A major overhaul of financial controls

The Premier League has agreed a major change to its financial rulebook, with clubs voting to move from Profit and Sustainability Rules to a new system centred entirely around squad costs. From next season, the Squad Cost Ratio will become the backbone of the league's regulatory framework, limiting what clubs can spend relative to their revenues. It marks the biggest shift in domestic football finance for a decade and brings the Premier League into closer alignment with European standards.

The vote in London saw 14 clubs support the SCR proposal, with six voting against, giving the minimum threshold required for it to pass. Alongside SCR, new sustainability regulations were unanimously approved, although a third proposal involving an anchoring system failed to gain enough backing.

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What the new squad cost ratio means

At its core, the Squad Cost Ratio limits the amount clubs can spend on wages, transfer fees and agents' fees to a fixed percentage of the club's revenue. The Premier League has opted for an 85 percent limit for next season, although clubs competing in European competitions will also need to remain within Uefa's stricter 70 percent ceiling.

Squad costs will include the salaries of players and managers, all transfer amortisation and any associated intermediary payments. Unlike PSR, which operated on a three year basis and considered every strand of club revenue, the SCR focuses purely on annual football spending. For several clubs with strong financial health, PSR was still the preferred model, and Bournemouth, Brentford, Brighton, Crystal Palace, Fulham and Leeds all voted against the change.

The Premier League explained in its statement that SCR is designed to create more opportunity, improve competitive balance and simplify financial regulation. It also introduces real time monitoring during the season and allows a degree of flexible spending where sporting circumstances require it.

How the thresholds and sanctions work

A key feature of the new model is the introduction of two thresholds that determine penalties. The Green Threshold sits at 85 percent of revenue. Once a club exceeds that level, financial penalties can be applied. These fines will be considerably lighter than Uefa's equivalents, with the focus on keeping clubs compliant rather than imposing severe financial hits.

Above that sits the Red Threshold. This is calculated by adding the 85 percent baseline to a rolling allowance of up to 30 percent, which gives every club a starting point of 115 percent. Should any club exceed that higher limit, a sporting punishment follows. The standard sanction will be a six point deduction, with an additional point added for every £6.5m spent above the threshold.

The multi year allowance is central to the league's attempt to balance financial control with the need for clubs to invest. It gives clubs temporary freedom to spend ahead of revenue, particularly if they are rebuilding the squad or suffering from poor performances. That allowance shrinks if clubs overspend and grows back towards the 30 percent maximum if they remain below the 85 percent baseline. This means the spending headroom for each club will change season by season depending on prior behaviour.

Every March, assessments will be carried out to determine whether sporting sanctions are required before the end of the same campaign. This creates a far more immediate regulatory process than PSR, which often resulted in delayed rulings and retrospective punishments.

The European challenge for competing clubs

Clubs playing in Europe face a more complicated situation. Uefa's Squad Cost Ratio is set at 70 percent, well below the Premier League's domestic limit. Last season both Chelsea and Aston Villa were fined heavily for breaching the European limit when it sat at 80 percent.

Under the dual structure, a club may find itself compliant in the Premier League yet penalised by Uefa. This could become particularly challenging for ambitious sides whose revenues increase sharply once they qualify for European competition. The Premier League maintains that its higher limit helps protect competitive balance because European clubs enjoy additional income streams that cannot be matched by domestic competitors.

Why anchoring failed to gain support

The proposal for anchoring generated significant discussion but ultimately fell well short, with only seven clubs backing the idea, 12 voting against and one abstaining. Anchoring would have created a spending cap based on the revenue of the league's bottom club. For this season, the 20th-place side is projected to earn around £120m, which would have set an upper cap of £600m.

Although the idea was designed to stop the gap between the richest and poorest clubs from widening, there were concerns about its long term effects. Manchester City and Manchester United opposed anchoring because they feared their rising revenues would eventually push them into non compliance. Arsenal and Liverpool, however, supported the concept as part of a wider push to restrain runaway spending.

There were also legal fears. The PFA warned that anchoring could amount to a wage cap in practice, potentially restricting what clubs could pay their players and leading to legal challenges. Some executives worried that a future reduction in broadcasting revenue would compound the effect, creating even tighter limits and reducing the league's global competitiveness. Another argument raised by senior clubs was the potential impact on their ability to compete for elite players against Real Madrid and other European giants.

Why sustainability rules were approved so easily

While SCR and anchoring generated debate, the sustainability measures were passed unanimously. This is because clubs already face similar demands under the incoming Independent Football Regulator, which will soon require detailed financial plans over the short, medium and long term.

Clubs will need to demonstrate responsible spending, outline investment strategies and show how they intend to fund operations sustainably. If a club falls into financial risk, the regulator and the Premier League can impose corrective measures, such as spending restrictions or debt restructuring requirements.

The emphasis is on long term stability and avoiding the financial crises seen in recent years across the English football pyramid. For most Premier League clubs, these conditions were already expected, making the vote straightforward.

What comes next for Premier League financial control

The adoption of SCR represents a significant shift in how the league governs itself. For clubs, the next step will be adjusting internal budgets to reflect the new limits and deciding how aggressively to use the rolling allowance. For supporters, it introduces a clearer understanding of how overspending leads to points deductions and brings a degree of transparency previously missing.

The next few seasons will reveal whether SCR delivers a more balanced, sustainable Premier League or creates fresh complications. What is clear is that financial rules are now much closer to those used across Europe, and the era of PSR is drawing to a definitive close.