Nottingham Forest received a four-point deduction for violating PSR regulations last season.
This season has been a far cry from Nottingham Forest’s struggles last year, as the club continues to chase a place in the top four and a spot in next season’s UEFA Champions League.
Forest, currently sitting in third, level on points with second-placed Arsenal and just six points behind leaders Liverpool, have been the surprise package of this season, with Nuno Espirito Santo’s men upsetting the odds to begin the year in a title race.
Of course, last season’s story was rather different. Forest finished the season six points and one position above the bottom three, but received a four-point deduction after being found in violation of the Premier League’s profit and sustainability guidelines (PSR).
The goal of PSR is primarily to maintain financial prudence and that clubs live within their means in a sustainable manner. Clubs can lose up to £105 million during a rolling three-year evaluation period, with deductions for infrastructure investment, academy and women’s team expenditure, and money spent on community activities. Losses due to the COVID-19 epidemic were also allowed.
With Forest targeting European football this season, another PSR breach would be a painful blow to fans. But how likely is that, and how does Forest appear in terms of compliance?
According to data supplied by football finance expert Swiss Ramble, Forest should be able to slip under the radar in terms of PSR while remaining within the limitations.
For the 2021/22 and 2022/23 financial years, Forest made pre-tax losses of £46m and £67m, respectively. Against allowable deductions for those two periods of £4m and £15m the net PSR result for the club was a combined £92m. But with the 2021/22 period falling when Forest were in the Championship, that campaign allowed them to only make a £13m loss as opposed to the £35m per year loss allowed for in the Premier League.
That means that Forest, whose 2023/24 accounts will be published in the coming weeks, are still hamstrung when it comes to their PSR position due to the Championship season still be included in the rolling three-year assessment period.
Forecasts from Swiss Ramble, however, have Forest breaking even for the 2023/24 period, which, when adding in allowable deductions of around £10m, means that the club has a positive PSR position of £10m for the season. What that means for the club’s PSR position as a whole is that they would be just under the limit to the tune of £1m. Were Forest working with the full £105m amount, as they will be for the 2024/25 period, which will be the last PSR assessment before clubs move to a squad cost ratio rule, they would have been well under at around £23m.
With the forecast having Forest able to just about remain compliant when including the 2023/24 period, the current financial year, which runs until the end of June, is predicted to bring more headroom for the club, with Swiss Ramble predicting that the club could lose as much as £72m in the current financial year and still be compliant with the PSR regulations after the Championship year drops off the rolling period, giving the club an extra £22m of room for manoeuvre.
Moving towards a squad cost ratio rule, which limits a club’s spending on the first team and its coaching staff’s wages, transfer fee amortisation, and agents fees to 70% of revenue (reported to include profit on player sales) for clubs competing in UEFA competition and 85% for clubs not competing in UEFA competition, would be aided by Forest’s successful season on the field this season.
If Forest were to win Champions League football, they would generate significant revenue by competing and having access to Champions League broadcast rights, as well as an anticipated increase in commercial activity. Increased revenue would give for greater financial flexibility in the transfer market, allowing the team to turn a successful season into something that happens more frequently.
Following last year’s PSR troubles, Forest appear to be turning a financial corner, allowing them to solidify their Premier League place and push for future success.
