Premier League clubs have approved a significant change to their financial regulations. From next season, a new Squad Cost Ratio (SCR) system will replace the current Profit and Sustainability Regulations (PSR). This decision came during a recent meeting in London. Clubs voted on three proposals for the future of financial oversight.

The Squad Cost Ratio model secured 14 votes. This met the minimum required for a rule change. Six clubs opposed it. Another proposed system, known as “anchoring,” failed to gain traction. Anchoring aimed to link spending levels to the league’s lowest-earning club. Twelve clubs rejected it, seven supported it, and one abstained. Separately, rules focused on long-term financial sustainability received unanimous backing.

Why the Change? Aims of the New System

The Premier League stated the new system aims to “promote opportunity for all clubs.” It also seeks to align the league’s financial framework more closely with UEFA’s existing Squad Cost Ratio rules. The updated regulations promise transparent in-season monitoring and clear sanctions. They also protect against sporting underperformance. Clubs will have the ability to spend ahead of revenues. They can also invest more effectively off the pitch. The league hopes to reduce complexity by focusing primarily on football-related costs.

Understanding the New Spending Limits

Under the new framework, clubs can allocate up to 85% of their revenue. This spending covers wages, transfer fees, and agent commissions. However, teams participating in European competitions face a stricter limit. They must adhere to UEFA’s 70% spending cap. This dual system means a club could follow Premier League rules but still incur penalties from UEFA.

Opposition and Transition Measures

Not all clubs supported the change. Some preferred the existing PSR system. Bournemouth, Brentford, Brighton, Crystal Palace, Fulham, and Leeds voted against the new rules. To facilitate a smooth transition, the Premier League introduced a 30% rolling allowance. This provides clubs with extra capacity to invest beyond the standard spending limit. It can be utilized across several seasons. This allowance helps clubs navigate revenue fluctuations or periods of poor sporting performance.

Penalty System and Thresholds

The new system includes two crucial thresholds for compliance. Spending above 85% triggers a financial penalty. This is known as the Green Threshold. Exceeding the Red Threshold incurs more severe consequences. The Red Threshold combines the 85% limit with the additional 30% allowance. Breaching this results in an automatic six-point deduction. For every £6.5 million spent beyond that, an additional point is deducted.

All clubs will begin next season with the full 30% allowance. This effectively sets their initial upper spending limit at 115%. This allowance will adjust each season based on club usage. For instance, a club spending 105% next season will have only 10% remaining for the 2027-2028 season. This reduces their maximum threshold to 95%. Clubs operating below the 85% spending line can rebuild their allowance. They can restore it to the maximum 30% over time.