Premier League clubs have voted to introduce new financial regulations starting from the 2026-27 season, signaling a significant shift in how clubs manage their finances. The central component of these changes is the implementation of a "Squad Cost Ratio" (SCR), which will restrict clubs' on-pitch spending to 85% of their soccer revenue, plus any net profit or loss from player sales. This move aims to promote financial sustainability and a more competitive balance within the league.
The SCR model replaces the previous "Profitability and Sustainability Rules" (PSR), which have been criticized for assessing financial performance over a rolling three-year period. The PSR system previously led to point deductions for Everton and Nottingham Forest. The new SCR system will monitor finances each season.
Under the new regulations, squad costs will encompass player and head coach salaries, agent fees, and transfer fees. Soccer-related revenue includes earnings from league matches, other competitions, commercial deals, and net profits from non-soccer events hosted at stadiums. The Premier League has stated that SCR gives clubs greater freedom to invest in other aspects of their operations by concentrating on squad costs.
While the 85% spending cap is the core of the new rules, clubs will have an additional allowance of 30%. However, exceeding this threshold will trigger financial penalties, and going beyond that into the "Red Threshold" will result in sporting sanctions, such as point deductions. The exact details of these penalties are still to be defined, but the framework is designed to disincentivize overspending. Specifically, clubs face a six-point deduction for breaching the Red Threshold, with an additional point deducted for every 6.5 million pounds spent over the limit.
In addition to the SCR, the Premier League has also approved "Sustainability and Systemic Resilience" (SSR) regulations. The specifics of SSR are less detailed in initial reports, but they are expected to further reinforce the league's commitment to long-term financial stability.
The decision to implement these spending caps reflects a growing concern about the increasing financial disparities between clubs and the potential for unsustainable spending. By aligning more closely with UEFA's financial regulations, the Premier League aims to create a more level playing field, encouraging clubs to focus on developing talent and building sustainable business models. While a proposal for a salary cap was voted against, the SCR is expected to achieve a similar effect by limiting overall spending on players and staff.
