Leicester City and PSR – Everything you need to know on EFL dispute, player sales, and what next

[davieG]

If you don't fancy plowing through these 3 topics here's an overview of the situation and what can and might happen.

 

 

 

https://www.leicestermercury.co.uk/sport/football/football-news/leicester-city-psr--everything-9148251?fbclid=IwAR3kW9SM6KLTXSlJ_7u7MmhTlyAmH7kZush_hQMwRVpuFfpoAPgMc59mFJ8

 

Leicester City and PSR – Everything you need to know on EFL dispute, player sales, and what next
All of the details on Leicester City's EFL hearing, the Profit and Sustainability Rules they are at risk of breaching, what might happen next and when there will be clarity

ByJordan Blackwell
11:24, 7 MAR 2024UPDATED12:42, 7 MAR 2024
Leicester City's King Power Stadium

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A dispute between Leicester City and the EFL has been ruled in the club’s favour, but that is far from the end of the matter and hides a bigger story.

Statements posted on Wednesday revealed that a hearing took place in January after City argued it was against the EFL’s own rules for the league to force the club to submit a financial business plan, explaining how they would keep costs down and avoid a breach of Profit and Sustainability Rules (PSR). A panel said City were right and the EFL were wrong.

However, it remains the case that City could break the regulations and be subjected to sanctions. They have until the end of June to get their finances into order. Here’s a rundown of the key matters, what happens next, and when that will happen.

 

Back in November, the EFL’s Club Financial Reporting Unit (CFRU) suspected City were on course to breach PSR for the 23-24 season. As such, they requested a business plan from the club about how they would stay within the guidelines.

A business plan is supposed to outline player sales, wage reductions, and potential uplifts in revenue, all with the intention of balancing the books. If the EFL are not satisfied with a club’s business plan, they can place them under transfer embargo.

However, City argued that it was against the EFL’s rules and the CFRU’s jurisdiction to ask for a business plan at the time they did. They responded in December, and a hearing was called for January.

At the hearing, City argued the EFL’s rules state that City only need to submit future financial information and a projection of their end-of-season accounts by the end of March. As a result, the EFL should not be allowed to make an assessment of their finances until after that date.

The CFRU argued that City’s interpretation was “inappropriately technical” and “inconsistent with the underlying duty on the club to cooperate with the EFL”. They said that if the rules are how City interpret them, it would lead to inequality between clubs.

The CFRU are able to make assessments on 18 Championship clubs from the start of the season based on PSR calculations they submitted the previous March, which in this case is March 2023. But for the six clubs who were either relegated or promoted into the division this season, they wouldn’t be able to make assessments of them until March 2024. They were not Championship clubs in March 2023 and so can’t be judged on finances from those periods.

Ultimately, the independent panel ruled in City’s favour and said the CFRU did not have the power to request a business plan when they did. It was not the case that City exploited a loophole. Merely, they interpreted the rules in a way that the independent panel deemed reasonable. Now, the EFL are seeking to rewrite their rules to avoid other clubs interpreting them the way City have.

 

 

What does all this mean for City?

This dispute is not the big story. The big news is that the EFL believes City are on course to breach PSR rules this season and that could lead to sanctions. This is not something City deny.

In the report of the hearing, it says: “The CFRU submitted that relevant context is that LCFC has not disputed that it is forecast to breach the upper threshold in the 2023-24 season and that this is a serious matter.”

What do City need to do now?

It means they have three months to get their finances in shape so that they do not breach PSR. City’s financial year runs until June 30, so that is their cut-off date.

They are allowed to have lost £83m in the three years up to the end of the 2023-24 season. That includes allowable losses of £35m per each campaign they were in the Premier League, covering 21-22 and 22-23, and then allowable losses of £13m for their year in the Championship, 23-24. So far, the finances for only one of those three seasons have been made public. City made losses of £92.5m in 21-22.

Because of the risks of breaching PSR rules for 23-24 season, City are going to have to take action in the next three months. There are ways to raise finances, such as through FA Cup progression, or through sponsorship deals, which are more likely to come about if City are promoted to the Premier League.

However, possibly the easiest way to raise finances is through selling players. City will have only the first month of the transfer window to do it though, as those sales will need to be completed before June 30.

 

Are there any other problems?

Yes. As things stand, City are actually at risk of two breaches, and they could come with two separate punishments.

Because the finances for the 22-23 season have not yet been made public, it is still not clear if City are within PSR for the three years up to June 2023. Over the previous two campaigns, City lost a combined £120.5m, and so would need to make a profit of more than £20m to be under the allowable losses of £105m.

However, within that, some spending is not factored in, such as that for infrastructure or on the academy. So City’s three-year losses may exceed £105m but they could be within the threshold and avoid punishment.

 

What are the punishments?

As seen with Everton, breaches can be punished with points deductions. The issue for City is what happens if they breach PSR this season but get promoted. Technically, City would have breached EFL rules, but will be a Premier League club, so it will require the two organisations to come together to determine a punishment.

If City have breached PSR for the three years up to the end of 22-23, a points deduction for when they're next in the Premier League is the likely outcome. If they go up this year, that could mean starting next season on minus points.

When will there be clarity?

There will be some clarity at the end of this month when City release their finances for the 22-23 campaign. It will then be known if City have breached PSR for the three years up to June 2023, and it will provide more information as to what they must do to avoid breaching PSR for the three years up to June 2024.

 

What else is there to be considered?

If it’s not messy enough already, there is still the issue with Everton and Nottingham Forest. Both clubs have been charged with breaching PSR for the three years up to the end of the 22-23 season, the campaign in which they finished just above City and avoided relegation.

If City did not breach the rules for that season, and the teams who finished directly above them are found guilty of doing so, they may feel they have a compensation claim. A decision over Everton and Forest is due by May 24 at the latest.

[themightyfin]

Another thread? Really? 

[CosbehFox]

Davie - the article from Blackwell is wrong. He's comparing the financial results and tying them to the PSR FFP calculations. It's inaccurate and misleading. 

[ClaphamFox]

2 minutes ago, CosbehFox said:

Davie - the article from Blackwell is wrong. He's comparing the financial results and tying them to the PSR FFP calculations. It's inaccurate and misleading. 

This is what Blackwell writes:

"Because the finances for the 22-23 season have not yet been made public, it is still not clear if City are within PSR for the three years up to June 2023. Over the previous two campaigns, City lost a combined £120.5m, and so would need to make a profit of more than £20m to be under the allowable losses of £105m.

 

"However, within that, some spending is not factored in, such as that for infrastructure or on the academy. So City’s three-year losses may exceed £105m but they could be within the threshold and avoid punishment."

He explicitly references the difference between financial results and PSR/FFP.

[CosbehFox]

3 minutes ago, ClaphamFox said:

This is what Blackwell writes:

"Because the finances for the 22-23 season have not yet been made public, it is still not clear if City are within PSR for the three years up to June 2023. Over the previous two campaigns, City lost a combined £120.5m, and so would need to make a profit of more than £20m to be under the allowable losses of £105m.

 

"However, within that, some spending is not factored in, such as that for infrastructure or on the academy. So City’s three-year losses may exceed £105m but they could be within the threshold and avoid punishment."

He explicitly references the difference between financial results and PSR/FFP.

My bad cos the line before about profit more than £20m is untrue - it's poorly worded. 

[RonnieTodger]

Thank goodness we didn’t get a transfer embargo. January was massive.

[st albans fox]

4 minutes ago, RonnieTodger said:

Thank goodness we didn’t get a transfer embargo. January was massive.

And  maybe that’s why we pulled the plug on any spend without anything coming in ?.

 

 

Edited 8 March by st albans fox

[hackenbacker]

Leicester City and PSR – Everything you need to know on EFL dispute, player sales, and what next

This can we easily reduced to "We're Fvcked"

[hackenbacker]

Reported Salaries (Leicester Mercury)

Vardy £140,000 a week

Iheanacho £80,000 a week

Ndidi £75,000 per week

Vestergaard £75,000 per week

If true, in the Championship these salaries are insane. What happened to the salary reduction with relegation clauses?

 

In the Australian Football League many players are on automatic salary reductions as their contract length is met ie. they are paid more in the early years of their contract than in the latter years to reflect their increase in age and more possibility of injury that can follow. 

 

[davieG]

1 hour ago, themightyfin said:

Another thread? Really? 

Wasn't meant as another discussion just to save people who haven't kept up with the details a chance to see it laid out in a simple way.

[Chelmofox]

16 minutes ago, hackenbacker said:

Reported Salaries (Leicester Mercury)

Vardy £140,000 a week

Iheanacho £80,000 a week

Ndidi £75,000 per week

Vestergaard £75,000 per week

If true, in the Championship these salaries are insane. What happened to the salary reduction with relegation clauses?

 

In the Australian Football League many players are on automatic salary reductions as their contract length is met ie. they are paid more in the early years of their contract than in the latter years to reflect their increase in age and more possibility of injury that can follow. 

 

Good luck signing players in the PL under those terms.  Australian league hold no weight in the argument.

[coolhandfox]

I will stick this in here as I post it in another thread.

 

My view is it's pretty tight. It could go either way. 

 

Using The Swiss Ramble data, as he is far better than me, as a starting point for the previous report period ending in 21/22, we were around 1m under FFP limits (See Table 1) * (19/20 and 20/21 are combined and taken as an average due to COVID so its actual a 4 year period rather than 3)   

 

For the 22/23, the 19/20 accounts drop out, and then I've made some assumptions/guesses about our income and expenditure for 22/23 and I have us going over by 8m (See Table 2)

 

Many variables could nudge us 10m either way, largely down to what we can convince the PL are allowable deductibles.   

 

 

All PL clubs must submit their accounts for the 22/23 season by December 31, 2023. The Premier League has charged Everton and Nottingham Forest with breaching its financial rules based on that submission before they have published their official accounts. 

 

So my question is, why haven't we been charged? Is it because we didn't have to do the December 31, 2023 submission because we are no longer a PL club, or are we ok?

 

The short answer is nobody knows other than the club and the PL. 

 

Edited 8 March by coolhandfox

[moore_94]

1 minute ago, coolhandfox said:

I will stick this in here as I post it in another thread.

 

My view is it's pretty tight. It could go either way. 

 

Using The Swiss Ramble data, as he is far better than me, as a starting point for the previous report period ending in 21/22, we were around 1m under FFP limits (See Table 1) * (19/20 and 20/21 are combined and taken as an average due to COVID so its actual a 4 year period rather than 3)   

 

For the 22/23, the 19/20 accounts drop out, and then I've made some assumptions/guesses about our income and expenditure for 22/23 and I have us going over by 8m (See Table 2)

 

Many variables could nudge us 10m either way, largely down to what we can convince the PL are allowable deductibles.   

 

All PL clubs must submit their accounts for the 22/23 season by December 31, 2023. The Premier League has charged Everton and Nottingham Forest with breaching its financial rules based on that submission before they have published their official accounts. 

 

So my question is, why haven't we been charged? Is it because we didn't have to do the December 31, 2023 submission because we are no longer a PL club, or are we ok?

 

The short answer is nobody knows other than the club and the PL. 

 

Say this is correct, would we need to sell a player (that is still on their first contract like Kristiansen) for £8-10m more than what is left on their current book value?

 

Or could we sell him for £8-10m and be sorted?

 

Or is this where it would basically need to be someone on their second contract or homegrown like JJ or KDH?

[coolhandfox]

1 hour ago, CosbehFox said:

My bad cos the line before about profit more than £20m is untrue - it's poorly worded. 

This is why people need to be careful listening to 99% of the reports on this. 

 

We can make a loss and still be ok, it's the size of the loss and what is deductible that important. 

[coolhandfox]

Just now, moore_94 said:

Say this is correct, would we need to sell a player (that is still on their first contract like Kristiansen) for £8-10m more than what is left on their current book value?

 

Or could we sell him for £8-10m and be sorted?

 

Or is this where it would basically need to be someone on their second contract or homegrown like JJ or KDH?

My numbers are for the 22/23 PL FFP window, people are talking about.

 

Which we can't impact now other than arguing allowable deductibles. 

 

For the Championship P&S for 23/23, I have us around 4-5m over if we have cut wages with relegation clauses to around 50% of the previous wage bill, so find more income, commercial or sell a player, cut cost or argue more allowable deductibles. 

 

[indierich06]

This PSR shit is absolute ****ing nonsense and the sooner they do away with it the better. FFP was bad enough, but now it seems that any club who don't have the revenue streams of these mutants like United and Chelsea are unable to even remotely compete for players in a market that has been overinflated by said clubs.

 

How is it that the transfer activity of clubs like Everton, Leicester, Forest and even Villa comes under more scrutiny and is considered more damaging than what the likes of Chelsea and United do season after season? With these rules, they've created a scenario where anyone who isn't a top 6 club, with the revenue streams connected with that status, will genuinely never be able to compete in this country's top league. We can't buy the same players as the top clubs, we can't invest in our squads in the same way. If I was running a PL club, I would be genuinely looking at whether these rules breach UK anti-competition laws.

[Fox forever]

3 minutes ago, indierich06 said:

This PSR shit is absolute ****ing nonsense and the sooner they do away with it the better. FFP was bad enough, but now it seems that any club who don't have the revenue streams of these mutants like United and Chelsea are unable to even remotely compete for players in a market that has been overinflated by said clubs.

 

How is it that the transfer activity of clubs like Everton, Leicester, Forest and even Villa comes under more scrutiny and is considered more damaging than what the likes of Chelsea and United do season after season? With these rules, they've created a scenario where anyone who isn't a top 6 club, with the revenue streams connected with that status, will genuinely never be able to compete in this country's top league. We can't buy the same players as the top clubs, we can't invest in our squads in the same way. If I was running a PL club, I would be genuinely looking at whether these rules breach UK anti-competition laws.

Sadly those running the majority of current premier league clubs voted for these rules. 

[hackenbacker]

28 minutes ago, Chelmofox said:

Good luck signing players in the PL under those terms.  Australian league hold no weight in the argument.

Ohhh i love armchair experts you actually know nothing .. keep on keeping on 

[Gravel]

Based upon Everton's penalty so far, it could end up being better for the club in the long term to stick their fingers up to the EFL and PL and just take a points deduction on the chin. 

 

A player fire sale might do more damage in the end

[HankMarvin]

Not quite everything you need to know 

[Chelmofox]

Just now, hackenbacker said:

Ohhh i love armchair experts you actually know nothing .. keep on keeping on 

Care to explain how contracts are devised in the Australian league (ranked significantly lower than many second or third tier european leagues) bear any resemblance to trying to compete in the Premier League?  It's not that I don't like the concept, but you are competing for the players so you can compete in the biggest league in the world. It's the biggest factor in all of this, and if Leicester start offering contracts on far worse terms why would a player sign for you?

[Lesta Legend]

23 minutes ago, coolhandfox said:

My numbers are for the 22/23 PL FFP window, people are talking about.

 

Which we can't impact now other than arguing allowable deductibles. 

 

For the Championship P&S for 23/23, I have us around 4-5m over if we have cut wages with relegation clauses to around 50% of the previous wage bill, so find more income, commercial or sell a player, cut cost or argue more allowable deductibles. 

 

Getting Sensi would have been stupid without the sales. I’d imagine the club had no intention so late on, they knew they weren’t selling anyone for the funds they needed and knew they were tipping over the edge with wages. 

[Trav Le Bleu]

I can help.

 

How much is my bottle of unopened Captain Morgan worth?

[Foxes96]

Surely this all also points to the importance of raising additional revenue. Especially considering infrastructure investments is deductible from FFP/ PSR, then surely we need to get on and expand the stadium. Will help us far more financially in the long run..?

[Foxdiamond]

1 hour ago, hackenbacker said:

Reported Salaries (Leicester Mercury)

Vardy £140,000 a week

Iheanacho £80,000 a week

Ndidi £75,000 per week

Vestergaard £75,000 per week

If true, in the Championship these salaries are insane. What happened to the salary reduction with relegation clauses?

 

In the Australian Football League many players are on automatic salary reductions as their contract length is met ie. they are paid more in the early years of their contract than in the latter years to reflect their increase in age and more possibility of injury that can follow. 

 

Wages in top level football which after all is a team sport are nuts. Not like an individual sport where you have do it all on your own. I think players deserve a great wage but crikey imagine 30k a week on a 3 year contract. Not bad eh but this is considered low.