The Premier League is set to introduce new financial regulations, replacing the existing Profit and Sustainability Rules (PSR) with a framework comprised of the Squad Cost Ratio (SCR) and Sustainability and Systematic Resilience (SSR). These changes, agreed upon by clubs in a recent meeting, will take effect from the start of the 2026/27 season.
Squad Cost Ratio (SCR)
The SCR is designed to regulate clubs' spending on "on-pitch" activities, limiting it to 85% of their football revenue and net profit/loss from player sales. This encompasses player wages, transfer fees, head coach salaries, and agent costs. The SCR aims to create a fairer environment, enabling more clubs to strive for success. It also aligns the Premier League's financial system more closely with UEFA's existing SCR rules, which operate at a 70% threshold.
Under the SCR, clubs have a multi-year allowance of 30% that they can use to exceed the 85% threshold. However, utilizing this allowance will incur a levy, and once exhausted, clubs must comply with the 85% limit or face sporting sanctions. Potential punishments for breaches include point deductions, with further penalties for overspending by specific amounts. The introduction of SCR signals the end of PSR.
Sustainability and Systematic Resilience (SSR)
The SSR rules are designed to assess a club's financial health across the short, medium, and long term. This is achieved through three tests: the Working Capital Test, the Liquidity Test, and the Positive Equity Test. The Working Capital Test ensures clubs have enough cash to cover current season costs and unforeseen fluctuations. The Liquidity Test ensures clubs can handle a variety of financial shocks inherent to the industry, including relegation. The Positive Equity Test assesses a club's long-term financial health through balance sheet evaluations. All 20 Premier League clubs voted in favor of SSR.
Additional Considerations
A proposal for "Top to Bottom Anchoring" (TBA) was also considered but ultimately rejected due to insufficient support. TBA would have imposed a universal spending cap based on a multiple of the revenue earned by the bottom-placed club in the previous season. Concerns were raised that anchoring could face legal challenges from players, essentially acting as a salary cap across the league.
Premier League CEO Richard Masters has stated that the aim of the new rules is to better align with UEFA's financial regulations. The Premier League and its clubs have been collaborating since 2023 to develop these financial controls, with the objectives of maintaining the league's value, protecting competitive balance, and ensuring clubs operate sustainably. The new system also aims to offer transparent in-season monitoring and sanctions, protect against sporting underperformance, enable spending ahead of revenues, strengthen off-pitch investment, and reduce complexity by focusing on football costs.
