Nottingham Forest have a bit of a predicament on their hands when it comes to PSR – and we’ve been here before.
Last season, Forest breached the PSR threshold and were subsequently deducted four points.
Thankfully, Nuno Espirito Santo was able to steer Forest to survival with the three promoted teams all returning to the Championship.
This isn’t a sustainable way to run a football club and Evangelos Marinakis knows that things have to change.
Ultimately, the rules might favour some of the bigger clubs but Forest have to adhere to them nonetheless.
It’s an extremely frustrating situation with Forest now facing a race against the clock to raise some funds before the end of the month.
Football finance expert delivers verdict on Forest’s PSR situation
So, just how big of an issue is the current predicament that Forest find themselves in?
The club will keep this under wraps for now when it comes to exactly how close to the wind Forest are sailing.
It’s not yet been made common knowledge what the account sheet looks like for 2023/24.
Despite, some concerns regarding the PSR situation, TBR Football’s football finance expert Adam Williams believes there are some positives – but only if Forest can raise £20 million.
He told Nottingham Forest News: “Before Forest can start budgeting for 2024-25, they need to navigate the rest of 2023-24.
“In Profit and Sustainability Rules terms, the season and the three-year rolling assessment window period is not over until 30th June.
“It is believed that Forest need to make up a PSR shortfall of around £20m before that date.
“Crucially, that £20m figure needs to be made up of ‘profit’ on player sales, not just the value of individual player sales themselves.
“If a club sells an academy player, his entire fee will count as pure profit. So the £47.5m Forest received for Brenan Johnson was added back in its entirety to Forest’s PSR calculation.
“But a player’s value in the books decreases over the length of their contract, so a player signed on a five-year contract for £5m would be valued at £5m in year one, £4m in year two, £3m in year three and so on.
“Any fee they recouped for him in that time would be offset against his book value, so if they sold him for £5m in year three, it would count as a £2m profit.”
Light at the end of the tunnel for Forest
Clearly, the fact that this situation is still at the forefront of the club’s mind represents a cause for concern.
However, there could be some light at the end of the tunnel for Forest – if they can comply and raise the relevant funds this month.
Williams explains that as Forest are now set to embark on a third season in the Premier League, the amount they’re allowed to lose is set to increase.
He continued: “Assuming they manage to make up their circa £20m deficit before 30th June, their PSR calculation will roll over to the next three-year assessment window, from 2022-23 to 2024-25.
“Their allowable loss limit will rise from £61m because they will have now spent three years in the Premier League, so will be allowed to lose £105m for the three years up to 2024-25.
“I expect they will have some room for manoeuvre after the 30th June deadline, therefore.
“But I equally wouldn’t be surprised if we saw an approach that elected to spread costs, minimise risk, and prevent the Premier League’s regulators from breathing down their necks.”
How Forest can solve PSR issue
There really is only one solution here and it’s to sell at least one of their star players.
Ultimately, it needs to be for profit and that leave Murillo the most vulnerable to a sale.
The Brazilian defender cost just £10 million and given that Forest now value Murillo at £70 million, a sale for him makes more sense.
Morgan Gibbs-White, Callum Hudson-Odoi and Taiwo Awoniyi have also been linked with moves away from the City Ground.
Forest won’t want it to be a regular occurrence that they have to cash in on their better players.
As a result, Marinakis will hope to take a more savvy approach to transfers in the future and hopefully lessons can be learned by Forest.
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