Premier League Introduces Squad Cost Ratio System To Replace Profit And Sustainability Rules

Squad Cost Ratio: A New Era Of Premier League Financial Fair Play

The Premier League is moving to a new financial era. From next season, clubs will be governed by a Squad Cost Ratio (SCR) system, replacing the long-standing Profit and Sustainability Rules (PSR).

At a meeting in London, clubs voted for three possible methods, with SCR emerging victorious — 14 votes in favor and 6 against — meeting the minimum threshold for a rule change.

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What Is Squad Cost Ratio And How Does It Work?

The SCR system focuses on team-related costs per season, rather than the broader three-year revenue balance sheet used in PSR.

• Squad costs include player and manager wages, transfer fees, and agent fees.

• Clubs’ total squad costs must not exceed 85% of their revenue (known as the Green Threshold).

• Clubs participating in European competitions must comply with UEFA’s stricter limit of 70%.

This approach ensures that clubs spend within their means while retaining competitive balance, particularly for Europe-bound teams with larger revenues.

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Penalties And Allowances: How Clubs Are Monitored

The Premier League introduces a dual-threshold system with financial and sporting sanctions:

• Spending above 85% triggers a financial penalty.

• The Red Threshold = 85% + a 30% rolling allowance. Exceeding this results in a 6-point deduction, increasing by 1 point for every £6.5m spent above the limit.

• The allowance permits clubs to invest ahead of revenue, cover variance, or absorb temporary sporting underperformance.

Essentially, clubs start the season at 115% of squad costs (85% + 30% allowance) before facing sporting penalties. The percentages will adjust in future seasons, giving clubs flexibility to manage budgets over time.

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Why The Change?

The Premier League says the SCR system aims to:

• Promote opportunity for all clubs

• Align the league’s financial system closer to UEFA’s rules

• Simplify financial monitoring

• Strengthen off-pitch investment

• Protect against sporting underperformance

Some clubs were resistant, preferring the existing PSR framework. Bournemouth, Brentford, Brighton, Crystal Palace, Fulham, and Leeds voted against the change, citing their stable finances.

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The Impact On Clubs

Clubs will need to balance ambition with sustainability. Teams planning to invest heavily in the transfer market must carefully manage their squad cost ratios to avoid fines or point deductions.

For example:

• A club spending 105% next season uses 20% of its allowance, leaving a maximum of 95% before sporting sanctions in 2027-28.

• Clubs spending below 85% can replenish their allowance up to the 30% maximum.

The system rewards prudent spending while ensuring clubs remain competitive and financially healthy.

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A Smarter Future For Premier League Finances

The SCR marks a major step forward in Premier League financial regulation, giving clubs clarity, flexibility, and accountability. Fans can expect a more level playing field, while UEFA-aligned limits protect teams from overextending financially.

The new rules come at a pivotal time, as clubs plan for a high-stakes transfer window and European campaigns. The Premier League’s approach blends financial control with competitive ambition, keeping the league among the world’s best sport markets.