A fresh era of financial regulations may be on the way for the Championship after a landmark Premier League decision on Friday.
Top flight clubs voted by the slimmest of margins to introduce squad cost ratio (SCR) to replace the profit and sustainability system that had been in place since 2013.
The EFL has traditionally followed in their footsteps, including keeping PSR aligned with the Premier League for this season, and it would be a surprise if they didn’t now fall in line.
The Athletic’s football finance expert Matt Slater said: “In a nutshell, instead of trying to stop clubs from losing too much money every season, the league will now try to limit how much money they can spend on the product they put out on the pitch.
This means clubs will be encouraged to spend only 85 per cent of their football-related revenues (money generated by their broadcast, commercial, matchday and player-trading activities) on the wages of their first-team coaches and players, amortised transfer costs and agents’ fees.
Confusingly, they will actually be allowed to spend up to 115 per cent on this stuff in a single season, but it will cost them a luxury tax-style levy, which will be calculated according to how far over 85 per cent they go and then shared equally among those clubs that stay below the lower threshold. If they bust 115 per cent, it will cost them points.”
In the Championship it would be an intriguing development.
Most clubs’ income is consumed by wages alone. A report from Deloitte last summer, studying the latest available figures – from 2023/24 – suggested that even those in receipt of parachute payments would struggle to meet SCR rules. Leicester (105% of revenue on wages) and Southampton (95%) would breach the limits.
Only Leeds United (66%), Norwich (71%), Watford (59%), Plymouth Argyle (65%) and Rotherham (78%) spent less than 80 per cent of money earned on wages. Stoke City were at 98 per cent.
It remains uncertain what comes next but, in the Premier League, the room was clearly divided about whether it would be for better or worse.
The Times reported: “The argument is that it benefits the richest teams. Under Profitability and Sustainability Rules, clubs could lose £105m over three years, so if they had one bad year that could be balanced up by extra income in other years — from player sales, for example.
SCR is an annual calculation, reducing clubs’ margin for error. However, while Uefa calculates it over a calendar year, in the Premier League it will be calculated at the end of each season.
(But the Premier League) says the system ‘enables more timely enforcement and encourages clubs to manage their finances responsibly in real time, rather than relying on longer-term financial balancing’.
It adds that the figure each club has to comply with will be agreed before the season, and so will not be affected by a bad campaign.”