What are Premier League profit and sustainability rules?

When Premier League teams approved the introduction of financial regulations in 2013, West Ham United's joint-chairman David Gold revealed: "Some clubs are a little concerned, but the vast majority voted in favour."

A decade on, the majority of Premier League clubs are more than a little concerned by the strict punishments resulting from the rules they originally approved.

During the 2023/24 Premier League season, a fifth of the top flight is under some form of investigation from the division's bean counters. Originally known as financial fair play regulations (FFP), the spending habits of England's top flight have to abide by the Premier League's profit and sustainability rules (PSR).

Here's everything you need to know about a set of economic restraints that have top clubs so worried.

What are Premier League profit and sustainability rules?

The top-line figure that is invariably churned out when PSR comes up is that clubs are allowed maximum losses of £105m over a three-year rolling period. However, the limit is actually only £15m but can be stretched to £105m if the club's owners are willing to cover £90m. This extra investment can only come in the form of owners expanding their portfolio of shares in the club rather than simply loaning the money.

This is why Manchester United had been more cautious in recent windows. United's majority shareholders, the much-maligned Glazer family, are infamously reluctant to put money into the club. Director of football John Murtough warned that PSR has "real teeth" while bracing fans for a quiet start to 2024 in the transfer market.

However, with Sir Jim Ratcliffe and INEOS' recent investment and a significant clear-out expected in the summer of 2024, the club is expected to be a little less restrained in the summer transfer window.

How are Premier League profit and sustainability rules calculated?

At the end of each calendar year, Premier League clubs have to submit their financial accounts for the previous season to the division - so the books from 2022/23 were handed over on 31 December 2023. But it is not as simple as tallying up the total income and expenditure and checking whether it breaches the £105m cutoff.

Any costs relating to the stadium, training ground, women's team or academy are not considered.

COVID-19 also wreaked havoc with the calculations. Justifiably, clubs could not be blamed for a significant drop in revenue when it was illegal for fans to attend matches. The 2019/20 and 2020/21 seasons were clumped together and any losses that were made due to the pandemic - a subjective judgement that some clubs stretched to the limit - were also ignored.

An independent judicial panel, headed by Murray Rosen KC (an Arsenal fan reportedly) makes the final decision on Premier League financial breaches based on the balance of probability, rather than beyond a reasonable doubt - the requirement for rulings in commercial rather than criminal cases.

How the Premier League profit and sustainability rules differ from UEFA's financial fair play regulations

PSR vs FFP. In the battle of acronyms, UEFA have the edge. European football's governing body approved the implementation of financial regulations back in 2009 and they apply to every club involved in the Champions League, Europa League and Europa Conference League.

UEFA's FFP regulations only allow losses of €60m (£51.8m) over a rolling three-year period, with €55m (£21.5m) covered by "secure funding" from owners. However, there is a loophole baked into the laws to account for any club that UEFA deems to be in good financial standing. Any entities that fit this vague criteria are allowed to lose €90m (£77.7m) over three years - which is still roughly half as much as the Premier League affords its clubs.

Under Aleksander Ceferin's reign as president, UEFA's FFP regulations have shifted towards squad cost ratio. This figure is effectively the balance of how much a team spends (player and manager wages, transfer fees, agent costs) and how much it makes (daily income, player sales).

Currently, clubs are only allowed to spend 90% of their income. That figure will eventually shrink to 70% by 2025/26.

While being gently grilled on a trip to parliament at the start of 2024, Premier League chief executive Richard Masters revealed England's top flight are discussing the possibility of "moving and aligning more with the UEFA system".

Premier League clubs that have broken profit and sustainability rules

In November 2023, Everton were sensationally slapped with the largest points deduction in the competition's history for breaching PSR. An independent review of the club's accounts ending with the 2021/22 campaign found that Everton had exceeded the allowed threshold of £105m by £19.5m.

The Toffees have fiercely railed against their severe ten-point deduction and were incensed further when the Premier League charged them again with another breach in January 2024. The initial ten-point punishment was later reduced to six, but uncertainty remains in the air at Goodison Park.

Nottingham Forest were also flagged that month for a violation and were eventually penalised to the tune of four points in March.

Manchester City have been accused by the Premier League of 115 breaches. The division's reigning champions were referred to an independent panel in February 2023, a month before Everton's initial breach was brought to light, yet are still awaiting a verdict. UEFA banned City from the Champions League in 2020 for alleged financial breaches but were forced to overturn the decision after the club won their appeal at the Court of Arbitration for Sport (CAS) later that year.

The Premier League agreed upon a "sanctions policy" in August 2023 after fines failed to elicit any significant change in economic restraint. The new policy states that a fixed starting point for punishment is a deduction of six points, with an increase of one point for every £5m over the limit. This, however, is only a guideline for the independent panel, which used a different formula when ruling on Everton's first breach.

Can Premier League clubs appeal profit and sustainability breaches?

Everton's director of football Kevin Thelwell labelled his club's punishment "wholly disproportionate and unjust". Unsurprisingly, the Merseyside outfit swiftly appealed the decision.

A special appeals panel oversees any contests against PSR breaches. However, Premier League clubs cannot take the case to CAS, the mysterious independent institution based in Switzerland which cleared Manchester City in 2020.

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