Financial expert’s lowdown on why Forest were right to appeal
A DAMNING verdict has been issued on the four-point deduction imposed on Nottingham Forest for their breach of the Premier League’s Profitability and Sustainability Rules.
The club have appealed against their punishment, which saw them drop into the relegation zone as a result. And financial expert Robert Matusiewicz says he can completely understand why they have made that decision.
Matusiewicz, a chartered account and Nottingham Forest Supporters’ Trust board member, joined Max Hayes and Sarah Clapson on Nottinghamshirelive’s Garibaldi Red podcast.
Below is his take on the Reds’ PSR breach and the written report from the club’s hearing in front of an independent commission. The full interview can be viewed on our Youtube channel and across all usual audio platforms.
■■Q: Could you explain the PSR charge and break down what Forest were actually charged with?
RM: “Before we get into that, can we go back a step further and explain the objectives of the PSR Rules? I think it’s important to understand what the objectives of the PSR rules are, then consider what Forest have done and been accused of, and then compare what they’ve been accused of with what the objectives of the rules are.
“The stated aims of PSR are to improve the economic and financial capability of clubs, increase transparency and credibility, improve governance standards, encourage clubs to operate on the basis of their own revenues, introduce more discipline and rationality in club finances and encourage responsible spending for the long-term benefit of football. So basically it’s to instil in clubs some financial discipline so they don’t overspend and remain solvent, that’s the first element of PSR.
“The second element is how much clubs are allowed to lose before they find themselves on the naughty step. Premier League clubs are allowed to lose £35m a year. The breach is assessed over a rolling three-year period, so in any three-year period a Premier League club can lose £105m.
“The rules are changed slightly if a club spends time in the Championship because the allowed losses for a Championship club are £22m a year less than for a Premier League club.
“For Forest’s PSR breach, they had two years in the Championship and one year in the Premier League so the allowed losses were £61m. The independent commission found Forest had actually breached that and the losses amounted to £95m, an excess of £34m.
“A lot of the media have taken the simple approach and thought, well, that’s a slam dunk. Guilty as charged. How many points are you going to be deducted? On the face of it, that might appear a reasonable approach – rules are rules, you’ve broken them, take the punishment.
“But the situation with Forest is far more complicated than that. There’s a technical breach but I think the circumstances underlying it haven’t been recognised at all by the commission. I can absolutely understand why the Forest board and owners were not happy when the judgement was delivered.”
■■Q: Forest were in the Championship for a long time before they got promoted. They went up with Bournemouth and Fulham, who both had parachute payments. Did the commission take that into consideration at all or is that something the Premier League doesn’t account for?
RM: “As far as the independent commission are concerned, it’s irrelevant. I think they’re wrong in their application. Some of the comments in the report, I think, are materially wrong.
“Going back a stage, to Forest’s breach, the club were in contact with the Premier League throughout the season. Clubs were required some time in December 2022, I think, to submit to the Premier League what they thought their PSR position would be. Forest did that.
“Based on their accounts after six months and their expectations of what the year would show, it was recognised they were close to the limit. But Forest had recognised there were covid-related costs of £12m or thereabouts.
“The December 2022 submission for forecasted PSR included an allowance for covid costs. But it also claimed as an allowance an additional £20m that was the cost to players for bonuses following success in the play-off final. On that basis, Forest were sailing close to the edge – and they recognised that. Even in December they were looking at the potential need to sell a player.
“In March 2023, Forest submitted a further revision of their PSR projection. At the beginning of June, the Premier League advised Forest they weren’t going to accept the covid claim and they didn’t regard the bonuses paid on promotion as being an allowable deduction from their losses.
“So at a stroke, two or three weeks before the year end, at a time when the transfer window was closed, Forest were told, you’re not going to have a minor breach, you’re £35m adrift.
“We could argue for ever and a day about whether Forest should have known that. I’d have more sympathy with that argument if the potential stance of the Premier League had been notified to Forest in January, when the winter transfer window was still open. I’m not sure what the Premier League thought Forest could do about it, being told that they had a material breach after the season had finished or just as the season was finishing and two weeks before the transfer window had opened.
“The transfer window opens on the 14th of June, Forest’s financial year ends on the 30th of June. Anybody that has been involved with professional football clubs will know the minute the season finishes, players, staff, managers are off. That’s when they have their holidays.
“Looking at the timelines, I think Forest were put in an almost impossible position with the timing of the advice that they were in breach. You have to ask yourselves when the Premier League knew that was going to be a problem and why wasn’t the club advised sooner, rather than leaving it until what seems like the last minute?”
■■Q: Do we know why the timelines of the transfer window and the PSR calculation period don’t correlate?
RM: “There’s no explanation. You’ve identified what I think is a huge flaw in the PSR rules.
“If you were serious about the objectives of PSR then it would make perfect sense to have club year ends running coterminous with the opening and closing of transfer windows. So if the transfer window closes on the 30th of June, have accounts run to the 30th of June. It would avoid a lot of problems.”
■■Q: Is a four-point deduction fair, given your findings? Or is it harsh?
RM: “If you look at the Brennan Johnson transfer in detail and the various stages it went through, and if you examine the stance of the commission, it’s ridiculous. I think it was on the 30th of June, Atletico Madrid
came in with an offer for Brennan Johnson but it was conditional on a number of factors.
“It needed Spanish League approval and they needed to agree terms with the player. But more significantly, it was dependent on Atletico actually selling one of their own players to generate the transfer fees to pay for Brennan. That wasn’t an offer that was capable of acceptance.
“You can only speculate as to what the reaction of the commission would have been if Forest had accepted this conditional offer and the whole thing turned to dust because Atletico couldn’t sell the player they wanted to sell and get the money for it. But there’s a comment in the report that says Forest should have accepted that because hopefully it would have been concluded shortly after the year end. I’ve never seen a comment like that in a legal judgement before.
“On what basis is the independent commission suggesting Forest should have accepted an offer because hopefully it would have been completed? Nonsense.
“That was rejected. Then a few weeks later, Brentford steam in with an offer – £30m, I think. That was rejected. They come back a fortnight later, £35m. I think they increased it again after that. The offers were rejected because – and it’s recorded in the report – Brennan had appointed new advisors. The club had told the new advisor they were in a position where they might have to sell, so the new advisors were looking for options for Brennan.
“Tottenham were mentioned as a potential purchaser during the back end of last season. Given the option of joining Tottenham and Brentford, it’s up to the player to choose.
“It’s not Forest’s choice because it takes three parties to agree a transfer – the selling club and the buying club need to agree a price, and then the buying club needs to agree terms with the player. Without those three in agreement, no transfer can take place. That’s a factor that seems to have been ignored by the independent commission in the way they have finished this report.
“Forest subsequently sold Brennan to Tottenham for £47.5m – £17.5m more than the original offer from Brentford.
“To my mind, and I think to the minds of any right-thinking person, that is totally consistent with the aims and objectives of PSR – sensible financial management, maximising your revenues.
“The commission view was somewhat different. Forest should have accepted the lower offer – it might have cost them money, but it would have shown respect for the rules. Again, what rules? How on earth is knowingly taking a loss of £17.5m consistent with the stated aims of PSR. It’s nonsense.”
■■Q: Did Forest’s points deduction get reduced by two points, to four taken off, because of anything to do with Brennan and the mitigating circumstances? Or was it more because Forest co-operated with the Premier League?
RM: “It’s a bit of both, I think. Having read the report following Everton’s reduction of points, I have to say I didn’t quite follow it. It was almost as if they thought, we’ve got to do something here, because some of the reasons given for the deduction didn’t make sense.
“There’s a bit of spiel in the 50 pages (of Forest’s report) that it was a serious breach and we could have done this and we could have done that, but we’ll call it six and then we’ll knock two off.
“The impression I got when I was pouring through the 50-odd pages was that it was a hatchet job.
“Do you remember when Forest were newly promoted, how the media kept banging on and on about the number of signings? Well, it was like an echo in this report – they spent all this money on players and they’ve got all these players.
“Actually, if you look it, a lot of players came in but a lot of players went out in the promotion season. The headcount actually fell.
“It (the report) was repeating this old line of Forest signed all these players without actually paying attention to the facts.
“They also said Forest spent £145m, and that’s far more than any club has spent having been promoted from 2013 to 2023. In some respects, the report is right. Nobody spent £145m on players in 2013. But what the report didn’t say to qualify that statistic is that football revenues in 2023 were twice the level in 2013.
“It sounds like the sort of statistic you’d throw in if you wanted to make it look as if you knew what you were talking about, but without actually thinking about the ramifications of what you were saying. I thought that was a slightly disingenuous statistic to throw in.
“Coming back to the parachute payments, we all know the circumstances Forest were in when Steve Cooper took over and the rebuilding the squad needed. Forest said, yeah, but Fulham and Bournemouth have come up as well and they’ve had the benefit of parachute payments.
“The Premier League expert reported that that’s true – Fulham had £44m of parachute payments and Bournemouth had two years’ worth, £79m. But that wasn’t spent on players, it was spent to cover the loss in revenue from relegation.
“I think that’s a slightly misleading stance because by virtue of the fact they had the parachute payments, they were able to continue to pay the salaries of the players with Premier League experience that they wanted to keep.
“They didn’t have to buy players to cover a gap, as Forest did, because the parachute payments allowed them to keep them on the payroll.”
■■Q: What kind of penalty do you think Forest should have got?
RM: “There’s no framework for sorting out what the penalties should be for a breach. They say if a club goes into administration, it’s nine points. But you sell a player two months after the year end and you get four points, where’s the sense in that? It’s totally disproportionate.
“If the Premier League applied the rules fairly and consistently across all the clubs, then perhaps there would be more acceptance of it. But that’s not what the Premier League are doing.
“This could be a cynical view, but it seems, depending on how big the club is and how much clout they’ve got in the corridors of the Premier League, they get away with it.”
■■Q: How hard is it for newlypromoted clubs to actually compete?
RM: “I don’t think newly-promoted teams stand a chance. Any team that comes up is going to be put in an almost impossible position of needing to sell to avoid a PSR breach.
“That means players are going to have to be sold in the winter window or clubs are going to run the same risk Forest had with having two weeks at the end of June to sell a player before the shutter comes down and the PSR get the abacus out and calculate how big the deficit is. It’s crazy.
“A cynical view might be that it would suit the top six clubs if all the star players in the teams that are promoted can be picked off at low transfer fees because those clubs are desperate to sell because they don’t want a points penalty. On what basis is that encouraging a strong and fair competition? It’s not. The rules have to change.”
■■Q: Can you understand the club’s decision to appeal?
RM: “Absolutely. I’m not surprised the club were a little upset when they read the report because it read to me like a hatchet job.
“The Premier League appointed a commission and I would have expected better from them, I have to say.”