Nottingham Forest has been given a four-point deduction for breaching the Premier League’s profitability and sustainability rules (PSRs).
The club reported losses that exceeded the allowed amount over the three-year reporting cycle ending in the 2022-23 season, leading to their referral to an independent commission in January.
As per the guidelines, Forest faced either a fine or a points deduction for the breach, and the four-point deduction now places them in 18th position in the Premier League.
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Forest becomes the second team in the Premier League this season to receive points deduction following a breach of PSR rules, with Everton previously being docked 10 points in November, which was later reduced to six points following an appeal. Everton and Forest were both charged with another breach of PSR rules in January, potentially leading to a second points deduction for Everton this season.
Forest now have seven days to decide whether to appeal against the sanction, with a backstop date of May 24 set by the Premier League for any appeals, after the end of the season on May 19.
What did the Premier League say?
A statement from the Premier League read: “An independent commission has imposed an immediate four-point deduction on Nottingham Forest FC for breaching the Premier League’s profitability and sustainability rules (PSRs) for the period ending season 2022/23.”
“The independent commission made the decision after the club admitted to breaching the relevant PSR threshold of £61million by £34.5m. The case was heard quickly in accordance with new Premier League Rules, which fast-tracks the resolution of PSR cases in the same season the complaint is issued.”
The commission acknowledged the club’s cooperation in the process, stating that the club had shown ‘exceptional cooperation’ in their dealings with the Premier League throughout.
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What did Forest say?
A statement from Nottingham Forest expressed disappointment with the commission’s decision to sanction the club with a four-point deduction.
The club was particularly dismayed by the tone and content of the Premier League’s submissions before the commission, stating that the decision was unexpected and had damaged the trust and confidence that the club had in the Premier League.
Club statement.
— Nottingham Forest (@NFFC) March 18, 2024
The club criticized the Premier League’s initial starting point for a sanction of eight points as “utterly disproportionate” and highlighted the “unique circumstances” and mitigating factors involved in their case.
They raised concerns about the impact of the decision on aspiring clubs and the potential stagnation of the national game as a result of the strict rules.
The statement also noted that the club’s high level of cooperation throughout the process was not reciprocated by the Premier League.
How did we get here?
Forest’s referral to the commission in January was due to an alleged breach of the PSR calculation for the three-year reporting period ending with the 2022-23 season.
Forest stated their intention to fully cooperate with the Premier League on the matter and expressed confidence in a fair resolution.
The club has made significant investments since their promotion in May 2022, with the owner approving a substantial transfer spend to establish the club in the Premier League. The issue mainly centered around the sale of Brennan Johnson to Tottenham Hotspur.
Johnson’s sale to Tottenham was key to Forest’s argument (Michael Regan/Getty Images)
The club’s argument was that they could have sold Johnson earlier but chose not to in order to secure a better price. The sale was finalized after the financial year ended, resulting in a significant transfer fee.
New guidelines aimed at expediting PSR decisions were implemented to ensure timely resolution of breaches and potential punishments in the same season.
All clubs had to submit their accounts for 2022-23 by December 31, with any breaches and charges confirmed within 14 days.
What are profitability and sustainability rules?
Each Premier League club is evaluated annually for compliance with profitability and sustainability rules.
The evaluation is based on the club’s PSR calculation, which comprises adjusted earnings before tax over the assessment period.
Clubs are permitted to incur losses up to £105m over three seasons, with certain costs such as investments in youth development and community initiatives being deductible.
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Special allowances were made for circumstances related to the COVID-19 pandemic, with the league extending the accounting period to four years to support clubs affected by the pandemic.
Given Forest’s history in the Football League during part of the accounting period, their allowable losses were capped at £61m, with specific allocations for each season reflecting their status in the Championship and the Premier League.
Have there been any other cases like this?
Forest is the third club to face such action, following Everton’s breaches this season and Manchester City’s situation with over 100 charges. The outcome of City’s case is pending and subject to appeal.
Last year, Chelsea self-reported financial discrepancies under their previous ownership, resulting in fines from UEFA and ongoing investigations by the Premier League and English FA.
Transactions made under Abramovich are still under investigation (Paul Gilham/Getty Images)
While such cases are common in the Football League, penalties related to PSR breaches in the Premier League are rare, with Everton’s recent sanction being unprecedented.
Previously, only Middlesbrough and Portsmouth have faced points deductions in Premier League history for match-related issues and financial troubles.
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‘Frustration and disappointment for Forest’
Analysis by Nottingham Forest correspondent Paul Taylor
There is frustration and disappointment at Nottingham Forest following the four-point deduction, which has pushed the club into the Premier League relegation zone.
The club is considering appealing the decision within the 14-day timeframe, as dropping into the bottom three adds to their woes.
Forest emphasized their efforts to cooperate with the Premier League throughout the process, despite admitting to breaching regulations and explaining mitigating circumstances, particularly concerning the sale of Brennan Johnson.
While the club acknowledges the severity of the punishment, they are determined to secure a third season in the top flight under Nuno Espirito Santo.
(Top photo: Jon Hobley/MI News/NurPhoto via Getty Images)