Why Leicester faced PSR challenges

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).