Points of contention: what Burnley v Everton tells us about potential future compensation claims

In February 2023, the Premier League referred Manchester City FC to an independent commission over alleged breaches of the competition’s financial rules.¹ The allegations concerned the accuracy of the club’s financial reporting, compliance with Premier League and UEFA spending limits, and co-operation with the League’s investigation. Manchester City disputes the allegations, describing the evidence in defence of its position as ‘irrefutable’.²

In September 2026, the Independent Commission found that Manchester City committed all charges relating to serious breaches of the Premier League’s financial rules over a nine-year period, and the majority of charges in relation to its failure to co-operate with the League’s investigation.³ This is a landmark ruling in domestic English football that could have significant consequences for the club, as well as for other clubs potentially affected by the alleged breach of rules. It has also delivered a reputational blow to English football.

The Independent Commission’s findings, published in redacted form on 29 September, concern financial reporting across nine seasons, from 2009/10 to 2017/18.⁴ Central to the Commission’s decision-making was the finding that City recorded £831m of funding that was fundamentally from its owner, Abu Dhabi United Group (ADUG), as sponsorship income, through a ‘disguised funding scheme’.

The Commission also identified understated expenses and concluded that accurate reporting of the relevant arrangements would have revealed substantial breaches of Premier League and UEFA financial requirements.

The disciplinary case remains ongoing. Sanctions will be considered at a separate hearing, with potential penalties including fines, points deductions and other sporting sanctions. Manchester City has maintained its innocence, and has lodged an appeal against the opinion of the Independent Commission.⁵

While the Premier League v Manchester City case continues, alongside this process sits the prospect of claims for compensation by individual clubs that believe they were negatively affected by City’s alleged breaches. In November 2024, Arsenal, Liverpool, Manchester United and Tottenham were reported to have lodged legal notices reserving the right to claim compensation. It was noted that waiting for the disciplinary proceedings to conclude could expose clubs to a six-year statute of limitation deadline.⁶ It remains to be seen whether any of the other 14 Premier League clubs will consider pursuing legal action.

The economic questions could extend beyond those clubs finishing immediately below Manchester City in the league table. Clubs are likely to argue that the breaches affected title races, European qualification, final table placings, and perhaps even relegations. Each potential claimant would need to identify the sporting outcome(s) relevant to its own alleged loss.

The first-instance decision in a dispute between two Premier League clubs, Burnley v Everton, handed down in June 2026 and currently under appeal,⁷ provides the first and only precedent for how a Premier League club may successfully claim compensation for financial rule breaches by another club. In that case, the Independent Commission concluded that Everton’s breach of the Premier League’s Profitability and Sustainability Rules (PSRs) by £19.5m caused Burnley’s relegation in 2022, on the balance of probabilities.⁸ It assessed damages at around £26m before interest.⁹ The analysis and decision inherent in this case provide a useful reference point for potential future claims: how might alleged financial breaches be connected to sporting outcomes, and how might the resulting financial loss be measured? We explore these questions in more detail in this article.

1 Building a case—counterfactual, causation and quantum

1.1 Counterfactual

Causation and quantum can be assessed only once a counterfactual has been established. This requires an analysis of what would have happened if the club that is accused of the infringement had not committed it. In Everton’s case, the club’s £19.5m breach of the Premier League’s PSRs meant that the counterfactual had to take into account what Everton would have done to remain under the PSR threshold during the infringement period. Notably, the Everton decision established both that a breach occurred and its size,¹⁰ and Burnley therefore did not need to prove this overspend again.

In contrast, the (heavily redacted) Manchester City decision has so far concluded that breaches occurred through the disguised funding scheme, but has not quantified their impact on PSR.¹¹

The alleged breaches by Manchester City cover a much longer period than those by Everton, as they span nine seasons. The analysis would therefore need to take account of the financial regulations in force in each season and estimate the level of any counterfactual breach. The relevant context in this case is that UEFA’s Financial Fair Play (FFP) rules were introduced in 2011/12 for clubs seeking to participate in UEFA club competitions; and the Premier League introduced its Profitability and Sustainability Rules (PSR) for member clubs in 2013/14.¹²

Once the level of any breach has been established, the counterfactual must also describe the steps that the club would have taken to improve its financial position. In the Everton v Burnley case, the Commission concluded that Everton could have complied only through player trading. This would have involved Everton securing an additional £19.5m in profit on player sales (together with associated wage savings that may have arisen).

Changes to player expenditure, whether through fewer purchases or more sales, ultimately affect the composition of the team. They may prevent a club from signing key transfer targets or require it to sell star players, with potential consequences for sporting performance. In its defence, Everton claimed that this change in player expenditure would not have affected its sporting performance that season, citing a pattern of inefficient spending by the club and the presence of underperforming players within its playing squad as evidence that sporting performance would have been unchanged in a no-breach counterfactual. The Commission rejected this argument, concluding that Everton’s proposed counterfactuals were neither practical nor realistic. This left scope to argue that reductions in player expenditure would ultimately have affected sporting performance.

That finding was important because it helped to establish a causal chain between a PSR breach, player expenditure and points won on the pitch. This was the mechanism that was found to have driven losses in Burnley’s case.

It is likely that any future case would need to address the same question of how the club would have mitigated a counterfactual breach of the financial regulations during the infringement period. The extent to which the measures needed to mitigate the breach would have led to lower player expenditure are likely to be a central issue in any case for damages.

Once the counterfactual has been developed and clearly articulated, questions of causation can be addressed.

1.2 Causation

Burnley’s claim was that Everton’s PSR breach caused Burnley’s relegation. Burnley instructed football finance and business experts Rob Wilson and Will Daniels to assess this empirically.

To establish causation, Burnley’s experts undertook a statistical and probabilistic modelling exercise comprising three stages.¹³

1. Establish a correlation between player-related expenditure and points won. The experts concluded that their analysis demonstrated a high degree of correlation.
2. Estimate the effect of Everton’s overspend. They used the results of the first stage to calculate Everton’s points per £1m of player-related expenditure, and applied this to the £19.5m overspend.
3. Model the possible league outcomes. Using historical ‘ratings’ developed and used by the gambling industry, they ran 100,000 simulations of Everton’s results for the season to assess the probability of Everton or Burnley being relegated.

Following stages 1 and 2, Burnley’s experts concluded that Everton’s overspend had resulted in a gain of between 7.13 and 3.85 points.¹⁴ After adjustment for expenditure growth, the range narrowed to 3.66–4.66 points.¹⁵ In stage 3, the experts weakened the results estimated for Everton by the estimated effect of the overspend and simulated Everton’s league matches. With Everton avoiding relegation by only four points and having an inferior goal difference to Burnley, once the 100,000 simulations had been conducted, they concluded that Everton was more likely than Burnley to be relegated.

Everton’s economic expert, Derek Holt, used a different methodology. He allocated the entire £19.5m overspend to player-related expenditure, then used logit regression analysis to assess how player spending influenced match results.¹⁶ This technique uses a statistical approach to predict a categorical outcome.¹⁷ For seasons across the PSR infringement period, Holt replayed all 380 Premier League matches and modelled the expected results, points and league positions. He then deducted the points that were attributable to Everton’s breach from the club’s actual points in each season to calculate its counterfactual points total. He concluded that Everton’s overspend had provided a sporting advantage, but that the effect in the 2021/22 season was modest, amounting to between 0.2 and 2.6 points.¹⁸ In his view, that was not enough to have caused Burnley’s relegation.

The Commission scrutinised the experts’ methodologies at trial, including how the overspend should be allocated across the infringement period, how to account for rising transfer fees and wages, and how to account for spending inefficiency. It ultimately found Burnley’s experts’ analysis to be more compelling and concluded, on the balance of probabilities, that Everton’s PSR breach had caused Burnley’s relegation.¹⁹ Although the Commission recognised the criticisms of the approach to estimating Burnley’s upper-end range (i.e. 7.13 points gained from the overspend), this did not alter its conclusions as even the approach that was most generous to Everton showed a greater probability of Everton rather than Burnley being relegated.

Because the causation argument turned on the relationship between sporting performance and player expenditure, it reinforced the importance of establishing a counterfactual in which the defendant would have had to reduce player expenditure to comply with the financial regulations. Although a case could consider whether a club could have mitigated the loss by reducing non-player expenditure, the Commission applied the practical test of ‘what would a club acting in good faith, and in its own commercial interests, realistically have done?’, which ultimately rejected any alternative mitigation approaches.

It is likely that any future claims would include a similar analysis. Experts could be expected to investigate the relationship between sporting performance and player expenditure, then apply it to the reduction in player expenditure that is likely to have arisen under the counterfactual. This could provide the basis for assessing whether there was a causal link between the alleged financial-regulation breaches the resulting impact on player expenditure and sporting performance. The analysis would help potential claimants to assess whether sporting outcomes might have been different had financial breaches not taken place.

A notable aspect in the Burnley v Everton case, which may prove to be significant to any empirical analysis in future cases, was the discussion of diminishing marginal returns. Everton’s expert argued that the relationship between expenditure and sporting advantage may be non-linear: each additional pound spent could yield progressively smaller returns in terms of the points advantage gained from overspending. This argument was accepted by the Commission, but it considered that it was less relevant to Everton, given the club’s position as a lower- to mid-spending team. It considered that diminishing marginal returns were more relevant for higher-spending teams, citing Manchester City as an example. As it was put, ‘Manchester City spending £20m on a new player would have relatively little impact on its squad whereas Everton spending a similar sum would have a significant impact with that player likely to feature regularly in the matchday squad.’²⁰

This suggests that diminishing marginal returns, and the strength of the relationship between player expenditure and on-pitch performance, may be more material considerations in future cases.

1.3 Quantum: measuring the resulting financial loss

Even where a probabilistic change in sporting outcome is established, the damages calculation remains a separate exercise.

In Burnley’s case, its financial expert Richard Boulton used a ‘lost cash flows’-based approach, comparing actual financial performance with performance in a world without the relegation caused by Everton’s breach. His assessment departed from traditional accounting treatment. Rather, his cash flows comprised the aggregate of operating profit/loss (before deductions of depreciation, interest, player amortisation and profit/loss on the sale of players) and net player trading (the total cost of player registrations acquired in a period, less the disposal proceeds of any player registrations sold).²¹ The Commission rejected using Everton’s £19.5m breach as a proxy for Burnley’s loss.²²

The initial disagreement on quantum was substantial. Burnley’s expert calculated a £51.7m loss (before interest), while Everton’s financial expert, Louis Dudney, calculated (in his primary case) an £18.2m gain (before interest) due to Burnley’s effective management of its finances. This led to an overall variance of £69.9m in the primary assessments of quantum between the experts.²³

These differences highlight the importance of assessing the full financial consequences of relegation, including changes in revenue, expenditure and player trading. Empirical research suggests that the financial consequences of promotion and relegation are significant.²⁴ However, the assessment of potential compensation additionally requires examination of the actual claimant’s costs and individual circumstances.

Burnley’s expert modelled four possible paths for the club’s league status after the season in which survival was assumed, assigning each a 25% weight.²⁵ The Commission accepted this approach in the absence of persuasive alternatives, while recognising that, ideally, probabilities should inform the weighting.²⁶

The Commission also scrutinised assumptions within those scenarios. It adopted more conservative assumptions about Burnley’s future Premier League finishing positions (than were presented by the club’s expert), adjusting league distributions and bonuses accordingly.²⁷ It also assessed assumptions about commercial income, matchday activity and player trading.

The implication for potential future claims is that an altered sporting outcome would need to be translated into a new financial outcome. For a hypothetical claim about a missed European qualification, that could mean comparing additional competition revenues with participation costs, bonuses and evidenced changes in squad expenditure. For a title-related claim, it would mean identifying the commercial and other financial consequences that were attributable to winning rather than finishing below the top spot.

The duration of the effect would also need to be considered. The Burnley assessment covered FY2022–25; later outcomes were considered too uncertain. The interest incorporated in the award was material, at around £9m. For claims concerning older seasons, both the period of loss and the treatment of interest could substantially alter the assessment of overall damages.

2 A new precedent for the industry

The Independent Commission’s decision against Manchester City is the most significant of its kind involving a Premier League club to date, and has ignited debate about how fans will view City’s trophy-laden era following its takeover by ADUG. It has also prompted discussion about the severity of sporting sanction that should be applied, with a full spectrum of options now appearing possible. With City having appealed the decision, a final ruling may still be months or even years away. Many in the industry, however, are keen for sanctions to be imposed as quickly as possible.

There is the prospect of this case being a catalyst for compensation claims by clubs that believed they were negatively affected. At the heart of any potential damages claim are several economic questions concerning the counterfactual, causation, and quantum.

The recent Burnley v Everton case sheds light on how the Commission may approach future cases , particularly in terms of its assessment of relevant economic arguments. Although future cases may follow a similar empirical structure, there are reasons to avoid simply replicating the analytical approach used in Burnley v Everton. Individual cases may have distinct features that warrant closer consideration.

First, as discussed, the size of the alleged breach in a given season may be disputed. Burnley v Everton proceeded on the basis of an earlier decision that established the size of Everton’s breach. In different circumstances, the starting point for any compensation claim may be more contested.

Second, for breaches that span multiple seasons the cumulative effects of any overspend may have compounded over a greater number of years. In Burnley v Everton, the Commission accepted that spending can have a cumulative effect.

Third, the arguments surrounding diminishing marginal returns may be more relevant in future cases.

Finally, the establishment of the compensation quantum is likely to be complex. For a claimant in a season where European qualification was just missed, estimating any lost prize money would require assumptions about how it might have performed in European competition had it qualified. Such counterfactual assumptions will necessarily introduce uncertainty into any quantum calculation. The further removed the causal chain is from the alleged breach, the greater the scope for disagreement between the parties on these assumptions.

With the Commission ultimately siding with the claimant in the Burnley v Everton case, this sets a precedent for establishing a causal link between breaches of financial regulations and sporting performance. Its decision therefore provides some valuable insights into how economics might inform future compensation claims in the football sector.