The English Football League (EFL) is planning to change its financial rules to close a loophole that it feel sLeicester City have exploited in order to avoid being subjected to a strictly-controlled business plan.
Under the financial rules, Leicester were allowed to lose up to £83m over the last three years – two of which were in the Premier League, with rules in the top flight allowing £35m losses per year on average, while the EFL says a maximum of £13m can be lost per season in the Championship.
However, when the club submitted its accounts on March 1, projecting their financial position at the end of the financial year in June, the EFL’s independent club financial reporting unit discovered that Leicester were on course to have losses in excess of £83m for the three-year period.
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Highlights of the Sky Bet Championship match between Sunderland and Leicester City
Leicester did not breach the EFL rules, but their accounts showed they were on course to do so by the end of the season. That breach could, of course, be averted by the club cutting costs or increasing revenue – perhaps by player sales – before their year-end accounts are filed.
As a result of the predicted rule breach, the EFL followed its own procedures and told Leicester they wanted the club to submit to a business plan, enforced by the EFL, to ensure the club returned to compliance by the summer.
However, Leicester objected to that suggestion, arguing that because they were in the Premier League for most of the period, the EFL rules did not apply to them. They asked for the matter to be reviewed by the independent Club Financial Reporting Panel, who found in Leicester’s favour.
As a result, Leicester have no further case to answer with the EFL, but the EFL is now considering how best to alter its rules so that this situation cannot happen again with other clubs in the future.
Championship leaders Leicester are three points clear at the top
A Leicester statement on Wednesday evening read: “Today the EFL has published a decision of the Club Financial Reporting Panel (CFRP), which confirms that the EFL’s Club Financial Reporting Unit (CFRU) acted outside of its powers in its dealings with Leicester City in November 2023.
“Although the Club is pleased that the CFRP’s decision found in its favour, it is concerned that it was necessary for the CFRP to intervene in this way to prevent the CFRU from acting outside of established EFL rules.
“Leicester City confirms it is in discussions with the football authorities regarding its profitability and sustainability calculations. Notwithstanding the CFRP’s decision, the club remains committed to seeking an appropriate overall outcome in this matter.”
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