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What’s in store for the Premier League’s profit and sustainability regulations?

Nottingham Forest finds themselves in a precarious position, now sitting in the relegation zone of the highly competitive Premier League. This unfortunate turn of events is a direct result of the club's recent four-point deduction, imposed due to their violation of financial regulations. Such breaches have become a prevalent concern in the world's wealthiest football league, sparking widespread discussions and debates.

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27 March, 2024

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Everton has also faced a six-point deduction, which was reduced to 10 on appeal, leaving them fighting to maintain their 70-year status in the top flight. The Premier League now finds itself in an embarrassing situation where relegation will be decided in tribunals after the season has ended. The deadline for the appeals process comes five days after the final day of the campaign. In this article, we will explore the rules, why they are often criticized, and what could potentially happen next.

What are the rules?

Premier League clubs are allowed to lose a maximum of £105 million ($134 million) over a three-year assessment period. However, for every season a club spends in the second-tier Championship, that amount is reduced by £22 million. Forest, therefore, were only permitted losses of £61 million as they were promoted back to the Premier League for the first time in 23 years in 2022. There are certain deductions allowed for spending on costs that are considered to be in the general interest of the club and the game. These include spending on infrastructure, youth development, and women’s football.

Why are they controversial?

Financial sustainability rules are designed to limit clubs from spending beyond what they generate in revenue. However, these rules are often criticized for helping established elite clubs maintain their privileged position. The elite clubs make the most money due to larger stadiums, better commercial deals, and regular involvement in lucrative European football. Forest accused the Premier League of limiting ambition in a way that undermines mobility in the football pyramid. Newcastle, backed by the Saudi sovereign wealth fund, has also seen their rise halted this season due to the spending restrictions.

The Premier League’s approach to sanctions has also attracted criticism. With no fixed penalty for breaches, an independent panel decides the severity of any points deduction. In the case of Forest and Everton, Forest breached their cap by £34.5 million, while Everton exceeded their £105 million limit by £19.5 million. However, Everton received a tougher penalty. The time it takes for cases to be heard is also problematic, leaving teams fighting for survival uncertain about their position in the table.

Where do we stand now?

Forest’s deduction has placed them in the bottom three, one point behind Luton and four adrift of Everton. However, Everton could face further punishment as they have admitted to a second breach for the three-year period ending last season.

What could come next?

A landmark case against Manchester City could set a precedent for future sanctions. The English champions are facing accusations of 115 charges of breaking the rules dating back to 2009. These allegations came to light in 2023 after a five-year investigation. The date for City’s case to be heard has been set but cannot be revealed due to legal restrictions. Several other clubs are on the verge of breaching the rules unless they make significant sales before the end of the football’s financial year on June 30. Chelsea, who spent over £1 billion in the first three transfer windows under new ownership, reportedly need to recoup around £100 million to avoid exceeding the limit. Championship leaders Leicester could start next season with a deduction due to their losses in the three years prior to being relegated last season.

Premier League clubs have become accustomed to flexing their financial muscles in the transfer market thanks to the substantial television rights deals. However, transfer spending in the January window by English clubs declined significantly as many clubs were reluctant to risk sanctions. This trend could continue during the summer transfer window. Additionally, the rules are set to change as the Premier League aligns with UEFA’s new squad cost controls. The current £105 million limit will be replaced, and clubs will only be allowed to spend a set percentage of their revenue on transfer fees, player and coach wages, and agents’ fees.