Forest handed four-point deduction for breaching Premier League's financial rules

Nottingham Forest have been handed a four-point deduction following a breach of the Premier League’s profitability and sustainability rules (PSRs).

Forest were referred to an independent commission in January after the club reported losses that exceeded the allowed amount over the three-year reporting cycle ending in the 2022-23 season.

Under the guidelines, they could have been fined or deducted points for the breach, and their four-point deduction now drops them to 18th in the Premier League.

They are the second Premier League team this season to be deducted points following a PSR breach after Everton had 10 points docked in November. This was later reduced to six points following a three-day appeal. Everton could face a second points deduction this season after they were charged alongside Forest with another breach of PSR rules in January.

Forest now have seven days to notify whether they intend to appeal against the sanction.

The Premier League has 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.

What did the Premier League say?

A statement read: “An independent commission has applied an immediate four-point deduction to Nottingham Forest FC for a breach of the Premier League’s profitability and sustainability rules (PSRs) for the period ending season 2022/23.

“Nottingham Forest was referred to an independent commission on January 15, following an admission by the club that it had breached the relevant PSR threshold of £61million by £34.5m.

“The threshold was lower than £105m as the club spent two seasons of the assessment period in the EFL Championship. The case was heard in accordance with new Premier League Rules, which provide an expedited timetable for PSR cases to be resolved in the same season the complaint is issued.

“The independent commission determined the sanction following a two-day hearing this month, at which the club had the opportunity to detail a range of mitigating factors.

“The commission found that the club had demonstrated ‘exceptional cooperation’ in its dealings with the Premier League throughout the process.”

What did Forest say?

A club statement read: “Nottingham Forest is extremely disappointed with the decision of the commission to impose a sanction on the club of four points, to be applied with immediate effect.”

“We were extremely dismayed by the tone and content of the Premier League’s submissions before the commission,” it added. “After months of engagement with the Premier League, and exceptional cooperation throughout, this was unexpected and has harmed the trust and confidence we had in the Premier League.”

The club also called the Premier League’s initial starting point for a sanction of eight points as “utterly disproportionate” and pointed to a number of “unique circumstances” involved and the mitigation they put forward.

They also said the commission’s decision “raises issues of concern for all aspirant clubs” and that the rationale that clubs should only invest after they have realised a profit on their player development “destroys mobility in the football pyramid” and will lead to “the stagnation of our national game.”

“We believe that the high levels of cooperation the club has shown during this process, and which are confirmed and recorded in the commission’s decision, were not reciprocated by the Premier League,” the statement added.

How did we get here?

Forest were referred to the commission by the Premier League in January for the alleged breach, which concerns the PSR calculation for the three-year reporting period ending with the 2022-23 season.

Forest stated they would “continue to cooperate fully with the Premier League on this matter and are confident of a speedy and fair resolution”.

Forest have signed more than 40 players since securing promotion in May 2022, with owner Evangelos Marinakis sanctioning a transfer spend of around £250m ($318m) to help the club establish themselves in the top flight.

Forest believed they had worked within the regulations when it came to the allowable losses with a lot of the issue centring around Brennan Johnson’s sale to Tottenham Hotspur.

Johnson’s sale to Tottenham was key to Forest’s argument (Michael Regan/Getty Images)

The club’s argument — which they have made in conversations with the Premier League — was that they could have sold Johnson earlier in the window but doing so at that point would have meant accepting a markedly lower price. His sale did not go through until September 1, well after the financial year ended, for £47.5m.

New guidelines aimed at fast-tracking PSR decisions have been introduced 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.

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 confirmed 14 days later.

What are profitability and sustainability rules?

All Premier League clubs are assessed for their adherence to the competition’s profitability and sustainability rules each year.

Their compliance with said rules is assessed by reference to the club’s PSR calculation, which is the aggregate of its adjusted earnings before tax for the relevant assessment period.

Under the PSR, clubs are allowed to lose a maximum of £105m over three seasons (or £35m a season) but certain costs can be deducted, such as investment in youth development, infrastructure, community and women’s football.

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There were also specific allowances relating to COVID and, to help clubs, the league combined the two pandemic-hit seasons into one, turning the three-year accounting period into four years.

Forest’s permitted losses are lower than the £105m limit because the club 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.

Have there been any other cases like this?

Forest are just the third club to face action like this, following Everton’s two separate breaches and subsequent points deduction this season, while Manchester City were hit with more than 100 charges last February.

The outcome of City’s case has not yet been communicated, with The Athletic reporting that a verdict — which would be subject to appeal — likely to take considerable time to be reached.

Last year, Chelsea’s new owners self-reported incomplete financial information related to transactions that took place during the stewardship of the previous owner, Roman Abramovich, between 2012 and 2019.

Transactions made under Abramovich are still under investigation (Paul Gilham/Getty Images)

European governing body UEFA fined them €10m for the historical breach in July while the Premier League and English FA are continuing to investigate.

There have been several precedents in the English Football League in recent years, but a punishment relating to breaches of PSR in the top tier of English football was unprecedented before Everton.

In fact, on only two other occasions has a club been handed a points penalty in Premier League history.

Middlesbrough were docked three points for failing to fulfil a fixture in the 1996-97 season while Portsmouth were hit with a nine-point penalty in January of the 2009-10 campaign after going into administration.

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‘Frustration and disappointment for Forest’

Analysis by Nottingham Forest correspondent Paul Taylor

There is frustration and disappointment at Nottingham Forest, as they find themselves plunged into the Premier League relegation zone by a four point deduction for breaching profit and sustainability regulations.

And, over the weekend, the suggestion from within the club was that four points was the level of punishment at which they would consider making an appeal. They have 14 days to lodge that appeal, so they do have time to digest the verdict, before rushing into a decision. But it is likely that they will.

The fact that it drops them into the bottom three, will rub a little additional salt into the wound.

As will the fact that, throughout the process, Forest feel as though they have gone out of their way to work with the Premier League — to accept that they have breached regulations, but to explain what they believe were mitigating circumstances — largely surrounding the sale of Brennan Johnson, late in the window.

But, amid the frustration — at a time when Forest have felt hard done by over a number of controversial refereeing decisions —  there will also be an understanding that the punishment might have been more severe.

And, even amid the possibility of an appeal, Forest at least now know what they are facing, as they look to secure a third season of top flight football, under Nuno Espirito Santo.

(Top photo: Jon Hobley/MI News/NurPhoto via Getty Images)