Resident football finance expert Kieran Maguire from our Management School explains the accountancy which lies behind Everton’s recent points deduction:
What’s happened?
On Friday 17 November, it was revealed that Everton Football Club had been found guilty of breaching Premier League profit and sustainability rules (formerly known as financial fair play). The club was referred to an independent commission in March after posting their accounts for the 2021-22 season. The accounts showed that Everton suffered combined losses of £371.8 million over the previous three years – the Premier League allows clubs a maximum loss of £105 million.
Everton have been deducted 10 points with immediate effect. This is the biggest sporting sanction in the Premier League’s history and leaves the Merseyside club 19th in the table (in the relegation zone second from bottom).
The club aren’t happy with the ruling, stating: “Both the harshness and severity of the sanction imposed are neither a fair nor a reasonable reflection of the evidence submitted.”
Who made the decision?
An independent commission Chaired by David Philips KC including a lawyer and an accountant reviewed evidence provided by the Premier League and Everton to reach their decision.
Why is this controversial?
This is an unprecedented points deduction, only three clubs have been docked points in the Premier League’s history. If Everton had gone into administration because of the overspend, they would have been deducted just nine points, which makes the level of sanction seem harsh in the eyes of some unfair. Other Premier League Clubs, Manchester City and Chelsea, have also been accused of financial breaches and they haven’t (yet) had any penalties so Everton feel singled out.
Everton say that their overspend was brought about by unforeseen and unprecedented circumstances and they have further mitigation because of:
- The war in Ukraine led Everton to severing financial ties with Alisher Usmanov’s holding company USM. On top of existing commercial deals they had with USM, they lost a potential naming rights deal for the new stadium at Bramley Moore Dock worth £200m.
- Accounting and the new stadium: Everton borrowed money directly from their owner, Farhad Moshiri, to finance the new stadium which put them over the allowed limits, due to a quirk in accounting. If Everton had borrowed money through a bank and stated that the borrowing was to fund the stadium, they may have been closer to or been below the limit.
- Covid: Everton spent a lot of money on players which they then found difficult to sell during this period. Though they admit an overspend on underperforming players, Everton argue that external factors which meant selling players difficult were beyond their control.
What happens next?
Everton said they were “both shocked and disappointed” and would appeal the scale of the deduction. Local politicians have expressed their unhappiness with the ruling too.
There is a ripple effect for the decision beyond Merseyside, however. Clubs such as Leicester City, who were narrowly relegated from the Premier League to the Championship instead of Everton in the previous two seasons (2021/22 and 2022/23), may well take action, arguing that if Everton’s sanction had been handed down earlier, Everton would have been relegated instead. The action taken by other clubs remains to be seen, but could, if upheld, result in financial compensation.
It is unlikely that Everton will receive a greater points deduction if the club decides to appeal, because the mitigating circumstances (Covid and Ukraine) they reference appeal to all transfers at the time. Any appeal lodged would be unlikely to be considered “frivolous” and would be taken seriously by the Premier League.
It’s currently difficult to speculate on when an appeal will be heard but ideally it will need to be sooner rather than later so that clubs at the bottom of the table understand where they sit in respect to Everton. The closer we get to the end of the season the harder it will be to delay the appeal because the accountancy will start to affect things on the pitch.
You can listen to a special episode of Kieran’s podcase The Price of Football where he explains the Everton points deduction in full here.