Leicester City’s points deduction shows the tail doesn’t always wag the dog
The Premier League’s victory over Leicester City shows that clubs can’t lose money with impunity, but is it one battle in a much bigger war, writes Aaryaman Banerji.
Every ruling tells a story. And so it is that English football has become something of an anthology. This week’s verdict by a three-man independent commission, finding that Leicester City had breached EFL Profit and Sustainability rules, is simply the latest chapter.
The case, brought by the Premier League following Leicester’s promotion in 2024, but covering a three-year period during which time the club also competed in the EFL Championship, is at least a revealing episode, particularly in relation to financial regulation across English football.
Perhaps most starkly, the case is a troubling reminder of the scale of lossmaking that exists across the football pyramid. An £83m cap on lossmaking across a three-year period ought to be a relatively supine threshold for businesses – and yet Leicester’s accounts have shown an overshoot of that number by over 25 per cent.
The club are far from alone in such lossmaking; a recent study by LCP has shown that 84 per cent of clubs in the top five tiers of men’s football lose money. Leicester’s biggest sin appears to have been taking the party a bit too far.
There are political takeaways from this case too. Recent seasons have seen football’s regulators come under increasing pressure from their constituents.
Last year, the Premier League lost its battle against Manchester City to preserve its Associated Party Transaction regulations, when these were ruled as unlawful. Just over a year ago, Leicester themselves successfully disputed a separate charge by the Premier League of breaching financial regulations.
What regulator can learn from Leicester case
This week’s ruling, which imposed an immediate six-point deduction on Leicester, has a slightly different flavour; that of competition organisers successfully exercising their regulatory powers.
This will, at least for now, abate some of the discussion that the tail is being wagged by the dog, and that clubs are in a position to brazenly challenge existing regulations, or act with impunity. In that regard, it is a significant victory for both the Premier League and EFL’s regulatory credibility.
The ruling also creates questions for English football’s latest regulatory recruit, the Independent Football Regulator (IFR). This new body, operational as of late last year, is seeking to implement its own financial regulatory regime, aimed to avoid the sort of financial imprudence of which Leicester have been found guilty.
As the Premier League moves to change its own regulatory system from next season – introducing a squad cost ratio system that aligns more closely with that of Uefa – the Leicester verdict should provide the IFR with food for thought as to what regulatory strategies might provide a more successful deterrent than those which have been in place.
Wherever the IFR lands, what the last few years have shown is that it should remain cognisant that this is an industry that is increasingly fragmented, and in which drivers of unsustainable expenditure are increasingly difficult to curtail.
With or without the IFR however, and even with the regulatory credibility that this case has provided, it is clear that football remains a crowded, litigious regulatory arena.
Onto the next chapter, or 115.
Aaryaman Banerji is Head of Football Governance at consultancy LCP.