What Is Premier League Squad Cost Ratio? SCR Rules Explained

On 21 November last year, the Premier League announced a new regulatory framework designed to promote the league’s long-term sustainability.

At its centre is the Squad Cost Ratio (SCR) system, which clubs voted to introduce from the 2026/27 season following a trial period alongside the Profit and Sustainability Regulations (PSR) that are currently in place.

A 14-club majority was needed to pass the new proposal, which it received. This is the minimum required, despite 19 suggesting they were happy with SCR back in February 2025.

Read on to learn about how Squad Cost Ratio works, how it differs from PSR, and a practical example of what SCR could look like.

Squad Cost Ratio Explained

When the new laws take effect from the 2026/27 season, the Premier League’s Squad Cost Ratio regulations mean it will have aligned itself with UEFA, who first implement the system in 2023.

In short, SCR gives clubs a limit as to how much they can spend on their squad as a percentage of their estimated football-related revenue. 

At the start of each season, clubs submit their estimated revenues and costs to the Premier League. These figures establish a club’s ‘Green Threshold’—the maximum amount that it’s allowed to spend.

Compliance is then assessed in March of that season to see if the club stayed below the Green Threshold.

This threshold puts spending at a maximum of 85% of a club’s revenue, which can be used on squad costs such as wages, amortised transfers, and agent fees. Academy, women’s team and infrastructural costs are not included in the calculations to encourage investment in these areas.

However, clubs competing in Europe must follow a stricter Green Threshold of 70%, in line with UEFA rules.

The 15% leeway was included by the Premier League to allow clubs that fall short of European places to have “sufficient headroom to compete for qualification for UEFA Club Competitions against incumbents who receive additional European revenues,” according to the Premier League.

For SCR purposes, revenues include prize money, ticketing, broadcast rights and sponsorship deals, and apply to non-football events such as concerts.

SCR vs PSR: What’s the difference?

Squad Cost Ratio (SCR) is designed to replace the Premier League’s previous Profitability and Sustainability Rules (PSR), which are explained in full detail here.

Under PSR, clubs were assessed on their financial losses over a rolling three-year period, with teams allowed to lose up to £105 million in this time.

SCR instead focuses on spending relative to revenue, and is more strictly focused on the playing squad itself. Clubs will be limited to spending 85% of their revenue on squad costs, including wages, transfer amortisation and agent fees.

Previous PSR rules also failed to restrict a loophole surrounding asset sales. This allowed clubs to sell assets managed by the same ownership, such as hotels or women’s teams, to companies also under the control of the owners.

These deals could be used to inflate revenues to make the club compliant with PSR, though the Premier League is closing this loophole under SCR by only including strictly footballing revenues in the calculations.

Are there any Exceptions to SCR?

In short, yes, as part of what the Premier League calls the ‘Feedback Loop’. 

While clubs are very much encouraged to stick to the 85% limit, the league has also introduced a ‘Red Threshold’ of 115%, meaning spending can reach 115% of revenue before sporting sanctions apply.

However, clubs cannot freely push this limit.

If spending is found to be between 85% and 115% in the Compliance Test in March (i.e. between the Green and Red Thresholds), the club may face a financial levy (fine), but not a sporting sanction.

This headroom is designed to allow clubs to invest ahead of future revenue or account for short-term underperformance without drastic consequences.

However, this flexibility reduces every time the club breaches the 85%, as each breach lowers the club’s allowance for the following season by the amount they breached it by. This is known as the ‘Negative Feedback Loop’, and gives clubs less room for overspending if they have done so in the past.

Clubs can rebuild this allowance over time. If they return to compliance in later years, their headroom will increase by 10% per season until they reach the maximum 115% allowance again.

It is important to note that unused spending capacity cannot be carried forward.

SCR: A Practical Example of How it Works

Scenario 1: Fully Compliant

Let’s say a club begins their season with a predicted revenue of £100 million.

• Its Green Threshold (85%) therefore allows £85 million to be spent on squad costs.
• Its Red Threshold (115%) is £115 million—30% above the Green.

During the season, the club is performing as expected and only spends, for example, £80 million on its squad. It is therefore fully compliant with SCR, and no further action is needed.

Scenario 2: Between the Thresholds (85%-115%)

In this scenario, the same club spends £90 million. It is therefore at a Squad Cost Ratio of 90%.

The club would then be assessed by the Premier League at the end of that season in June using its actual revenues and costs. If it is indeed found to be above 85%, it may face a levy.

As the spending was 5% over the threshold, the following season would see its Red Threshold decrease by 5% to 110%.

If it was then fully compliant the season after that, the threshold would rise back up to its original 115%.

Scenario 3: Spending above the Red Threshold

If the club spends £120 million (120%), its SCR would be over the 115% limit.

As a result, the club would then be found to have breached SCR rules and could face sanctions. These include a fixed six-point deduction, which increases by one point for every £6.5 million spent over the Red Threshold.  

Overall, an understanding of the frameworks used to govern modern football is vital for students and professionals aspiring to work in football business, finance, and policy.

Global Institute of Sport aims to develop this next generation of modern sports professionals, with courses and modules ranging from administration to finance and beyond. To discover our  industry-leading programmes, click here.

Article by Zakaria Anani