club like Forest took the risk of effectively ignoring the PSR warning from its finance director before the January window in 2023, and rather than looking to sell players, it added players to its squad, ultimately leaving itself with just two weeks to sell Player A (Johnson) in the summer 2023 window, such risk-taking and ‘sailing close to the wind’ needs a proportionate sanction to maintain the integrity of the Premier League; and to hopefully enable Forest to operate a more sustainable business in terms of PSR going forwards.”
The independent commission met on March 7 and 8 and stated that despite the club’s cooperation with the investigation it had incurred a sporting advantage from its breach of PSRs, having gone through the entire 2022-23 season “with a squad that it could not afford if it wanted to comply with the PSR.”
The team now sits in 18th place in the Premier League table, one point from safety. If the club is relegated it may find itself hamstrung by the next cycle’s financial rules considering the large-scale investment in and inflation of its playing squad at the beginning of the 2023-24 season.
With the punishment confirmed, Forest have become the second Premier League side this season to incur a points deduction for breaching PSRs, following Everton’s 10-point deduction (later reduced to six).
In the statement, the independent commission cited Everton’s situation extensively when quantifying the level of punishment Forest was to face, with the differences and similarities between both breaches considered.
The commission also said: “The four-point sanction is not to punish Forest so much as it is to be fair to the other clubs; to give the public confidence that when a club invests as Forest did to compete in the Premier League it still needs to comply with the PSR threshold for losses.”
This decision and the Everton deduction indicate that the Premier League is strengthening its stance on PSR breaches, although the looming specter of Manchester City's currently unpunished 115 alleged breaches of financial rules threatens to undermine any authority the league may gain through punishing two smaller, less successful sides.
