Leicester City’s financial struggles with Profitability and Sustainability Regulations (PSR) seem all the more striking considering their extraordinary rise a few years ago.
Once the poster child for success outside the traditional Premier League elite, Leicester stunned the football world by winning the title in 2015/16 and reached the Champions League quarter-finals the following season.
However, this success came at a significant cost. Leicester’s chief executive, Susan Whelan, admitted that the club’s financial results had been driven by heavy investment in their playing squad.
She explained, “Over recent years the club’s financial results have reflected necessary levels of investment in the playing squad that allowed Leicester City to compete effectively in the Premier League.”
For a while, this approach seemed to be working. Leicester followed up their title-winning season with two successive fifth-place finishes, narrowly missing out on Champions League qualification.
However, the wheels came off in the 2022/23 season. The team’s poor on-pitch performances led to a disastrous relegation to the Championship, ending a nine-year spell in the Premier League.
The financial impact of this failure was significant.
“The club’s budget was based on reasonable expectations given the previous sporting performance,” said Whelan, highlighting the burden that underperformance placed on the club’s finances.
Between 2019/20 and 2022/23, Leicester recorded hefty losses totalling £283m. They have not posted a profit since 2017/18, with the value of Champions League qualification made clear by the £92m profit recorded in 2016/17.
Despite these losses, Leicester managed to avoid the kind of financial scrutiny faced by clubs like Everton, Chelsea, and Tottenham, who posted even larger losses during this period.
One reason for this was Leicester’s ability to generate significant income from player trading. The club made £191m from sales in the last four years, largely thanks to the transfers of Harry Maguire, Wesley Fofana, Ben Chilwell, and James Maddison.
However, the club’s decision to hold on to key players in 2021/22 – what it called its “primary assets” – backfired in terms of PSR. That year, Leicester’s player trading profit fell to just £9m, contributing to their financial difficulties.
Though Leicester managed to avoid punishment for breaching PSR regulations in 2022/23, their situation for 2023/24 looks far more precarious.
Following relegation, the club’s allowable annual PSR loss in the Championship dropped to £13m, far less than the £35m limit for Premier League clubs. This means Leicester’s maximum allowable loss over the three-year monitoring period fell from £105m to £83m.
According to Swiss Ramble, Leicester’s estimated PSR loss over the three-year period stands at £82m—just within the £83m limit. While their legal team may have found a way to navigate these regulations, the decision by the Appeal Board to let Leicester off the hook has raised serious questions.
Many feel it undermines the integrity of the Premier League’s financial rules, especially since Leicester clearly exceeded the allowable loss for 2023/24 by a substantial margin.