Five Teams Who Could Risk FFP Points Deductions
Everton became the first Premier League side to breach the new Financial Fair Play rules that are proving a nightmare for top-flight football clubs. However, they're unlikely to be the last.
Profit and Sustainability is the new buzzword among EPL club board members as accountants battle to balance the books and show they are acting within the league's limits.
The whole point of FFP rules – whether they be in the Premier League, the EFL, or the Champions League – are to prevent clubs from overspending and risking their futures. Just look at the likes of Leeds United and Portsmouth for examples of clubs that went too big, too fast, and suffered from it.
Profit and Sustainability is the latest effort from the regulators to oversee spending and stop club owners from going all-in on a risky bet.
In this guide we'll take you through the basic FFP rules, explain the easiest way clubs bend them, and pick out five teams who could fall foul of Profit and Sustainability issues in the years to come.
What is FFP and PSR
Financial Fair Play (FFP) is the catch-all term for the Premier League’s financial sustainability rules. The current iteration are the Profit and Sustainability Rules (PSR) that dictate how much a club can lose over a certain period before being punished.
Premier League clubs cannot make losses of more than £105m across any three-season window. However, the actual loss for transfers, wages, etc is only £15m over those three years. Any losses above that up to £105m need to be in the form of securities like owners buying up shares, which are seen as "secure funding".
If a club loses more than £35m across three seasons then they need to submit explanations of their financial plans for two upcoming years. Effectively, they need to prove they are operating sustainably.
The best way to stay within those limits is to keep spending down, sell players, and amortise any major signings.
How Football Amortisation Works
Before we look at five clubs under a magnifying glass, it's worth us explaining what clubs do with transfer fees and wages. These are the biggest pressures on FFP and accountants have found a smart way round them: amortisation.
Amortisation works by spreading the upfront cost of a player's transfer fee over the course of their contract. When Manchester City bought Jack Grealish in 2021 for £105m on a six-year contract, they were able to amortise that cost across six seasons. Their accounts would show an annual loss of £17.5m, rather than a £105m hit in August 2021.
Aston Villa, the recipient of the transfer fee, can do the opposite and record the full funds in their accounts even if City pay in instalments. That means Villa suddenly have an extra £105m worth of wriggle room within the bounds of PSR/FFP.
FFP Penalties
Transfer fees and wages take up the bulk of Premier League club spending. Clubs are allowed to invest in youth academies and other capital projects without it affecting their PSR figures.
However, even then some clubs are flirting close with the line and risk being punished. The current list of FFP penalties are:
- Fines
- Points deduction
- Delete or refuse player registrations
- Compensation to other clubs
- Replay matches
- Suspension from playing games
- Past trophies struck from the record
- Expulsion from the EPL
Fines and points deductions are the two most likely penalties any clubs found to have breached FFP/PSR will face. However, major breaches risk even bigger punishments, including the possibility of a club being expelled from the league.
Clubs Under FFP Threat
Now we know more about FFP/PSR, the punishments involved, and how transfer amortisation works, it's time to look at five clubs that are under threat.
Manchester City
Status: Charged with 115 alleged breaches
Manchester City were charged with 115 FFP breaches over the course of nine seasons, from the start of the 2009/10 campaign. The list of allegations is huge and covers falsified financial reporting and noncompliance with the EPL's probe.
The Man City FFP charges came in February 2023 and the club immediately put lawyers on the case. UEFA have already fined City £49m (in 2014) and £8.9m (2020) for alleged breaches of their FFP rules.
However, the Premier League case is different. The allegations go beyond spending and claim City failed to properly explain how they paid one of their past managers. City deny any wrongdoing.
A trial is set for autumn 2024 and won't conclude until summer 2025. At which point City may have won another treble and Pep Guardiola may have departed.
Potential Punishments:
The size of the alleged Man City FFP breach would lead to an unprecedented punishment. Considering Everton were given a 10-point penalty for one FFP breach, City could be looking at a huge number of points. Relegation from the Premier League is possible, although unlikely.
Everton
Status: Appealed a 10-point deduction, had it reduced down to 6 points and charged with further breach
Everton look likely to survive relegation in the 2023/24 season despite being docked 10 points for a single PSR breach. They're appealing the punishment and might get it halved to five points. Everton argued their >£105m loss between 2019 and 2022 was down to Covid-19, although their supposed losses from the pandemic were much greater than those posted by other clubs.
The alleged Everton FPP breach is as much as £24.5m. They were docked points after a complex argument regarding player amortisation and their new stadium development.
However, they are now also charged with a breach in their accounts from the 2022/23 campaign. They are appealing against that charge and a hearing date is yet to be confirmed. Should Everton lose that appeal then further points deductions are expected.
Possible punishments:
Additional points deductions from 2022/23 breach, after original points deduction was reduced upon successful appeal.
Nottingham Forest
Status: Alleged to have committed one breach, hearing set for April 2024
Nottingham Forest were charged with an FFP/PSR breach in January 2024 for what appeared to be an obvious overspend on player transfers.
The club have splashed in excess of £250m on more than 40 players since securing promotion to the top flight. Brennan Johnson is their only major sale to date. He joined Tottenham for £47.5m in August 2023.
Now, Forest's case is different to Everton's because the FFP parameters are tighter. Forest were a Championship club for two of the three seasons between 2020 and 2023, meaning their maximum permitted losses were just £61m.
Forest spent £177m alone on new players in their first Premier League season. At the end of the campaign they sold Johnson but, crucially, the sale came two weeks after the FFP window for that campaign.
Forest argue their losses would have fallen within the FFP/PSR regulations had they sold Johnson within the 2022/23 financial year. However, by waiting two more weeks they claim they earned an extra £17.5m from the Tottenham deal.
Possible punishments: It's difficult to know whether Forest will be punished here. Strictly speaking they breached the rules within the timeframe set, but they might be successful in arguing that selling Johnson later earned them more money. A breach will almost certainly lead to a points deduction, perhaps on par with Everton's. The hearing is expected to conclude in April.
Newcastle
Status: At risk of FFP breach soon
Newcastle United are the richest football club in the world. Backed by Saudi Arabia's Public Investment Fund, they are expected to eventually rival Manchester City, Real Madrid and Bayern Munich for regular European honours. But they can't rush it.
FFP/PSR is greatly restricting Newcastle's spending plans. Their Saudi owners have already splashed £400m since arriving but the year ending 30 June 2023 proved to be a £73.4m loss. That, coupled with the previous two seasons, is within PSR limits but only just.
CEO Darren Eales has admitted the club may need to sell players to balance the books. Critics of FFP argue the rules favour the elite clubs and prevent newly-minted sides like Newcastle from upsetting the pack. There's certainly a case to be made there.
Newcastle's revenues are expected to pick up and they can afford to invest in infrastructure and youth development. A Newcastle FFP breach is always possible but they will likely look at the charges that have befallen City and wonder whether going for broke so soon is worth it.
Possible punishments:
Newcastle would likely appeal any FFP/PSR breach and accept a fine if one were handed down. If they can't sell players over the next couple of transfer windows then they could accidentally fall foul of the rules and endure a penalty on par with Everton.
Chelsea
Status: EPL investigating Abramovich-era spending, breach also likely this summer
Todd Boehly has spent more than £1bn on new players across five transfer windows since he bought Chelsea from Russian oligarch Roman Abramovich. Fans have questioned how a Chelsea FFP breach hasn't been triggered yet. One answer is the Blues have signed players up to long contracts to spread the cost over six or seven years. Amortisation can only get you so far, though.
Stefan Borson, a former financial advisor for Manchester City, claims Chelsea need to offload as much as £100m of talent before 30 June 2024 to avoid a breach.
"This breach Chelsea are lined up for is much bigger than Everton's breach," he said, adding the Premier League would see the breach as deliberate. "Chelsea can't hide behind building a stadium (like Everton) or inadvertently breaching FFP (like Forest)."
The problem Chelsea have is their list of players to sell is slim, and there won't be too many buyers. Conor Gallagher, Reece James and Armando Broja could be offloaded. However, the only genuine suitors with enough cash to help Chelsea out are their Premier League rivals. Will anyone really drop £60m or so for Gallagher?
What's more, the Premier League is still investigating alleged FFP breaches from the Abramovich era. Chelsea’s profit/loss for 2020, 2021 and 2022 is -£552m.
Possible punishments:
UEFA fined Chelsea £8.6m last summer for historic breaches during Abramovich's reign. The Premier League is also looking at the Russian's dealings when he was owner. Should Chelsea fall £100m or so outside the Premier League's PSR limits this summer then a points deduction or fine is also very likely.