Relegation-threatened Leicester face nightmare points deduction over possible spending breach
East Midlands club unlikely to avoid return to Championship if they are found to have breached profitability and sustainability rules
Leicester City are enduring a difficult season on their return to the Premier League and next week will discover if it becomes even more turbulent.
By Tuesday at the latest, Leicester will be informed if they have breached profitability and sustainability rules (PSR) for the second time in 10 months.
If Leicester are found to have exceeded the permitted losses of £83 million over a three-year reporting period, they will join Everton and Nottingham Forest as the latest club to face punishment over PSR.
Everton and Forest were both deducted points last season and a similar outcome for Leicester is a nightmare scenario for a club already in relegation trouble.
The usual threshold for Premier League clubs is £105 million over three years, but Leicester’s allowance is lower – £83 million – as they spent the 2023-24 season in the Championship. While the outcome is shrouded in confidentiality, there is little doubt that it will be a close-run thing.
Leicester announced losses of £92.5 million and £89.7 million in the past two years but, privately, have been confident of avoiding sanctions.
After relegation to the Championship in May 2023 they raised over £90 million in the next financial year with the sales of Harvey Barnes (£38 million to Newcastle), Kiernan Dewsbury-Hall (£30 million to Chelsea) and Timothy Castagne (£13.5 million to Fulham), while Chelsea paid £10 million in compensation to appoint Enzo Maresca and his coaching staff.
To be clear, Dewsbury-Hall’s sale to Chelsea was officially announced on July 2 but completed in time to be included in the 2023-24 accounts.
Several high earners, including Youri Tielemans, Jonny Evans and Caglar Soyuncu departed as free agents, while the remaining players took wage cuts between 35 to 50 per cent.
Permitted add-backs, which are costs recognised to be in the general interest of the club, are also included, such as expenditure towards women’s football, training ground sponsorship, community development, the academy and depreciation.
Will it all be enough?
Respected football finance account Swiss Ramble has predicted an overshoot of £12 million, but only Leicester and the Premier League’s financial and legal departments will know the precise details.
The argument about whether Leicester are entitled to lose £105 million or £83 million could be crucial, perhaps dependent on how legislation is worded in the Premier League’s rules.
There is a suspicion among other top-flight clubs that the Premier League is ready to adopt a hardline stance with Leicester.
In September last year, the 2015-16 title winners successfully won a legal row with the Premier League over an alleged breach.
With the assistance of sports lawyer Nick De Marco KC, Leicester argued that the charge for breaching PSR in 2022-23 could not be applied as they had already been relegated when the accounts were completed in June 2023.
It was a development which angered the governing body and left other clubs stunned. Loophole or not, it was certainly an unexpected escape.
Since that moment, and for months before, Leicester’s financial team have worked tirelessly to lower the club’s cost base and attempt to comply.
In November, manager Steve Cooper was sacked in a move which cost the club millions in compensation. Owner Aiyawatt “Top” Srivaddhanaprabha made the decision but was annoyed to be forced into action as it was unplanned expenditure (though outside the current financial year being examined).
Leicester are not expected to spend large sums of money in the January transfer window.
They are keen to end Crystal Palace forward Odsonne Édouard’s loan deal prematurely and the priority signings at this stage are cheap full-backs.
The bleak reality is that Leicester’s issues with the rules are not going away any time soon.
Even if relegation is avoided this season, Leicester will return to the model of selling one key player every summer to assist with PSR compliance.
Mads Hermansen, the Danish goalkeeper, has emerged as the most likely sale after impressing in the Premier League this season.
Rival clubs have been made aware of his potential availability and in the recent 2-2 draw with Brighton, Hermansen was watched by Manchester United’s chief goalkeeping scout, Tony Coton.
Another player who could have generated cash was winger Abdul Fatawu, but a serious knee injury ended his season, which leaves Hermansen as the most coveted asset.
Leicester are extremely unhappy and believe the club have been unfairly scrutinised for displaying ambition.
Chelsea have sold hotels and even their women’s team, while the saga over Manchester City’s 115 charges still rumbles on.
Leicester feel they are facing potential punishment for simply daring to challenge the “big six”.
Many supporters, however, point to alleged mismanagement off the field, including poor recruitment and a gravy train of lucrative contracts for average players.
With those players on significant deals, buyers have been scared off and the wages-to-turnover ratio has remained high.
Leicester will know by Tuesday what happens next. After five successive defeats under Ruud van Nistelrooy, another charge will represent disastrous timing.
The club’s slogan “Foxes Never Quit” is being tested to the full.
