I am a football fan and an accountant, the former is supposed to provide some sort of distraction from the latter, but these days it seems you need to be a finance professional to truly follow the game. The traditional tallying of wins and losses now having to be balanced off against PSR calculations and points deductions. I have always allowed some crossover of these activities though, indeed this time last year on reviewing Forest’s accounts for the promotion season I wrote:
So, it isn’t this year’s set of accounts that raise the spectre of fear, it’s anticipation of next year’s. Promotion has multiplied the numbers and the reliance we have on an owner, or other external sources, to keep us afloat. Whilst revenue figures will be transformed the club will inevitably be more financially vulnerable too, especially given the aggressive strategy to retaining a Premier League place.
My fears turned out to be well founded. Ambition is not a negative in itself, but it needs to be grounded in some sort of coherent strategy and that always seems to be where Forest slip up. The financial headlines from the accounts to 30 June 2023, our survival season, are that we lost £67M on a turnover of £155M. It’s not hard to see where the money went, though it is hard to accept some of the profligate elements of it, and that spending brought about the joyous headline of a Premier League status retained, but the initially hidden cost hangs over us now.
This year it feels a little unnecessary to take a detailed look at the accounts. We know we spent big, broke the rules and are suffering the consequences, but there are some things that it would be wise for all of football to consider in the aftermath of these events. That’s what I am seeking to do here, think a little bigger picture than one year of one club’s accounts to the game as a whole.
On 20 September 2021 Forest were bottom of the Championship and in serious trouble, but within the blink of a metaphorical eye and the performance of a very literal miracle they were promoted to the top flight. Turnover exploded from a norm of around £25M in the Championship to £155M in the Premier League and whilst for a club fuelled by the pockets of a wealthy owner and the fairy dust of a manager who fit like a glove this was great news, it highlights some big problems for the game.
Cliff edges are not sustainable. They drive dysfunctional behaviour on both the green downs above and the stony beaches below.
On gaining promotion Forest famously signed a whole host of new players spending a fortune as they did. It is well documented that they needed a new squad as promotion left them with only a handful of competitive senior players, but that tells another story too. The Chairman at the time tried to spin a narrative of a five year plan being fulfilled, but in reality it had been four years of chaos and churn followed by a wholly unexpected rocket. That’s why neither the club nor the playing squad was ready.
In principle I support the idea of PSR, or some form of restraint when it comes to the spending of our football clubs, but the core problem in the process is that this type of measure is trying to solve a problem that simply cannot be fixed. The very nature of the Premier League as “the greatest league in the world” means that it sits philosophically outside of the English pyramid but physically at its head. These roles are in conflict and because the global franchise is where the money and ‘soft’ power is that takes precedence.
Forest’s argument is that the PSR rules prevent a club coming up from the Championship competing at the new level, but that doesn’t really ring true. After 23 years outside of the top flight Forest weren’t about to compete with Manchester City or Liverpool, they were looking to take on the 14 clubs outside of the top tier of the league, some of whom had many years of well thought through activity behind them, a justifiable competitive advantage, but quite similar financial capability.
Forest spent big taking their wages total to the 11th highest in the league and committing £170M in fees for new signings, but there was a familiar lack of cohesion to the recruitment and sense of competing ideas and personalities in the 29 new signings made through the season. A more targeted, coherent and efficient transfer policy may have secured more value for the spend, though there are no guarantees it would have secured the team’s Premier League place.
Constraints can contribute to improved performance because they can push you to be more creative and focused in the way you behave. If the club had embraced the restrictions of PSR rather than trying to push their boundaries it may have led to a better outcome all round. Inevitably there are ifs, buts and maybes around any conversation like this, because we simply don’t know and if the only measure is the league you are playing in then what we have now is success. It is that intangible element that makes the debate, or should that be argument, about the rights and wrongs of the current ownership so complicated.
The boundaries of the PSR also seek to prevent clubs getting into too much trouble down the line and looking at Forest’s accounts for last year you can see how this could play out. Marinakis continues to put large sums of money into the club, he released £32M of funding through his parent company to support last season’s activities, but he also drew down £34M of funding from a secured loan facility, that put up the training and academy sites as collateral. The fact that so much of the spending from last year was funded externally suggests Marinakis does have limits to what he is prepared to spend himself and they are well within the PSR limits, so the procedural restraint of the rules might help us in the long run.
Next season the rules are changing again, with the Premier League having unanimously agreed to a constraint of no more than 85% of turnover (defined as traditional accounting turnover plus an element of profits on sale of players) on squad costs (defined as squad wages, transfer fee amortisation and agents’ fees). This has been used to partly form the reasoning for a massive 24% increase in the cost of season tickets at Forest, but in reality whilst this will have a huge impact on the fans having to find that extra money it will do little to change Forest’s spending power.
The estimated impact of the price rise is about £2.5M of extra revenue, which doesn’t even cover the cost of a one year contract for Jesse Lingard, or the loan signing of a World Cup winner in an already well-resourced position. That isn’t to cherry pick “bad” signings as they happen in any structure, but merely to look at the obvious anomalies in our transfer activity that suggest too many cooks in that particular kitchen, something that has dogged our progress throughout the last few years.
At the same time the new rules would require Forest to pull back on their spending compared to last year, so voting for it seems to contradict the whole argument for disagreeing with, and ultimately breaking the PSR calculations. Indeed, only 5 of the “big 6” and the perennially fiscally well run Brighton have scope to increase spending. The game needs a set of rules in order to fend off accusations of poor governance, but it won’t do anything that damages the position of either the established order of top clubs or the unique global position of the Premier League brand, so it will never heal the ruptures it has caused in the English game as a whole.
So, why do we even bother to carry on this conversation? Why do we get so worked up about ticket price rises, the loss of connection between clubs and their local communities in favour of global audiences, or the damage to the structural integrity of the football pyramid? Partly it is the purely emotional attachment to following our club, passed to us by our parents and handed down to our own children, and also because this too shall pass and one day the eyes of the world will move on, the billionaires will drop us like a stone and we will be left with the rubble of our game.
When we lift our heads up from the binary arguments of the day we look to the nearly 160 years of history that went before and to the unknown decades that will follow and hope to connect with the whole thread of what makes Nottingham Forest, whether we play in the Premier League or Division Three South, whether led by Billy Walker, Brian Clough or Nuno Espírito Santo , whether we attend every game or merely dream of a visit to the City Ground. What is Nottingham Forest to us? Surely not just wins, losses and draws? If we don’t fight for, and care about it, no one else will.
I have peppered this piece with images from Forza Garibaldi displays. I hope they don’t mind, but I think they capture so much of what I am trying to say with words in their visual displays. Forza are something special, the care and attention to detail of their displays is an act love to our club and I believe unique to Nottingham Forest in the English game.
Beautifully written. Thank you.