A number of Leicester City’s rivals expect the club to be in breach of the Premier League’s profit and sustainability rules for the reporting period ending in 2023-24.
Leicester had until December 31 to submit their accounts for the 2023-24 season, when they were in the Championship, and several financial experts also estimate they will be in breach of the £83million limit for the last three-year cycle, which includes one season in the Championship.
While other clubs will not have seen Leicester’s accounts, which will be published by Companies House at a later date, a number of sources, speaking on the condition of anonymity, have told The Athletic they anticipate a breach.
Leicester’s position is unknown and they declined to comment when contacted by The Athletic.
What are profit and sustainability rules?
All Premier League clubs are assessed for their adherence to the competition’s profit and sustainability rules each year. Their compliance with said rules is assessed by reference to the club’s PSR calculation, which is the aggregate of its adjusted earnings before tax for the relevant assessment period.
Under PSR, clubs are allowed to lose a maximum of £105m over three seasons (or £35m a season), but certain costs can be deducted, such as investment in youth development, infrastructure, community and women’s football. Championship clubs are permitted to record losses of £13m per season.
What happened with Leicester’s previous PSR charge?
Leicester successfully defended on appeal a charge from the Premier League in September that they had breached the PSR threshold by £24.4m for the three-year cycle ending in 2022-23. The club had moved their accounting deadline back a month to June 30 after they had passed over their Premier League membership. They successfully argued that they were no longer a Premier League club at the point of the breach when they filed their accounts.
That decision sparked frustration from the Premier League and EFL that Leicester had been able to avoid sanctions over the question of jurisdiction due to the wording of the regulations. The Premier League and the EFL are both expected to be more robust with Leicester this time if they feel there is another case to answer.
Are they at risk of breaching again?
The English Football League (EFL) stated last season that Leicester were projected to be in breach for the three-year cycle ending with the 2023-24 season and placed a registration embargo on the club.
Zurich-based football finance expert Kieron O’Connor, who runs football finance blog the Swiss Ramble, published an analysis of Leicester’s estimated accounts for the 2023-24 season and believed they could be in breach by around £12million. His analysis is widely shared within the industry.
Any PSR charge for Leicester would be calculated based on accounts for the 2023-24 season — which are yet to be published on Companies House — the 2022-23 season, when they lost £89.7million, and the 2021-22 season, when they lost £92.5m.
Leicester did not secure any income from European football in 2022-23 and dropped from eighth in the Premier League table in 2022 to 18th in 2023, which equates to a loss in merit payments of about £30million. The club spent the 2023-24 season in the Championship, which meant missing out on the Premier League’s lucrative media rights income. They did bank two large transfer fees in the 2022-23 financial year with the sales of Wesley Fofana to Chelsea and James Maddison to Tottenham Hotspur.
Leicester then sold Harvey Barnes, Timothy Castagne and George Hirst during the 2023-24 financial year, bringing in more than £50m, but they also spent more than £20m on new signings and held onto several high earners. The £30m sale of Kiernan Dewsbury-Hall to Chelsea came after the PSR deadline for 2023-24, but Leicester did receive compensation from Chelsea for the departure of manager Enzo Maresca and his staff when he took over at Stamford Bridge in June, estimated to be worth up to £10million.
Harvey Barnes was sold to Newcastle (Catherine Ivill/Getty Images)
Leicester hold several assets they could dispose of or sell to another branch of the business to avoid a breach, as Chelsea did by selling a hotel to a sister company. Any sale would have to have come in the previous accounting period, before June 30, 2024.
Leicester have retained their former men’s training ground, Belvoir Drive, just outside the city centre, which is situated in a housing estate, and there is so far no information on the Land Registry of a sale. They also previously purchased land off Aylestone Road behind the South and East Stands for plans to build a retail, office and leisure area to generate extra income, but the plans were shelved after the Covid-19 pandemic dramatically escalated the costs, coupled with relegation.
Should Leicester be charged, it will not just be their relegation rivals who will have a vested interest in the situation, but also Leeds United, who were relegated with Leicester in 2023 and failed to get straight back up with them after major cost-cutting.
When will the Premier League make a decision and what happens then?
A charge by the Premier League could come on Monday at the earliest. In September 2023, the Premier League fast-tracked its financial disciplinary cases to ensure rule breaches are handled within a 12-week timeframe and any punishment is applied within an existing season. This ruling, voted for by member clubs, came in shortly after Leicester’s relegation.
All clubs were required to submit their accounts for the previous season by December 31 so any potential breach can be quickly assessed, a sanction enforced and an appeals process also carried out before the end of that particular season to protect the integrity of the competition.
Any breach could bring a points deduction. Everton (twice) and Nottingham Forest were both given points deductions last season for PSR breaches.
What could this mean for Leicester’s season?
It could have a big impact on their survival hopes. A breach of £12million, if accurate, could bring a reduced points deduction. Forest breached by £35million but were handed a reduced four-point deduction after they cooperated fully with the Premier League and admitted their breach. As already mentioned, the leagues were very annoyed with Leicester’s successful exploitation of the jurisdiction loophole last time.
Leicester manager Ruud van Nistelrooy (Justin Tallis/AFP via Getty Images)
“It is of critical importance that the Premier League is able to enforce its rules consistently to maintain the principle of fairness,” the Premier League said after the verdict. “The league will now consider what further action it can take to ensure this is the case.”
The EFL seemed equally determined to impose sanctions last season in the belief that Leicester would breach for 2023-24. If Leicester are charged and then proven to have breached, the authorities may choose to come down hard on them.
As for the January transfer window, if Leicester are looking to add to their squad this January, any money spent would have an impact on their future PSR calculations rather than the period for which they have just filed.
It is just over a week since the window opened and Leicester do not appear close to adding to their squad. Failure to do so could leave Van Nistelrooy contemplating his own future. The Dutchman resigned as manager of PSV Eindhoven in May 2023, citing a lack of support after two of his best players were sold in the previous January transfer window.
(Top photo: Plumb Images/Leicester City FC via Getty Images)
