The English Premier League has long been known for being the richest league of any across Europe, with teams across the continent simply unable to spend the same level of money that even lowly Premier League teams are able to.
However, there has been a renewed focus on Premier League teams attempting to keep the bank balance in check in recent seasons, with plenty of teams feeling the pressure of the league’s ‘Profit and Sustainability Rules’ (PSR).
Everton, in particular, were affected by PSR after they were handed a 10-point deduction in 2023/24 for excess spending, though that was eventually reduced to six after an appeal process from the Toffees.
As more clubs now tussle with the dreaded PSR, it is the perfect time to explain what it actually is and which clubs may soon be in trouble.
PSR Explained
In simple terms, when every Premier League team makes their annual accounts, they are only ‘allowed’ a loss of £105 million or less across the previous three seasons.
While that sounds simple and manageable, it becomes a lot more difficult to understand and contend with when it is broken down.
Of those losses, clubs are only allowed to lose £15 million of their own money, meaning no more than £15 million extra on things like transfer fees, player wages and other outgoings compared to their overall income from TV payments, season tickets and selling players.
Anything above those losses, up to £105 million, must be guaranteed by their owners buying shares, which essentially means bankrolling the club.
While that makes it appear as though any expensive signing is outlawed, there is a process called amortisation that helps clubs get around those tight PSR rules.
Amortisation is a process that means if a player is signed for £100 million on a five-year contract, then that £100 million fee will be split across the five years, equalling at a loss of just £20 million every year.
Who is in danger of breaching PSR?
Everton and Nottingham Forest have already felt the full force of the PSR rulings as they were each handed point deductions throughout 2023/24, Everton being deducted eight points in total and Nottingham Forest receiving a four-point deduction.
Leicester City were the most recent team to find themselves in hot water with PSR as they were alleged of going over the allowed threshold of £105 million in losses across three years, losing £129.4 million in the three years ending at the conclusion of the 2022/23 season.
However, the Foxes successfully argued that because their accounting period ended on 30 June 2023, they were no longer bound by Premier League rules as they had already been relegated from the league to the Championship.
Manchester City are set to be the next side to clash with PSR as their long-awaited hearing for an alleged breaching of 115 financial rules between 2009 and 2018 is on course to start next month. This case will act as a benchmark for future cases and is arguably the most crucial to date.
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