The 2025-26 Premier League and Championship seasons included the introduction of squad-cost ratio rules on a shadowbasis, testing to see how a spending cap for squad costs set at a percentage of a club’s total revenues might work.
These SCR regulations have now been permanently implemented for the 2026-27 season, replacing previous profit and sustainability rules (PSR).
Uefa has a 70% SCR cap for European competitions, so Premier League clubs who qualified for Europe fall in line with this limit.
Clubs who did not qualify for Europe, and so are only taking part in domestic competitions, are capped at 85% of their total revenue.
However, clubs can spend above the 85% limit by using a multi-year rolling allowance of 30%. This allows them to invest ahead of revenue and variance or sporting underperformance.
Every club will start this coming season on 85% + 30% allowance, so effectively 115%.
If a club spends 105% on their squad in 2026-27, it means they have used 20% of their allowance, and for 2027-28 their maximum spend before potential sporting sanction is 95%.
If a club spend less than 85%, they can increase the allowance again to the maximum of 30%.
Spending above 85% but under the allowance results in a financial penalty, whereas going over both the 85% and the allowance will land the club a fixed six-point deduction which increases by one point for every £6.5m spent over the 115%.
‘Anchoring’ was also trialled in 2025-26, which meant any club’s spending could not exceed a multiple of income earned by the bottom-placed club – however this was rejected at a vote of Premier League clubs.
SCR was approved by a vote of 14 clubs to six, and was introduced alongside sustainability and systemic resilience (SSR) regulations.
SSR involves three tests that are applied throughout the season:
- Working capital test – assesses short-term cash resources
- Liquidity test – assesses medium-term liquidity and resilience
- Positive equity test -assesses long-term financial health
The aim of the SCR and SSR regulations is to stop the richest owners providing endless funds to their clubs to sign new players, as any money injected this way does not count as seasonal revenue.
They will also aim to prevent clubs from overspending and accruing unmanageable losses.
What counts as squad costs?
SCR is calculated by ‘squad costs’ divided by ‘adjusted revenue’.
Squad costs are related only to on-pitch spending on a club’s senior men’s first team, including:
- Wages – the total salaries of first-team players and the head coach
- Amortisation – the process of spreading a player’s transfer fee evenly over the length of their contract
- Agent fees – all payments made to representatives and intermediaries during transfers or contract renewals
- Impairments – write-downs on player values because of long-term injury or severe underperformance
Not included in squad costs are:
- Expenses for youth academies
- Women’s teams
- Stadium infrastructure
- Non-playing staff wages
These are exempt to encourage healthy club development.
As stadium costs are not included, clubs have no upper limit on what they can invest in their ground – which means they can hugely increase revenue through hosting events. This has particularly been the case for Tottenham Hotspur.
What is adjusted revenue?
Adjusted revenue is the total core income generated by the club’s operation, including:
- Matchday income – ticketing and hospitality sales
- Broadcast revenue – television rights from domestic and international competition
- Commercial revenue – sponsorships, kit deals and merchandising
- Stadium events – income from hosting non-footballing events, such as music concerts or other sports
- Player-trading profits – net profit made from selling player registrations
What is the difference between PSR and SCR?
So how does SCR differ from the old system of PSR?
PSR:
- enforced a fixed cumulative loss limit over a three-year rolling period
- banned overall club losses greater than £105m over a rolling three-year block, regardless of total revenue size
- meant a single bad financial year could impact a club for multiple seasons
SCR:
- is a season-specific spending cap tied directly to a club’s football-related revenue
- limits on-pitch spending to a percentage of club revenue
- operates strictly on a single-season basis with in-season and annual compliance checks, meaning the consequences of overspending or a bad financial cycle affect only that specific campaign
This article is the latest from BBC Sport’s Ask Me Anything team.
