Premier League clubs have voted against a new proposal that could have brought in a salary cap from the 2026/27 season, with the division’s Profit and Sustainability Rules (PSR) to be replaced by Squad Cost Ratio (SCR) system from next term.
The 20 Premier League clubs voted on three main issues – Squad Cost Ratio, a Sustainability and Systematic Resilience Proposal (SSR) and a Top to Bottom Anchoring (TBA) proposal in a meeting on Friday.
The SCR and SSR rules were voted through, with the SCR voted through via the slimmest of margins. Fourteen out of the 20 Premier League clubs voted in favour of the SCR rules, which was the minimum number of votes needed to pass through the proposals.
The TBA regulations – which would have limited spending on squad costs to five times the amount the bottom club receives from the Premier League in broadcast and prize money, and could have introduced a salary cap as part of its rules – did not receive sufficient support.
Seven clubs were in favour of the anchoring system, 12 clubs voted against it – with one choosing not to vote.
Before the vote on TBA, the Professional Footballers’ Association (PFA) and some of the UK’s biggest player agencies were preparing to take legal action if anchoring was introduced. They felt it was effectively a salary cap on players.
After a legal challenge in 2021, the PFA stopped the EFL introducing a salary cap in League One and Two.
Players and agents warned the Premier League that any rules which included a salary cap would have be challenged in court.
What is SCR? The new rules replacing PSR?
From the 2026-27 season, Premier League clubs will be allowed to spend a maximum of 85 per cent of their revenue on squad costs – which cover player wages, amortised transfers and agents’ fees.
Nine Premier League clubs playing in Europe this season are already bound by UEFA’s SCR rules which limit spending to 70 per cent of revenue.
A shadow form of SCR has been trialled in the background alongside PSR since the middle of last season.
Each club will be set a ‘green threshold’ of 85 per cent of their revenues, and a ‘red threshold’ – an absolute spending limit up to 30 per cent over the green threshold.
Assessments will take place on March 1 of each year after the January transfer window, with monitoring in October.
If a club is above the green threshold, but under the red, they will receive a fine but not a ‘sporting sanction’, which would be a points deduction.
If a club is above the red threshold, they will face a sporting sanction. This will be a fixed six-point deduction, which increases by one point for every £6.5m spent over the red threshold.
Clubs can appeal both financial and point penalties. A club will have seven days to challenge the board’s decision, having first informally written to the league to try and resolve the issue.
How does SCR differ from PSR?
According to the Premier League, PSR and SCR differ in what they measure.
PSR evaluates a club’s overall profit by including all revenues and costs, while SCR focuses specifically on on-pitch spending.
By concentrating on squad costs, SCR gives clubs greater freedom to invest in other aspects of their operations.
Under PSR, clubs are assessed based on their financial performance over a rolling three-year period, whereas the SCR sets clear spending limits for each season, which clubs must adhere to throughout that campaign.
Compliance is monitored in-season as well as at the end of the season, allowing for earlier intervention if a club is breaching the rules. That means a club could receive punishments – for example, a point deduction – at any point of the season, rather than solely at the end of the campaign.
According to the Premier League, this shift encourages clubs to manage their finances responsibly in real time, rather than relying on longer-term financial balancing.
On top of that, because clubs announce their revenues in advance of the season, they are given more certainties regarding how much money they can spend.
Under the PSR rules, clubs were susceptible to falling into financial trouble due to unforeseen dips in revenue – caused by poor performances on the pitch, a loss in matchday revenue or commercial revenues falling.
What is the third set of rules clubs voted on – the SSR rules?
According to the Premier League, it is introducing three SSR tests to improve clubs’ financial sustainability and ‘investability’ over the short, medium and long-term, taking into account prevailing market conditions.
The three tests are:
Working Capital Test – Assessment of a club’s immediately available cash headroom across a season to ensure it can manage required outgoings and unforeseen fluctuations, particularly between transfer windows. A club must demonstrate that, for each calendar month over the course of a season, the sum of its projected cash balances and qualifying working capital funds is at least £12.5m.
Liquidity Test – Assessment of a club’s liquidity headroom over two seasons, including market value of player registrations, to ensure it can account for its current financial position and handle a variety of financial shocks inherent to the industry. A club must demonstrate that, for the current and following season, its ‘Liquidity Headroom’ is zero or positive having absorbed a ‘Stress Test’ of £85m. The Stress Test accounts for a variety of potential negative events, such as failing to qualify for Europe as one example.
Positive Equity Test – Assessment of a club’s balance sheet to evaluate its financial health, ensuring it has sufficient leverage to manage macro-economic factors. A club must demonstrate that its ‘Positive Equity Ratio’ (liabilities ÷ adjusted assets) is less than or equal to 90 per cent in the 2026/27 season, 85 per cent in the 2027/28 season and 80 per cent from the 2028/29 season onwards.
Each tests take place on July 7 each year. For newly-promoted clubs, they will be assessed on the Liquidity and Positive Equity tests on October 31.
Clubs may also face a ‘Call-In Event’ where they would be assessed further on whether they are complying to the rules.
If they do not comply with the rules, the Premier League will offer solutions whereby the club could return to compliance. They could include voluntary spending limitations, cash injections, or rebalancing their debt or equity positions.
Clubs could also be asked to present a business plan of how to bring the club back into within the rules. Failure to present a business plan would lead to sanctions from the Premier League.
Those sanctions could include asking permission from the league to register any new players, a spending limit being imposed or more serious sanctions that are currently in place within the PSR structure, such as a points deduction.
This news was originally published on this post .
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