Premier League fans were rocked last week, when Everton were docked 10 League points for breaching FFP rules, putting them 19th in the League. This is the first punishment of its kind, and the largest number of points deducted in Premier League History. Now, why has this happened?
League to ensure that no club is in a dire condition with regards to debt or financial losses; it ensures each club is financially responsible, the essence of it being that you a club should only spend the same amount or less than the revenue it generates. Everton’s finances showed combined losses of £124.5million over the previous three financial years, £20 million over the threshold allowed by the League for any given team.
The decision has not been well supported;
The 12 point punishment seems odd, when, if Everton were forced into administration due to their losses, their sanction would have only been 9 points, 3 points less than what is currently on the table. If they were to be relegated as a result of this deduction, the amount of money that they would lose out on would be catastrophic in this regard; it would sink them lower into the abyss.
This has other implications, as Leicester City, a side that got relegated in the previous Premier League season, might argue that Everton should have received this sanction earlier and they would have been relegated instead. They might believe they are entitled to financial compensation as well.
Those in favour however, argue that these rules are in place for a clear reason; £125 million is a lot of debt, and that level of profligacy is dangerous.
The next step is the appeal; Everton are nothing short of outraged. They have already accepted a breach of £8 million, but the appeal will probably accentuate the mitigating factors for the breach and arguing that the 12 points deduction is disproportionate to the financial crime they have perpetrated.
The overall message of the appeal will centre around the ‘force majeure’, a set of unforeseen circumstances that have led to these losses:
- The Russia-Ukraine war meant that any commercial deals and new stadium naming rights with the Russian businessman, Alisher Usmanov and his company that Everton received £400 million worth of investment from, would be nullified, cutting any potential profits.
- Corona Virus 2019 made it difficult to sell players and keep a stable revenue stream in stadiums.
- Borrowing finances from their owner, Farhad Moshiri, to finance a new stadium, instead of borrowing from a bank meant that an accounting technicality may have plunged them further into financial loss.
Whether the appeal will be entirely fruitful remains to be seen, however overall, the deduction of 12 points is nothing short of an overreaction. The Premier League did not follow sufficient guidelines, did not consider the level of loss, nor did they comprehend the fact that this amount of deduction will potentially do more harm to the goals and objectives of FPP than good; Everton might not survive.