What Nottingham Forest FFP breach could mean for summer transfer window plans after appeal blow

Nottingham Forest head coach Nuno Espirito Santo
Nottingham Forest head coach Nuno Espirito Santo -Credit:Getty

Nottingham Forest's focus is firmly on securing survival in their remaining two games but attention will soon turn to a big summer window.

There will be an even bigger spotlight on the Reds' transfer business after their four-point deduction for breaching financial regulations. This week saw the club's appeal over that sanction rejected, with the original decision upheld.

Forest will hope they can still do the business on the pitch to ensure they are preparing for another season in the Premier League in a few weeks' time. Below, we take a look at what the Reds falling foul of FFP is likely to mean for future transfer plans.

READ MORE: How Forest dressing room reacted to points deduction appeal blow

READ MORE: Forest notebook featuring survival pledge and transfer talk

What do we know so far?

Forest were found to have breached the Premier League's Profitability and Sustainability Rules by £34.5 million. Top-flight teams are only allowed to make a maximum loss of £105m across a rolling three-year period, or £35m each season. For promoted teams that is reduced, meaning the Reds were restricted to losses of £61m for the last three campaigns - £13m for the two seasons in the Championship prior to promotion, plus £35m last season.

The independent commission’s written reasons for the points deduction after the Reds' original hearing explained how the club made a loss of £40m in financial year 2022 (in the Championship) and a loss of £52m in 2023 (in the club’s first season back in the Premier League. The report said: “This resulted in an aggregate Adjusted Earnings Before Tax loss of £95,536,000, which exceeded the applicable PSR Threshold (£61m) by £34,536,000, which Forest has now admitted in full.”

Are they in danger of breaching the limit again?

The report, published in March, stated: “Forest claimed that it is taking active steps to improve its financial position to comply with the PSR in the current reporting period. This includes the sale of Gustavo Scarpa to Atlético Mineiro for EUR 5m and the loan of Orel Mangala to Olympique Lyonnais for a £10m loan fee (and an option to purchase for £15m). It has derived substantial profits, and wage savings, from its activities in the January 2024 transfer window. Currently, it is projecting to realise losses of approximately £12-17m for the year ending 30 June 2024.”

It added: “Forest appears to understand its PSR requirements for this current season and what it needs to do to avoid being in a similar situation in a year’s time. It has already told the Commission of its positive trend and that it will not have PSR issues at the end of FY2024. The Commission hopes that will be the case.”

What do those losses mean?

With two seasons in the Premier League behind them, the Reds would be permitted to make a maximum loss of £83m across the rolling three-year period up to June 2024 (£35m for each term in the top-flight and £13m for the season in the Championship).

Football finance expert Kieran Maguire told NottinghamshireLive last month after the verdict from the first hearing was delivered: “If we take a look at the report, it said they lost £40m in 2022 and £52m in 2023. Add those two together and it means they are already above the limit before we take into account what happens in 23/24.”

Factor in the projected losses of £12-17m for this year and it leaves Forest needing to get their figure down. And that points to potential summer sales - albeit selling players is usually par for the course for most top-flight teams.

What about the Brennan Johnson money?

Brennan Johnson’s sale to Tottenham Hotspur on September 1 last year for £47.5m was central to the Reds’ PSR case. It was their “golden mitigation” in their first hearing as they argued selling late in the window, on deadline day, meant they made more money than if a move had gone through earlier in the summer.

Maguire said: “I’m assuming the Brennan Johnson money is included. The reason why I say that is that if they lost £52m in 22/23, why are the projected losses for 23/24 so much lower? The losses are down by about £40m, which is a roughly Brennan Johnson-sized difference.

“If we assume the losses of £12-17m includes the Brennan Johnson sale, it would appear that a sale of another player before June 30, given that the commission rejected sales after June 30 in respect of Johnson, is needed. It would appear they are going to have to sell somebody before the end of the financial year.

“It’s out of a frying pan and into a fire, to a certain extent. To be fair, it doesn’t matter how big or small a club you are, you are always looking to shift players. Manchester City and Chelsea do the same.

“It’s not a fire-sale. The only downside is word gets out on the street and you get people putting in low-ball bids for players close to the deadline. And then you have the choice of whether to accept below market value for the player or accept a points deduction, or some form of punishment.”

What would happen if the Reds go down?

Relegation often prompts other clubs to come sniffing anyway. And as Forest’s near-neighbours Leicester City discovered, going down brings a whole new set of problems in terms of sticking to the rules.

“Leicester were relegated, having been in the Premier League, “ Maguire explained. “The EFL said, you’ve exceeded the limit so we want to put you into a business plan, which would have forced them to sell some more players.

“They sold James Maddison and Harvey Barnes, but they still look like they are going to be over the limit. Nick De Marco, who was Forest’s KC, acted on behalf of Leicester and he managed to find a flaw in the constitution of the EFL which said actually you weren’t members of the EFL so therefore they can’t force you to abide by this business plan.

“I think the EFL is changing its constitution as a result, which means Forest could be caught in the system. It’s going to be messy and complicated, and it’s not anything to do with football.”

But the Premier League are changing their rules, aren’t they? Will that make a difference?

“I don’t think so because you will still be assessed on the old rules, up to June 30, 2024,” Maguire said. “The best thing they can do is to win a few more matches, because every position in the Premier League that you go up is worth about an extra £3.5m."

Who could Forest sell?

Even back in January, the Reds were aware Murillo and Morgan Gibbs-White were their two most saleable assets. But letting them go then would have been detrimental to the team’s prospects on the pitch. That would be the case again in the summer, of course, but the pair are bound to have suitors.

Murillo is now said to have plenty of clubs keeping tabs on him. As for Gibbs-White, Maguire points out: “At the end of this season, he will be worth 60 percent of the original fee. If the original fee was £25m, 60 percent of that would be £15m. They could easily sell him for £50-60m, because he’s a fantastic player. Whether they would get market value for him by June 30 is another matter.”

There will be outgoings from the City Ground this summer. Forest do need to sell. It remains to be seen if their resolve is tested for Murillo and/or Gibbs-White, who they put a lot of value on. But the Reds do have other players they could look to offload.

Are you worried about Forest selling players in the summer? Have your say in the comments below