Forest could be plunged into the bottom three if they are found to be in breach of financial rules
(Image credit: Getty Images)
Nottingham Forest face an anxious wait to discover their fate after reports they may be at risk of being hit with a points deduction by the Premier League.
Nuno Espirito Santo’s side have only just pushed themselves back away from the bottom three by claiming a fabulous pair of victories away to Newcastle United and at home to Manchester United, but would be pulled firmly back into the mire if they were to suffer a similar punishment to relegation rivals Everton.
Sean Dyche’s side were hit with a ten-point deduction earlier this season and now sit just a single point outside the drop zone, with 15th-placed Forest just four points ahead of them. If Forest were to suffer the same penalty, it would move them down to 19th in the table as it stands, six points from safety.
What exactly have Nottingham Forest done wrong?
Potentially nothing, we should say right off the bat: everything would be subject to the accounts they submitted to the Premier League in December, which are not currently publicly available, and may then be subject to further investigation.
What may come into question, though, is whether Forest have breached rules around how much of a loss clubs are allowed to make over any three-year accounting period.
As you may be aware, clubs have to file annual accounts to HMRC, like any other business. Those accounts also get submitted to the football authorities: in this case, the Premier League and the EFL.
Those two organisations both have different rules for how much of an accounting loss clubs are able to make. For Championship clubs, it’s £39m over any three year period (or £13m a season on average). For Premier League clubs, it’s £105m over three years (or £35m a year on average).
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Nottingham Forest were promoted by beating Huddersfield Town in the 2022 Championship play-off final, so the maximum loss sits somewhere in between the EFL and Premier League limits.
The period the Premier League will be considering this time around covers the 2020/21, 2021/22, and 2022/23 seasons. (The ongoing 2023/24 season will not be taken into consideration until next year, when the powers-that-be will look at 21/22, 22/23 and 23/24 as the next rolling three-year period.)
So…that’s 2x Championship seasons = 2x £13m = £26m, plus 1x Premier League season = £35m, for a maximum allowable loss of £61m over the three seasons.
In effect, the Premier League will be looking at Forest’s profit and loss for last season to see if they have overspent. If they are found to be in breach, they may well be hit with a points deduction.
(Image credit: Getty Images)
Why is this happening now, in the middle of the season?
The Premier League and the EFL have been increasingly stringent with the application of their profit and sustainability rules (PSR) over the past few years, and increasingly keen to apply sanctions quickly.
That’s basically because it’s a terrible look for the leagues if clubs spend themselves into trouble, and it can get legally messy if there are delays in punishments being meted out: hypothetically, consider what might happen if a club were relegated at Forest’s expense while investigations were still ongoing over the summer. It’s a headache everyone would rather avoid.
As such, the Premier League recently introduced new fast-track measures that mean PSR is reviewed more quickly and as a matter of course. All 20 Premier League clubs had to submit their accounts for 2022/23 by New Year’s Eve.
If anyone is in breach, we’ll all hear about it by no later than 14th January, at which point any clubs who are in trouble will have two weeks to answer the charges laid against them. An independent commission may then get involved to review the two sides and provide a final decision by no later than 8th April, ensuring everything is done and dusted before the season comes to an end.
Why have Everton and now potentially Nottingham Forest been affected, and not other clubs?
We presume that rather weary question is in reference to Chelsea and Manchester City, who have both been the subject of rumblings that would take an entirely separate article each to explain fully.
As far as this goes, though, the simple explanation is that cases like Everton’s and, potentially, Forest’s are relatively cut-and-dry to sort out, making them ideal fodder for the new fast-track system.
The profit and loss figures are pretty much black-and-white numbers, and there is only so much wiggle room provided by standard accounting practices like amortisation, capital expenditure and deferrals
If those terms all go over your head, don’t worry: suffice it to say, it’s relatively straightforward in those cases for trained accountants to look at the figures provided and give a thumbs up or thumbs down.
Cases like Chelsea and Manchester City, however, require a whole other level of forensic investigation to unpick, which can take years to prepare in the first place and just as long to appeal, potentially through the courts.
Steven Chicken has been working as a football writer since 2009, taking in stints with Football365 and the Huddersfield Examiner. Steven still covers Huddersfield Town home and away for his own publication, WeAreTerriers.com. Steven is a two-time nominee for Regional Journalist of the Year at the prestigious British Sports Journalism Awards, making the shortlist in 2020 and 2023.
