How did Leicester City end up struggling so much with PSR?
They had been the shining example for clubs outside of the
traditional elite, when they shocked all and sundry by winning the Premier
League in 2015/16, then reaching the quarter-finals of the Champions League the
following season.
However, this success came at a price, as chief executive
Susan Whelan admitted, “Over recent years the club’s financial results have
reflected necessary levels of investment in the playing squad that allowed
Leicester City to compete effectively in the Premier League.”
In fairness, this ambitious strategy very nearly worked, as
Leicester then finished fifth in the Premier League two years in a row, which
meant that they only just missed out on again qualifying for the lucrative
Champions League.
However, the 2022/23 season was very different, as “the
regrettable results of the men’s team on the pitch” ultimately leading to
relegation to the Championship, ending a nine-year spell in the top flight.
The poor results had a direct impact on Leicester’s bottom
line in 2022/23, as noted by Whelan, “The club’s budget was based on reasonable
expectations give the previous sporting performance.”
Leicester’s investment in their squad produced some hefty
financial losses, amounting to £283m in the four years from 2019/20 to 2022/23.
In fact, the club has not posted a profit since 2017/18,
while the value of Champions League qualification was highlighted by the
substantial £92m profit the preceding season.
Of course, few football clubs make money, but Leicester had the fourth
largest loss in the Premier League over those four years, only better than
Everton, Chelsea and Tottenham.
Leicester have tried to offset the large operating losses
with player trading, making an impressive £191m profit from player sales in the
last four years, mainly thanks to the transfers of Harry Maguire to Manchester
United, Wesley Fofana and Ben Chilwell to Chelsea and James Maddison to Spurs.
The club’s strategic decision to retain what it referred to
as “its primary assets” in 2021/22 undoubtedly hurt the club in terms of PSR,
as it only made £9m that season.
Leicester have somehow managed to avoid punishment for the
2022/23 PSR assessment, but what about 2023/24?
Leicester’s PSR challenge became more difficult after relegation, as the
annual PSR loss in the Championship is only £13m, compared to £35m in the
Premier League, so their maximum loss over the three-year monitoring period
reduced from £105m to £83m.
The Swiss Ramble estimates a PSR loss of £82m over the
3-year monitoring period, which would mean that Leicester would be just about
within the maximum loss of £83m.
While Leicester’s legal team can be applauded for its
ability to find a loophole, the Appeal Board’s decision has made a mockery of
the Premier League’s rules, as it is clear that the club breached the maximum
allowable loss in 2023/24 (and by a long way).
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