Nottingham Forest

Nottingham Forest going through a finiancial issue

Published

11 months ago

January 4, 2024

A big January transfer window has taken on added importance for Nottingham Forest amid their finances coming under the spotlight.

On the pitch, the Reds have made a great start to new head coach Nuno Espirito Santo’s tenure by recording back-to-back wins. But recent headlines have focused on Forest’s situation off the field.

A report by The Times this week suggested the Reds are among the clubs at risk of breaching the Premier League ’s Profitability and Sustainability rules. Below, we take a look at what we know so far.

What has happened?

On Tuesday, The Times quoted football finance expert Kieran Maguire as saying Forest are “close to the limit” of Financial Fair Play regulations. And it is said if that is the case, it could result in sanctions being imposed.

Maguire, a lecturer at the University of Liverpool Management School, told The Times: “Nottingham Forest were very much at the limit of their Financial Fair Play allowance when they were promoted to the Premier League and that investment in new players continued in their first season, when they signed players on high wages. If you are looking for clubs close to the limit then they would be at the top in my opinion.”

Forest had to overhaul their squad after securing promotion to the top-flight in 2022. They made 29 signings across two transfer windows last season. Another dressing room reshuffle followed last summer, with 13 new faces added.

Lawyer appointed

According to the Telegraph, the Reds have appointed a leading sports lawyer as they look to argue their case, insisting they have “fully complied” with their obligations. Nick De Marco, a KC with Blackstone Chambers in London, is said to have an established record dealing with football, and especially Financial Fair Play.

A Forest spokesman has told the Telegraph: “The club has fully complied with its reporting obligations in respect of the Premier League’s revised profit and sustainability rules. Promotion to the Premier League will always create challenges, and the treatment of promotion bonuses is just one such example. The club approaches all such challenges with its long-term financial sustainability firmly in mind, as the Premier League rules intended.”

What are the rules?

Under new fast-track measures, top-flight clubs had to submit their 2022/23 accounts by December 31. Any charges will be announced by January 14, when clubs found to be in breach of the rules will have two weeks to respond. A subsequent hearing by an independent commission must be concluded by April 8. It is said any points deductions and sanctions imposed would need to be applied by the end of the season.

The Premier League rules state clubs are only allowed to make a maximum loss of £105 million across a rolling three-year period, or £35m each season. For promoted teams that is reduced, meaning Forest are restricted to losses of £61m for the last three campaigns – £13m for the two seasons in the Championship prior to promotion, plus £35m last season.

The Times reported: “Forest made a loss of £45.6m in 2021-22, when they were promoted, and £15.5m the season before. In both years, the club spent double the amount on wages that they earned in turnover. Although promotion to the Premier League will have boosted Forest’s income by about £90m, the club spent heavily on transfers after promotion and their wage bill will have rocketed too.”

What has been said?

After The Times article went live, Maguire added further context to the situation. He replied to a fan on X (formerly Twitter): “The Times asked me which club was closest to the limit and based on Forest only being able to lose £61m over three years and their spending last season they don’t have a lot of wiggle room. Not the same as saying they have breached the limit though.”

He went on to post: “Based on figures from final Championship season I estimate that Forest sneaked in just under the £39 million limit for the three seasons (as averaged out for 2019/20 and 20/21). Lot will depend on wages and amortisation for 22/23 as to whether they are below the £61m max.”

Johnson situation

It is understood a key part of Forerst’s defence will revolve around the club-record sale of Brennan Johnson to Tottenham for £47.5m on transfer deadline day last summer. The Telegraph adds: “Forest spent £177m in the season after their Premier League return, putting them in danger of exceeding the total allowed losses of £105m over three seasons. But the club argue they had accounted for the sale of Brennan Johnson, which falls outside the time frame in question but would push them back into permitted losses.”

Football finance journalist Dave Powell has explained: “Forest are understood to be confident that they have remained compliant with Premier League PSR, but the heavy spend could see them fly quite close to the allowed limit. They do have one significant deal to use in their defence, however.

“The sale of Brennan Johnson to Tottenham Hotspur in September will be key to Forest’s defence if they are to face the glare of the Premier League’s spotlight over their transfer activity. The sale was important for Forest in terms of what they were able to spend. As a graduate of Forest’s academy, the sale of Johnson was one that was pure profit for the club, with that £47.5m able to be booked straightaway.

“The issue for Forest is that the deal to sell Johnson happened outside the allotted time period that is assessed, up to June 30. However, with Forest having rejected bids of around £30m for his services during the period of assessment, there is the hope that any issue over the deal could be argued as requiring some leeway.

“It is claimed that Forest were in dialogue with the Premier League over the matter during the period, but in terms of how the League would view the deal should they come under scrutiny remains to be seen, with Everton having also been in regular dialogue with the Premier League over transfer business and cost management before they were hit with a charge last year.”

Maguire has addressed the Johnson situation on X. He said: “Having looked at it more closely the sale was 1st Sept and so unlikely to be included in the 22/23 figures.

Asked if Forest might have included the Johnson sale in the prior year’s figures, Maguire said: “No one knows. Given the Johnson sale was 1 Sep unlikely to be in the 22/23 calcs unless it qualifies as an adjusting post balance sheet event.”