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The Everton Financial Fair Play Situation Explained

The Everton Financial Fair Play Situation Explained

When it was announced on 17th November 2023 that Premier League stalwarts Everton — who are an original member of the league and have been playing in the top flight of English football since the 1954/55 season — would be deducted 10 points due to financial rule breaches, it was a huge moment. Many people within the footballing world were surprised by the severity of the punishment, as very few teams in Premier League history have faced points deductions at all, let alone ones this damaging. Thousands of Toffees fans protested against a decision that they labelled as "corrupt", but that changed nothing. 

While the EPL has handed out points deductions in the past, notably a nine-point deduction to Portsmouth in 2009/10 and a three-point deduction to Middlesbrough in 1996/97, this landmark decision represents the heaviest punishment ever handed to a Premier League team. Everton supporters are still reeling from it; however, the first team itself has been galvanised in the immediate aftermath, picking up plenty of wins and so far steering clear of the relegation zone despite the heavy penalty imposed on them.

Many people are still not entirely sure exactly why it is that this harsh punishment was delivered to the Merseyside club, particularly when some other teams are currently facing charges that from the outside seem even more serious. That's why in this article, we'll be offering you a deep dive into the Everton financial fair play situation, explaining why it is the club has been punished, and what the broader role of financial fair play is in English and European football.

The Role of Financial Fair Play in Football

Financial Fair Play (FFP) is a UEFA initiative that was brought in in 2009 to ensure that European clubs do not operate in a way that is deemed to be financially irresponsible. FFP prevents clubs from over-spending heavily or incurring significant losses, using a range of measures including Club Licensing and Financial Sustainabilty regulations relating to solvency, stability, and cost control, and a planned cap on wages, transfers and agents' fees that will see the amount spent on this side of the business limited to 70% of total revenue by 2025/26.

Our explainer piece on the role of Financial Fair Play in European football offers plenty more guidance on this subject, but when talking about the current situation at Everton it's important to draw certain distinctions, chiefly the difference between UEFA Financial Fair Play and the Premier League's Profit and Sustainability Rules, which while encompassing many of the same principles, are a separate entity.

The Premier League's Profit and Sustainability Rules (PSR) were first introduced in 2013, a few years after UEFA realised that something needed to change in relation to football finance at the highest level. PSR dictates that every season, Premier League clubs must submit a set of accounts for the current season and the two previous two campaigns, based on the latest information available to them.

These filed accounts will be examined by the Premier League, who will then assess whether a club has incurred excessive losses during a three-year period using what is called a PSR calculation. The Premier League's aim here is to make sure that its football clubs operate within their means and do not incur heavy losses over any short-term timeframe.

PSR is also used to ensure that clubs pay transfer fees, salaries and tax bills on time, and disclose any payments made to agents in the annual reports. While UEFA Financial Fair Play rules are limited by a statute of limitations that prevents evidence being available after five years, there's no such rule in the Premier League, meaning that clubs can be charged for more historic breaches of rules.

The Everton Financial Fair Play Situation Explained

A failure to comply with the Premier League's Profit and Sustainability Rules off the pitch is the reason that Sean Dyche's side is currently in relegation trouble. But what exactly is it that Everton have done wrong?

Profit and Sustainability Rules state that Premier League clubs are permitted to lose a maximum of £105m over a three-year period. Everton have been deducted 10 points because their accounts show that they have breached this limit in recent years; specifically, Everton recorded losses of £124.5m over the three-year fiscal period ending in spring 2022. 

This loss, which was £19.5m over the permitted limit, was described by the Premier League as "a serious breach that requires a significant penalty". What's more, the league viewed the club's transfer dealings in this period as "recklessness that constitutes an aggravating factor" — effectively the nail in the coffin for the Toffees.

Everton aren't the only top flight side in financial trouble right now, with Manchester City recently being charged by the Premier League for breaking Profit and Sustainability Rules on 115 occasions over a nine-year period stretching back to 2009. The Premier League claims that Manchester City failed to provide accurate financial information during this time, and also that the club failed to fully disclose the financial remunerations that were made to one of their managers over a four-year period. 

Manchester City reportedly failed to fully cooperate with the league’s investigation into these charges, and they have also failed to comply with UEFA FFP rules over a five-year period; meanwhile, Everton claim to have shown full compliance with the Premier League over their own financial situation, which they believe helps their case. Either way, the points deduction that Everton have been dealt could potentially spell danger for Manchester City; they currently face 115 charges, and if they receive similar points deductions for even a few of those charges, they could be hit with a deduction of 30 points or more.

How Have Everton Been Punished?

The punishment faced by Everton over this rule break has been severe. While other top flight clubs have received penalties over financial irregularities in the past — the most memorable being the nine-point deduction handed to Portsmouth in 2010 after the club entered administration — this is the first time a team has received a points deduction since the FSR rules were introduced. 

The Premier League statement on the decision read: "Following a five-day hearing last month, the commission determined that Everton FC's PSR calculation for the relevant period resulted in a loss of £124.m, as contended by the Premier League, which exceeded the threshold of £105m permitted under the PSRs."

In the lower divisions of the English football pyramid, it has become more common to see clubs docked points over financial irregularities and mismanagement in recent years, but a points deduction over such an issue is a rare sight in the Premier League. As a result, it's sent shockwaves across the football community.

How has the club responded to the FFP breach?

Everton have been defiant in their response to the Premier League's decision, initially coming out and saying they were "shocked and disappointed" by the findings of the independent commission that sealed their fate, before deciding to take things further — the club is currently appealing the decision, with this appeal set to be concluded before the end of the season.

The view of Everton FC is that this sporting sanction over what they deem an accountancy disagreement is unjust. They believe there are several mitigating factors including the fact that the club was forced to pull out of a lucrative stadium naming rights deal after the Russian invasion of Ukraine in 2022, due to their ties with oligarch Alisher Usmanov.

"The club believes that the commission has imposed a wholly disproportionate and unjust sporting sanction," said Everton's statement. "The club has already communicated its intention to appeal the decision to the Premier League. The appeal process will now commence and the club's case will be heard by an Appeal Board appointed pursuant to the Premier League's rules in due course. Everton maintains that it has been open and transparent in the information it has provided to the Premier League and that it has always respected the integrity of the process." 

They went on to add: "Both the harshness and severity of the sanction imposed by the commission are neither a fair nor a reasonable reflection of the evidence submitted. The club will also monitor with great interest the decisions made in any other cases concerning the Premier League's profit and sustainability rules."

What next for Everton?

As that final quote suggests, the Everton hierarchy will be closely monitoring how the Premier League chooses to deal with other examples of financial rule breaches at clubs like Manchester City and Chelsea. There is a widespread belief that the Premier League has decided to make an example of Everton in order to show that it is capable of adequately self-regulating in a time of increased scrutiny; however, now that the precedent has been set, there will be an expectation that other clubs found to have sidestepped the rules will be treated similarly strictly.

Meanwhile, the club continues to battle relegation on the pitch, with the recent 10-point deduction plunging them into a scrap with newly promoted sides Burnley, Luton Town and Sheffield United. Everton are currently outside the relegation zone with 16 points after 20 games, ahead of a crucial period of the season in which many of the bottom clubs face up against each other in what can without question be described as "six-pointers". 

However, if there's one man who fans would back to steer the Toffees out of danger, it would be their experienced manager Sean Dyche. As crunch time roles around, he'll be working hard at Finch Farm training ground to ensure that everything is in place for a strong second half of the campaign.