Leicester City have avoided a points deduction from the Premier League after being found to be compliant with profit and sustainability rules (PSR), but the club will now have its focus set on what the current financial year brings.
The Premier League informed its member clubs that no breaches of PSR were found after assessment and no clubs would face the threat of a points deduction, the likes of which were seen by Everton, twice, and Nottingham Forest last season.
Leicester remain at risk, however, with the Foxes and the Premier League both engaged in arbitration over an issue that centres on the 2022/23 financial year, an accounting period that saw Leicester move the financial year end, something permissible by law, thus the club had already relinquished its Premier League membership by the time that the PSR punishment was handed down. The Foxes won a legal case on the basis that the Premier League did not have jurisdiction.
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The details of the arbitration process remain confidential, but the Foxes remain confident in their position having been able to pick holes in the Premier League’s legislation, something that left the Premier League with a bloody nose and some significant embarrassment. But what does the future look like for the Foxes?
The aim of PSR is, essentially, to ensure financial prudence and that clubs operate within their means in a sustainable manner. Clubs are permitted to lose £105m over a rolling three-year assessment period, with allowable deductions for such things as investment into infrastructure, investment into the academy and the women’s team, and money spent on community initiatives. Losses attributable to the COVID-19 pandemic were also permitted.
Football finance expert Swiss Ramble had predicted that, while Leicester would make a small £5m loss for the 2023/24 financial year, giving them a net positive PSR position of £17m for the year, the club would be at £95m for PSR. While that would be compliant by £10m had the Foxes not been in the Championship for a season, where the allowable loss is £13m and not £35m for a season, the projection was a £12m PSR overshoot.
One explanation for the club being compliant could well be that the legal team managed to successfully argue a case that the club would be able to claim the full £35m for the year instead of the £13m, thus allowing them to remain compliant. There could have also been sales of tangible assets that were not accounted for in projections.
Looking ahead to what the final three-year cycle might look like before the shift to a squad cost ratio method, in line with what UEFA have in place, football finance expert Swiss Ramble has Leicester being able to make a loss of as much as £79m in the current 2024/25 financial year.
The main reason for that is that the heavy £92m loss from 2021/22 drops off the three-year assessment cycle, and that is impactful in terms of what the club can do. It is also based on the assumption that allowable deductions remain the same, which have been pegged at around £21m per season.
Player trading and the return of Premier League broadcast money for the financial year should ensure that Leicester fall well below that figure and that they will have no concerns over PSR compliance for the final cycle before the move to new regulation.
But with the spectre of the arbitration with the Premier League relating to 2022/23 hanging over them, while there will be confidence within the corridors of the King Power Stadium, complacency likely won’t be seen as the club wants to focus on getting itself onto a more sound financial footing, especially with the risk of relegation back to the Championship being a very real threat this season, which would be a significant blow in terms of finances for the club.
