How Everton’s point deduction may affect Leicester City

LEICESTER, ENGLAND - NOVEMBER 03: An aerial view of the King Power Stadium before the Sky Bet Championship match between Leicester City and Leeds United at The King Power Stadium on November 03, 2023 in Leicester, England. (Photo by Michael Regan/Getty Images)
LEICESTER, ENGLAND - NOVEMBER 03: An aerial view of the King Power Stadium before the Sky Bet Championship match between Leicester City and Leeds United at The King Power Stadium on November 03, 2023 in Leicester, England. (Photo by Michael Regan/Getty Images) /

In an unprecedented move, an independent Premier League commission today imposed a ten-point deduction on Everton to take immediate effect. The decision, which the the Toffees have announced they will appeal against, plunges the Goodison Park outfit into the relegation zone, only above bottom club Burnley on goal difference. But how will this point deduction affect Leicester City?

The Premier League’s profitability and sustainability rules (commonly known as financial fair play) permit clubs to lose £105 million over a three-year period. Everton recorded losses of a staggering £370 million between 2018-21. For financial fair play purposes, losses don’t included spending on things such as infrastructure. As a result, together with some allowance for the impact of COVID, Everton’s relevant losses have been whittled down to £124.5 million, still higher than the rules allow although easier to defend.

As The Athletic points out, this is the first time that the Premier League has imposed a punishment of any kind for breaching financial fair play rules. There have been points deduction before – Middlesborough were docked three points in the 1996-7 season and Portsmouth nine points in 2010 – but these penalties were imposed for other reasons, in the former case a failure to fulfil a fixture and in the latter for going into administration.

For Foxes fans, the key question is what impact the decision to punish Everton will have on Leicester City. And there could be quite an impact. As we have reported, the Foxes, along with Burnley and Leeds, previously wrote to the Premier League announcing their intention to seek financial redress if Everton were found guilty. According to the Daily Mail, talks between senior officials at the three clubs today reaffirmed that intention to sue for a combined figure of £300 million. It has subsequently been suggested that the chair of the independent commission – David Phillips KC – has revealed that five clubs – Leicester, Nottingham Forest, Burnley, Leeds and Southampton – have applied to the EPL for compensation and, in his view, these claims are potentially valid.

The two obvious questions from all of this are, firstly, do the clubs have a moral case and, even more importantly, what are their chances of success. Leicester City would seem to have the strongest case. Of course, the Foxes were relegated because the team’s performances weren’t good enough. However, the fact remains that had the decision to punish the Toffees been taken last season, the King Power outfit would have survived with some ease since they were only two points from safety. It doesn’t seem fair that the club were unable to make signings over the summer of 2022 precisely because they were complying with financial fair play whilst Everton benefitted from flouting the rules. It is possible that the Merseysiders’s appeal will result in a lesser penalty but extremely unlikely they will be found completely innocent. Indeed, the club has already admitted breaking the rules.

LCFC and the other four teams would seem to have a decent chance of securing some compensation from the Premier League. How much that would be, and when it would be received, is, at present, unknown. We are entering uncharted waters here. One potential disadvantage for Leicester City is that any compensation is likely to be extremely diluted if all five clubs are deemed to be eligible. It is extremely unlikely to be anything like equivalent to the revenue lost as a result of relegation.

The other option is to pursue legal action against EFC.  As I pointed out in a previous post, there are precedents. In 2007, for instance, Sheffield United, who were relegated, successfully sued West Ham for compensation when the Hammers were found guilty of breaching Premier League rules over the third-party ownership of Carlos Tevez, the striker whose goals played an instrumental role in keeping the London side up. The downside is that it took the Blades more than two years to secure a verdict and the amount they received (£20 million) was much less than the costs incurred by relegation.

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Perhaps the biggest consequence of the Everton decision does not involve the Foxes at all. As Everton have already alluded to in their statement, they (and us) will be watching very closely what penalty is imposed on Manchester City if they are found guilty of breaching the profitability and sustainability rules. A precedent has now been set.