The Premier League clubs have voted to implement the new Squad Cost Ratio (SCR) and Sustainability and Systemic Resilience (SSR) rules from the start of the 2026/27 season.

This overhaul is designed to modernise governance, more closely align domestic rules with UEFA rules, and enhance the predictability of financial outcomes.

The existing financial framework, the Profit and Sustainability Rules (PSR), established a threshold allowing clubs an aggregate loss of up to £105 million over a three-year rolling period. However, the PSR system has become increasingly controversial, proving complex, retrospective, and operationally restrictive. Recent, high-profile controversies, including points deductions applied to Everton and Nottingham Forest, exposed the opaqueness of the PSR enforcement mechanism and highlighted the destabilising effects of retrospective punishment.

The league recognised that the PSR system encouraged deferment of costs and accounting creativity rather than fostering genuine, forward-looking financial efficiency. The new framework  moves away from retrospective loss assessment toward a proactive, revenue-based cost-control model.

The new SCR and SSR rules have been officially approved by Premier League shareholders.

 These regulations are scheduled to formally replace the existing PSR framework starting from the 2026/27 season.

Harmonisation with UEFA Financial Sustainability Regulations (FSR)

A primary motivating factor for adopting SCR was the desire to minimise the operational friction experienced by clubs forced to comply with dual financial regulatory systems: the Premier League’s domestic rules and UEFA’s requirements for European competitions (Champions League, Europa League, and Conference League).

Premier League CEO Richard Masters explicitly noted that clubs were operating in a “dual system coming in and out of Europe,” and alignment was necessary to resolve this complexity.

UEFA’s overarching FSR framework is built upon  Solvency, Stability, and Cost Control.

The Premier League’s new system directly mirrors this: the SCR governs Cost Control, and the SSR framework manages Solvency and Stability checks. 

By adopting a ratio-based cost control system similar to UEFA’s, the Premier League standardises compliance requirements for clubs participating in European tournaments, making it easier to meet both domestic and continental governance standards simultaneously.

Alongside SCR and SSR, a third, more stringent regulatory proposal, Top-to-Bottom Anchoring (TBA), was debated but ultimately rejected due to insufficient support from shareholders.

TBA proposed implementing a rigid hard cap on spending, limiting any club’s total football-related expenditure to five times the central revenue distributed to the bottom-placed club in the division. Based on prior season figures, this cap was estimated to be around £550 million to £600 million.

This proposal faced strong opposition, particularly from the league’s most financially powerful clubs, including Manchester United, Manchester City, and Arsenal. The argument against the hard cap contended that TBA would restrict the spending capacity of English clubs, thereby hindering their ability to acquire and retain global talent against rivals in Europe (who might not face such restrictive caps) and the burgeoning state-backed leagues, such as the Saudi Pro League.

In rejecting the hard cap, the league has chosen to uphold its global competitive advantage and revenue supremacy over implementing radical measures aimed solely at achieving domestic competitive parity. 

SCR, functioning as a “soft cap” tied directly to a club’s financial success, is perceived as less limiting for the highest-earning entities than a fixed, arithmetic hard cap would have been.

Squad Cost Ratio (SCR): Technical Analysis

The Squad Cost Ratio (SCR) is the centerpiece of the new cost control regime, directly linking a club’s allowable spending on its playing staff to its operational revenue generation. SCR is calculated as a percentage, dividing defined “Squad Costs” by “Adjusted Revenue Base.”

Defining “Football Costs” (Squad Cost)

Squad costs aggregates expenditures deemed most sensitive to sporting performance. The scope of squad costs under the Premier League’s new definition is comprehensive, ensuring that all immediate investments in sporting capacity are regulated.

The calculated cost base comprises four primary categories:

1. First-team Player Wages and Salaries: Compensation paid directly to all first-team registered players.
2. Head Coach/Manager and Senior Technical Staff Wages and Salaries: Compensation for the most senior coaching and technical personnel.
3. Amortised Transfer Payments: The accounting expense of transfer fees, which is spread over the duration of a player’s contract.
4. Agent and Intermediary Fees: Commissions and fees paid to player representatives.

Crucially, the regulatory design excludes certain long-term, beneficial investments from the SCR calculation. These strategic exemptions provide essential flexibility for ownership groups looking to enhance the club’s institutional value without immediately compromising cost-control compliance. Excluded costs explicitly include:

• Investments in infrastructure (e.g., stadium redevelopment or training ground improvements).
• Operational costs associated with the women’s team.
• Costs related to the development and operation of the academy and youth teams.

Defining “Adjusted Revenue Base”

The “Adjusted Revenue Base” includes all core operational income derived from football operations:

• Broadcast rights revenue.
• Matchday receipts.
• Commercial deals and sponsorship income.
• Net profits from non-soccer events hosted at the stadium, such as concerts.

Significantly, the calculation includes the net profit/loss on player sales.  Effective player trading will continue to play a huge part in financial compliance. A club that generates a substantial net profit from the sale of developed players (either academy products or shrewd acquisitions) directly increases its “Adjusted Revenue Base.” 

This will in turn, lower the Squad Cost Ratio, rewarding strong recruitment, development pipelines, and strategic asset trading. For compliance purposes, player trading moves from being merely an accounting item to a critical function for expanding allowable spending capacity.

Dual Compliance Thresholds: The 70%/85% Mandate

SCR mandates a dual-compliance structure that recognises the additional financial regulations faced by Premier League clubs based on their participation in continental football.

• The Premier League Standard (Domestic Cap): The standard SCR limit for all Premier League clubs  is set at 85% of their adjusted revenue base.
• The UEFA Compliance Cap: Clubs that qualify for and participate in the UEFA Champions League, Europa League, or Conference League must adhere to the stricter UEFA threshold of 70% of adjusted revenue. This ensures that the English top flight’s representatives meet the established European governance standards.

The existence of this 15% disparity (85% vs. 70%) offers non-European clubs a higher spending leeway to aspire to greater success”  and compete for talent domestically. 

This acknowledges the reality that clubs outside the European bracket lack the substantial, guaranteed prize money and broadcast revenues that continental participation generates, cushioning this financial difference.

It will however create significant headaches for clubs that perhaps do not anticipate European qualification (for example through winning a domestic cup trophy).

SCR Enforcement, Buffers, and Sanctions

A critical improvement in the new system is the move towards a more objective, rapid, and predictable enforcement architecture, designed to minimise the prolonged legal disputes that previously characterised the PSR era.

Monitoring and Reporting Methodology

SCR shifts the fundamental financial assessment timeline.

 Unlike the PSR, which evaluated performance over a rolling three-year period, SCR requires an annual assessment cycle.

This change facilitates transparent in-season monitoring and sanctions.

By setting clear, quantifiable metrics that must be met yearly, the system offers compliance officers clear indicators of potential breaches in real-time. This predictability reduces the subjectivity that plagued the PSR system and allows clubs to manage their finances proactively throughout the season, rather than reacting to a retrospective aggregate assessment.

The Three-Tiered Sanction System: Green, Allowance, and Red

The new system defines three clear tiers of compliance, each associated with a predetermined consequence, ensuring a swift, objective application of penalties.

Green Threshold (Compliance)

This is the baseline state of compliance. A club operating at or below the standard 85% ratio (or 70% if competing in Europe) on its defined squad costs is deemed compliant and subject to no further regulatory scrutiny regarding the ratio itself.

To prevent immediate imposition of sporting sanctions for minor, temporary overruns, the SCR framework introduces a crucial buffer mechanism. 

Clubs are granted a multi-year allowance of 30% that they may deploy to spend in excess of the 85% core threshold. This allowance provides financial directors with flexibility for necessary short-term tactical investments (e.g., a critical mid-season transfer).

Utilising this allowance, however, is not without cost. 

Spending between 85% and the upper limit of the allowance incurs a predefined levy (a financial penalty or fine) based on the amount of overspend.

This mechanism effectively establishes a “luxury tax,” monetising temporary non-compliance. This allows high-revenue clubs to execute higher spending while maintaining the integrity of the league’s financial control, with the levy revenue potentially being redistributed or used for enforcement costs. 

Once this allowance is fully exhausted, compliance with the 85% threshold becomes strictly mandatory to avoid higher-tier penalties.

Red Threshold and Sporting Sanctions (Above 115%)

Breaches that exceed the upper limit of the spending allowance,  referred to as the “Red Threshold” (estimated around 115% of adjusted revenue) or occur after the allowance has been exhausted, will result in severe mandatory sporting sanctions.

The proposed penalties are designed for both deterrence and rapid resolution. They include an automatic six-point deduction for repeated serious breaches, coupled with further penalties for quantifiable amounts of overspent funds (e.g., a penalty applied for each £6.5 million overspent).

Sustainability and Systemic Resilience (SSR) Rules: Governance and Solvency

Approved unanimously by clubs, SSR moves beyond the cost-control focus of SCR to address essential financial health metrics, aiming to guarantee the structural solvency and viability of clubs in the short, medium, and long term.

The Purpose and Scope of SSR

SSR functions as the league’s governance backbone. 

While SCR manages expenditure in relation to revenue, SSR focuses on ensuring that clubs have adequate liquidity and capital structure to withstand unforeseen operational difficulties. 

The rules are specifically intended to promote “systemic resilience,” meaning the league as a whole is protected from the failure of individual clubs. 

The SSR framework mandates three specific quantitative tests derived from standard corporate finance practice, assessing different time horizons of financial risk.

The Working Capital Test (Short-Term Liquidity)

The immediate objective of this test is to ensure operational stability and prevent short-term payment defaults. 

Clubs must demonstrate adequate working capital, the difference between current assets and current liabilities, to cover all expected operating bills for the current season.

Furthermore, they must maintain an additional financial buffer specifically designed to absorb “unforeseen fluctuations” in revenue or unexpected liabilities, such as major injury costs or unforeseen litigation.

The Liquidity Test (Medium-Term Shock Resilience)

The Liquidity Test assesses a club’s capacity to absorb financial setbacks inherent to the volatile sports industry.

This stress test is engineered to ensure the club can manage “a variety of financial shocks,” with the most critical scenario being the immediate and severe reduction in revenue resulting from relegation from the Premier League.

By mandating that clubs demonstrate liquidity provisions specifically against relegation risk, the league effectively stabilises the broader financial ecosystem of the English Football League (EFL). 

This should prevent clubs from facing immediate financial collapse or fire sales of assets upon dropping into the Championship, promoting continuity and responsible spending even among clubs battling relegation.

The Positive Equity Test (Long-Term Structural Solvency)

The Positive Equity Test addresses the long-term structural health of the club. It requires clubs to maintain a positive net equity position throughout every reporting period.

 Net equity is defined as total assets minus total liabilities.

This requirement is vital for guarding against unsustainable reliance on continuous shareholder loans or debt financing, which can often mask fundamental operational losses. 

While owners can provide equity injections, persistent negative equity requires immediate regulatory intervention and remediation efforts. 

This test is a fundamental governance principle, ensuring long-term viability by demanding a healthy balance sheet structure, mirroring the core Solvency pillar of UEFA’s FSR.

 Sustainability and Systemic Resilience (SSR) Three Mandatory Tests

The introduction of the SCR and SSR regimes represents a fundamental shift in Premier League governance, moving from a deficit control model to an efficiency and solvency-based model

The key differences between the retiring PSR and the incoming framework underscore the league’s focus on harmonisation, speed, and objective metric alignment:

The most significant operational change is the transition from a three-year retrospective review to an annual assessment. This change mandates continuous financial discipline, making compliance a yearly operational requirement rather than a triennial accounting challenge.

Financial Planning under SCR

1. Focus on Revenue Maximisation: SCR ensures that the highest-earning clubs will inherently retain the highest spending limits. Financial strategy must aggressively prioritise growth in matchday, commercial and broadcast revenues. 
2. Player Trading as a Compliance Tool: The inclusion of net profit on player sales within the Adjusted Revenue base elevates player trading to an essential compliance mechanism. Clubs must manage transfer operations to generate significant net income, as every million realised directly expands the allowable spending ceiling, providing a buffer against the 85% cap. This regulatory structure rewards player development and shrewd market activity.
3. Leveraging Exemptions: A key element for long-term strategic investment is the explicit exemption of capital expenditures. Owners seeking to demonstrate long-term commitment and build enterprise value can allocate significant resources toward infrastructure (stadiums, training facilities), academies, and women’s teams without compromising the 85% SCR limit. This creates a mechanism for sustainable, non-inflationary investment that was less clearly defined under the previous PSR rules.

Governance Requirements under SSR: A Financial Director’s Mandate

The SSR rules necessitate a dramatic enhancement in corporate governance and sophisticated financial modeling within clubs, demanding a proactive stance on liquidity and solvency.

1. Robust Cash Flow and Working Capital Modeling: The Working Capital Test requires continuous, granular cash flow monitoring. Financial departments must move beyond statutory profit and loss statements to model, track, and guarantee the maintenance of immediate liquidity buffers, which must exceed operational needs to cover unforeseen liabilities. This test ensures that clubs cannot over-extend themselves and risk short-term debt crises.
2. Stress Testing for Catastrophic Loss: The Liquidity Test mandates formal financial stress testing, specifically modelling the profound impact of relegation on the club’s revenue stream. Financial directors must demonstrate that sufficient reserves or guaranteed lines of credit are in place to manage the immediate drop in broadcasting revenue, stabilising the club structure even in the event of sporting failure.
3. Equity Management and Shareholder Funding: Compliance with the Positive Equity Test requires continuous vigilance over the balance sheet. This test discourages high levels of net debt and necessitates careful structuring of owner funding. For regulatory compliance, equity injections are structurally preferred over shareholder loans, as excessive liabilities (even those owed to the owner) would negatively impact net equity, triggering regulatory concern and potentially demanding remedial action.

 Conclusion: 

The SCR system guarantees that competitive spending power remains intrinsically linked to commercial revenue generation. This will continue to reinforce the global dominance of the highest-earning clubs while imposing mandatory fiscal restraint on all participants. 

The rejection of the Top-to-Bottom Anchoring proposal confirms the Premier League’s strategic priority: maintaining international competitiveness over enforcing radical domestic parity.

Furthermore, the SSR rules impose a mandatory level of financial hygiene previously lacking, requiring clubs to demonstrate robust liquidity and structural solvency against industry risks, most notably relegation. By combining the ratio-based control of SCR with the solvency-based integrity of SSR, the Premier League has engineered a regulatory framework designed to ensure that the pursuit of on-field success is underpinned by long-term financial stability and rigorous corporate governance.

The strategic focus for clubs must now shift towards aggressive revenue maximisation and prudent, targeted capital investment that leverages the structural exemptions provided by the new regulations.

For fans, and this is an area that seems completely overlooked, affordability is now even less of a consideration than it has been in recent years. In fact the opposite is now true. Revenue maximisation can only mean that fans will pay more for every aspect of supporting their teams – ticket prices, hospitality, food and beverage, merchandising and any other product or service offered by clubs to fans is set to go through another aggressive inflationary cycle.