English Premier League clubs vote in favour of squad cost ratio rules

LONDON – English Premier League clubs have agreed on a new set of financial regulations to replace the divisive profit and sustainability rules (PSR) with a new squad cost ratio (SCR) system.

A statement on Nov 21 said Premier League shareholders had voted in favour of the new rules that will come into force for the start of the 2026-27 season.

“Following extensive consultation, clubs agreed to bring in squad cost ratio and sustainability and systematic resilience (SSR) proposals,” the statement said.

It added that there had been insufficient support for a proposal on top to bottom anchoring (TBA) – a hard cap on clubs’ football-related spending set at five times the money earned the previous season by the bottom-placed club in central payments passed on by the Premier League.

SCR rules will regulate clubs’ spending to 85 per cent of their football revenue and net profit/loss on player sales, although clubs will have a multi-year allowance of 30 per cent that they can use to spend in excess of the 85 per cent.

The extra allowance will incur a levy and once it is exhausted, clubs will need to comply with 85 per cent or face sanctions.

“The new SCR rules are intended to promote opportunity for all clubs to aspire to greater success and brings the league’s financial system close to UEFA’s existing SCR rules,” the statement said.

UEFA’s financial regulations cap a club’s spending on player wages, transfers and agents’ fees at 70 per cent of their revenue.

Premier League clubs playing in European competitions will still need to meet UEFA’s 70 per cent ceiling or face the threat of punishment by the European football governing body.

The Premier League said the new rules will allow for transparent in-season monitoring with a club’s SCR assessed once a year in March, following the January transfer window.

As well as the SCR system, clubs voted in favour of SSR rules which will assess a club’s short, medium and long-term financial health through three tests on working capital, liquidity and positive equity.

The SCR and TBA systems were used in non-binding trials in the 2024-25 season, continuing this term as agreed at the Premier League annual general meeting in June 2024.

“This enabled the league and clubs to fully evaluate the system, including the operation of UEFA’s equivalent SCR regulations, and to complete the consultation with all relevant stakeholders including the PFA (Professional Footballers’ Association) and football agents,” the league said.

The existing PSR system, which allowed maximum losses of £105 million (S$180 million) over a rolling three-year period, was introduced in 2015-16 to prevent clubs from reckless spending.

While the PSR system evaluates a club’s overall profit by including all revenues and costs, SCR focuses specifically on on-pitch spending, allowing clubs greater freedom to invest in other aspects of their operations.

Several clubs, including Nottingham Forest and Everton, have fallen foul of PSR, which critics say limit clubs’ ability to spend and widen the gulf between the bigger clubs with huge revenues and the others.

PSR will remain force for the rest of the current season. REUTERS