Will the Introduction of “Squad Cost Ratio” improve Competition in the Premier League?
- 1 July 2026
- SLAM
This article examines whether the introduction of the Squad Cost Ratio (‘SCR’), due to come into effect from the start of the 2026-27 Premier League season, will meaningfully enhance competitive balance within the league.
The SCR forms part of a broader evolution in football financial regulation and will cap clubs’ expenditure on player wages, transfer fees, and agent costs as a proportion of total revenue. Unlike the existing Profit and Sustainability Rules (‘PSR’) and the former Financial Fair Play (‘FFP’) regime, which primarily focused on long-term financial stability and loss limitation, the SCR introduces a more direct link between sporting expenditure and club income.
While the SCR is intended to improve financial transparency and discipline, its impact on competitive balance is more uncertain. This is largely due to the persistent structural disparities in revenue generation across Premier League clubs, particularly in relation to broadcasting income distribution, commercial revenues, and global brand value. As a result, wealthier clubs will continue to benefit from a higher absolute spending ceiling, even under a proportional spending model.
From a theoretical perspective, this raises questions consistent with which argues that professional sports leagues must maintain a degree of competitive uncertainty to preserve commercial attractiveness and fan engagement. If financial regulation fails to meaningfully narrow the gap between clubs, the long-term entertainment value and commercial growth of the Premier League may be affected.
In this article, Yasin Patel, Olivia Wall, and Caitlin Haberlin-Chambers analyse the structure of the SCR, compare it with existing regulatory frameworks, and assess whether it is likely to enhance competitive balance or merely refine financial governance without altering the competitive hierarchy of English football.
The SCR forms part of a broader evolution in football financial regulation and will cap clubs’ expenditure on player wages, transfer fees, and agent costs as a proportion of total revenue. Unlike the existing Profit and Sustainability Rules (‘PSR’) and the former Financial Fair Play (‘FFP’) regime, which primarily focused on long-term financial stability and loss limitation, the SCR introduces a more direct link between sporting expenditure and club income.
While the SCR is intended to improve financial transparency and discipline, its impact on competitive balance is more uncertain. This is largely due to the persistent structural disparities in revenue generation across Premier League clubs, particularly in relation to broadcasting income distribution, commercial revenues, and global brand value. As a result, wealthier clubs will continue to benefit from a higher absolute spending ceiling, even under a proportional spending model.
From a theoretical perspective, this raises questions consistent with which argues that professional sports leagues must maintain a degree of competitive uncertainty to preserve commercial attractiveness and fan engagement. If financial regulation fails to meaningfully narrow the gap between clubs, the long-term entertainment value and commercial growth of the Premier League may be affected.
In this article, Yasin Patel, Olivia Wall, and Caitlin Haberlin-Chambers analyse the structure of the SCR, compare it with existing regulatory frameworks, and assess whether it is likely to enhance competitive balance or merely refine financial governance without altering the competitive hierarchy of English football.
Flaws of Financial Regulation Under FFP/PSR and the limits of the SC
Structural weaknesses in the Financial Fair Play and Profitability Rules
A key criticism of both FFP and PSR is that, while they are effective in limiting excessive financial losses, they are significantly less successful in promoting competitive balance.
Although PSR was introduced with the aim of enhancing financial sustainability and restricting excessive expenditure, it has been widely criticised for both its structural complexity and its retrospective enforcement model, which often results in regulatory outcomes being determined long after the relevant sporting period has concluded. This temporal disconnect between breach and sanction raises important questions regarding regulatory certainty, proportionality, and the integrity of competition outcomes, particularly where sanctions may influence league standings in seasons unrelated to the original breach period.
One structural flaw lies in the ability of wealthier clubs to maintain spending power through indirect forms of owner support, contributing to what economists describe as a (‘situation in which loss-making firms or enterprises are bailed out by public authorities or creditors’). A soft budget constraint arises where clubs operate under the expectation, implicit or explicit, that financial losses will ultimately be absorbed or underwritten by external sources, reducing the disciplining effect of financial regulation.
This phenomenon has been widely discussed in relation to Manchester City and the ongoing 115 charges (now 114 alleged breaches), which include alleged breaches of financial regulations over multiple seasons. The case illustrates the broader point that financial regulation does not necessarily prevent sustained sporting success by clubs with access to substantial external resources. Accordingly, a central limitation of FFP-style regimes is that, while they may restrict losses, debt accumulation, and short-term financial overreach, they do not inherently address underlying disparities in revenue generation or capital strength. As a result, they are limited in their ability to equalise competitive capacity across clubs.
Creative accounting and regulatory arbitrage have historically been the Achilles’ heel of FFP. Clubs have been able to structure transactions in ways that comply formally with regulatory frameworks while enhancing apparent revenue or reducing reported expenditure. Examples include inflated commercial sponsorship arrangements and the amortisation of transfer fees across contract lengths, allowing clubs to reduce reported annual costs.
As Szymanski (2014)In this sense, financial regulation may reshape accounting practices without fundamentally altering competitive outcomes. For example, the use of related-party sponsorship agreements has been widely debated, particularly where commercial deals appear to exceed fair market value when compared with equivalent agreements in the football economy. This is seen with the Parisian football team, Paris Saint Germain (PSG), where a 200-million-euro sponsorship valuation with Qatar Tourism Authority (QTA) was halved by UEFA’s financial control board due to the belief QTA paid over the odds to help out the club. While such arrangements may be subject to scrutiny under “fair value” assessments, determining an objective benchmark for valuation remains inherently complex and contestable.
Similarly, the widespread use of long-term player contracts combined with amortisation of transfer fees enables clubs to distribute acquisition costs over extended periods, thereby reducing the immediate impact on reported annual expenditure. An example of this can be seen in Chelsea FC’s transfer strategy under Todd Bohely and Clearlake Capital. The club frequently offered seven and eight year contracts to allow for the spreading of the costs due to a longer accounting period: spreading fees over time. This significantly reduced clubs reported annual expenditure and helped them to remain within FFP and PSR rules despite a substantial transfer spending. This strategy then became so prominent that UEFA later introduced rules limiting amortisation FFP purposes to a maximum of five years even if contracts are longer.
Although this practice is permissible within accounting and regulatory frameworks, it can materially enhance short-term spending capacity without breaching formal cost controls.
Taken together, this demonstrates that financial regulation in football is limited in its effectiveness in achieving genuine competitive balance and often operates at the level of formal compliance rather than substantive constraint.
Although PSR was introduced with the aim of enhancing financial sustainability and restricting excessive expenditure, it has been widely criticised for both its structural complexity and its retrospective enforcement model, which often results in regulatory outcomes being determined long after the relevant sporting period has concluded. This temporal disconnect between breach and sanction raises important questions regarding regulatory certainty, proportionality, and the integrity of competition outcomes, particularly where sanctions may influence league standings in seasons unrelated to the original breach period.
One structural flaw lies in the ability of wealthier clubs to maintain spending power through indirect forms of owner support, contributing to what economists describe as a (‘situation in which loss-making firms or enterprises are bailed out by public authorities or creditors’). A soft budget constraint arises where clubs operate under the expectation, implicit or explicit, that financial losses will ultimately be absorbed or underwritten by external sources, reducing the disciplining effect of financial regulation.
This phenomenon has been widely discussed in relation to Manchester City and the ongoing 115 charges (now 114 alleged breaches), which include alleged breaches of financial regulations over multiple seasons. The case illustrates the broader point that financial regulation does not necessarily prevent sustained sporting success by clubs with access to substantial external resources. Accordingly, a central limitation of FFP-style regimes is that, while they may restrict losses, debt accumulation, and short-term financial overreach, they do not inherently address underlying disparities in revenue generation or capital strength. As a result, they are limited in their ability to equalise competitive capacity across clubs.
Creative accounting and regulatory arbitrage have historically been the Achilles’ heel of FFP. Clubs have been able to structure transactions in ways that comply formally with regulatory frameworks while enhancing apparent revenue or reducing reported expenditure. Examples include inflated commercial sponsorship arrangements and the amortisation of transfer fees across contract lengths, allowing clubs to reduce reported annual costs.
As Szymanski (2014)In this sense, financial regulation may reshape accounting practices without fundamentally altering competitive outcomes. For example, the use of related-party sponsorship agreements has been widely debated, particularly where commercial deals appear to exceed fair market value when compared with equivalent agreements in the football economy. This is seen with the Parisian football team, Paris Saint Germain (PSG), where a 200-million-euro sponsorship valuation with Qatar Tourism Authority (QTA) was halved by UEFA’s financial control board due to the belief QTA paid over the odds to help out the club. While such arrangements may be subject to scrutiny under “fair value” assessments, determining an objective benchmark for valuation remains inherently complex and contestable.
Similarly, the widespread use of long-term player contracts combined with amortisation of transfer fees enables clubs to distribute acquisition costs over extended periods, thereby reducing the immediate impact on reported annual expenditure. An example of this can be seen in Chelsea FC’s transfer strategy under Todd Bohely and Clearlake Capital. The club frequently offered seven and eight year contracts to allow for the spreading of the costs due to a longer accounting period: spreading fees over time. This significantly reduced clubs reported annual expenditure and helped them to remain within FFP and PSR rules despite a substantial transfer spending. This strategy then became so prominent that UEFA later introduced rules limiting amortisation FFP purposes to a maximum of five years even if contracts are longer.
Although this practice is permissible within accounting and regulatory frameworks, it can materially enhance short-term spending capacity without breaching formal cost controls.
Taken together, this demonstrates that financial regulation in football is limited in its effectiveness in achieving genuine competitive balance and often operates at the level of formal compliance rather than substantive constraint.
The Squad Cost Ratio: A More Effective Mechanism?
The move toward the SCR reflects a regulatory response to perceived limitations within the PSR framework, which permitted clubs to incur aggregate “adjusted” losses of up to £105 million over a rolling three-year assessment period.
The SCR framework represents a structural shift in regulatory design by moving away from retrospective multi-year loss assessments towards a season-by-season expenditure model. Under the proposed system, clubs will be restricted in their spending on wages, transfer fees, and agent costs to a fixed percentage of club revenue. In principle, this represents a more direct form of expenditure control than FFP/PSR, as it links squad costs explicitly to income generation rather than focusing primarily on profitability or accumulated losses.
Potential advantages
In order to show the potential advantages, four key questions must be answered:
The SCR is a financial regulation mechanism which caps a club’s total squad expenditure—including wages, transfer fees, and agent fees at a fixed percentage of its football-related revenue. Unlike PSR or FFP, which focus primarily on profitability and multi-year loss thresholds, the SCR operates as a real-time expenditure cap directly linked to annual income.
What problem is it solving?
The SCR is designed to address the structural limitations of existing financial regulation, particularly the tendency for clubs to engage in excessive wage inflation and transfer spending driven by competitive pressures rather than underlying financial capacity. In practice, this has contributed to “arms race” dynamics between elite clubs, where escalating expenditure is used to secure marginal sporting advantages.
It also seeks to reduce reliance on retrospective enforcement mechanisms, which often result in sanctions being imposed long after the relevant financial conduct has occurred. Clubs breaching the rules get immediate benefit and in effect plan for future punishment.
Why does it solve this better than PSR/FFP?
FFP and SCR are governed by UEFA making it more efficient for clubs competing in Europe as the rules overlap creating a clearer structure compared to PSR which is governed by the Premier League. The main objectives of FFP and PSR was to prevent clubs from spending beyond revenues and ensuring they stay financially sustainable. This was measured through breakeven requirements and maximum allowable losses with a spending focus on overall club finances and profitability and losses. SCR limits spending on football related costs through its key metric of squad cost ratio and has a spending focus on player wages, transfers and agent fees. Further to this, FFP and PSR are monitored over multiple years whereas SCR is an annual ratio test making it quicker and easier to identify breaches and overspending. What is the limitation even within the advantage?
In contrast, SCR limits spending on wages, transfers, and fees to be based on a percent of revenue and a percentage revenue cap on squad cost. This could put players off joining teams in the Premier League, negatively affecting the commercialisation of the Premier League due to players being the biggest commodity. One argument for SCR improving competitive balance is the direct control of spending.
This is because it caps total squad expenditure preventing excessive wage inflation and transfer market bubbles, which always benefit the richer and more powerful clubs. Further to this, SCR is more transparent and harder to manipulate. The revenue ratio rules, reduce information as symmetry, and enforcement will potentially increase competitive ballots. This also limits overperforming spending, meaning clubs cannot overspend to temporarily outperform revenue level, helping to regulate mid-table competition and reducing financial collapse risk.
SCR also calls for better regulatory clarity and alignment with UEFA rules to allow for consistency for those competing in European competitions and to prevent cross-league exploitation to help boost revenue and reduce costs. However, an argument against SCR is that revenue inequality still exists as the larger clubs still have access to bigger revenue from broadcasting deals, larger global fan bases, and more opportunity for bigger commercial sponsorships. This is seen with Manchester United, who have a particularly large fan base in Asia compared to clubs like Sunderland.
This means revenue will be considerably higher and therefore spending within the percentage shall be higher. This will not help but instead reinforce the dominance of the top clubs like Manchester City. Another argument against SCR is that there is no redistribution of wealth or revenue sharing.
The SCR framework represents a structural shift in regulatory design by moving away from retrospective multi-year loss assessments towards a season-by-season expenditure model. Under the proposed system, clubs will be restricted in their spending on wages, transfer fees, and agent costs to a fixed percentage of club revenue. In principle, this represents a more direct form of expenditure control than FFP/PSR, as it links squad costs explicitly to income generation rather than focusing primarily on profitability or accumulated losses.
Potential advantages
In order to show the potential advantages, four key questions must be answered:
- What is the SCR rule?
- What problem is it solving?
- Why does it solve it better than PSR/FFP?
- What is the limitation even within the advantage?
The SCR is a financial regulation mechanism which caps a club’s total squad expenditure—including wages, transfer fees, and agent fees at a fixed percentage of its football-related revenue. Unlike PSR or FFP, which focus primarily on profitability and multi-year loss thresholds, the SCR operates as a real-time expenditure cap directly linked to annual income.
What problem is it solving?
The SCR is designed to address the structural limitations of existing financial regulation, particularly the tendency for clubs to engage in excessive wage inflation and transfer spending driven by competitive pressures rather than underlying financial capacity. In practice, this has contributed to “arms race” dynamics between elite clubs, where escalating expenditure is used to secure marginal sporting advantages.
It also seeks to reduce reliance on retrospective enforcement mechanisms, which often result in sanctions being imposed long after the relevant financial conduct has occurred. Clubs breaching the rules get immediate benefit and in effect plan for future punishment.
Why does it solve this better than PSR/FFP?
FFP and SCR are governed by UEFA making it more efficient for clubs competing in Europe as the rules overlap creating a clearer structure compared to PSR which is governed by the Premier League. The main objectives of FFP and PSR was to prevent clubs from spending beyond revenues and ensuring they stay financially sustainable. This was measured through breakeven requirements and maximum allowable losses with a spending focus on overall club finances and profitability and losses. SCR limits spending on football related costs through its key metric of squad cost ratio and has a spending focus on player wages, transfers and agent fees. Further to this, FFP and PSR are monitored over multiple years whereas SCR is an annual ratio test making it quicker and easier to identify breaches and overspending. What is the limitation even within the advantage?
In contrast, SCR limits spending on wages, transfers, and fees to be based on a percent of revenue and a percentage revenue cap on squad cost. This could put players off joining teams in the Premier League, negatively affecting the commercialisation of the Premier League due to players being the biggest commodity. One argument for SCR improving competitive balance is the direct control of spending.
This is because it caps total squad expenditure preventing excessive wage inflation and transfer market bubbles, which always benefit the richer and more powerful clubs. Further to this, SCR is more transparent and harder to manipulate. The revenue ratio rules, reduce information as symmetry, and enforcement will potentially increase competitive ballots. This also limits overperforming spending, meaning clubs cannot overspend to temporarily outperform revenue level, helping to regulate mid-table competition and reducing financial collapse risk.
SCR also calls for better regulatory clarity and alignment with UEFA rules to allow for consistency for those competing in European competitions and to prevent cross-league exploitation to help boost revenue and reduce costs. However, an argument against SCR is that revenue inequality still exists as the larger clubs still have access to bigger revenue from broadcasting deals, larger global fan bases, and more opportunity for bigger commercial sponsorships. This is seen with Manchester United, who have a particularly large fan base in Asia compared to clubs like Sunderland.
This means revenue will be considerably higher and therefore spending within the percentage shall be higher. This will not help but instead reinforce the dominance of the top clubs like Manchester City. Another argument against SCR is that there is no redistribution of wealth or revenue sharing.
Comparison
NFL model = salary cap + revenue sharing:
The NFL combines a salary cap with an almost equal distribution of broadcasting revenue amongst clubs, limiting the financial advantages of larger market teams and promotes competitive parity across the league creating unpredictable outcomes, a wider range of title challenges and a more balanced competitive environment.
Premier League model = SCR + partial redistribution:
The Premier leagues SCR seeks to improve financial sustainability by limiting squad expenditure to a fixed percentage of football related revenue, however, unlike the NFL, TV revenue is only partially redistributed, leaving significant revenue disparity between clubs. This can be seen with Manchester City not playing a single Saturday 3pm kick-off away from home benefiting from increased broadcasting exposure and commercial income. This allows them to spend more under the new SCR rules and consequently, clubs with higher revenues continue to enjoy a substantial financial advantage.
Furthermore, while SCR is designed to safeguard against financial manipulation, these measures may not completely eliminate potential loopholes. Additionally, UEFA applies fair-value assessments to related-party sponsorship transactions to help reduce the risk of artificially inflated commercial deals, however, determining a fair market value can be subjective, creating opportunities for clubs to maximise reported revenues within the regulatory limit. Similarly, SCR does not fully prevent artificial revenue expansion, particularly where clubs possess strong ownership networks or global commercial structures as higher reported revenue directly increases spending permitted under the SCR framework and therefore reinforces existing financial advantages.
Further to this, multi-club ownership models create opportunities for intra-group player trading, although they can be scrutinised for their valuations and strategic use to generate profit or to manage squad costs, leaving concerns that sophisticated ownership structures could exploit areas that are difficult to regulate and monitor. Multi-club ownership is a model that many owners are now embracing in order to get around rules that Leagues are developing in order to control some of the power abuses that the wealthy clubs have developed.
Direct comparison conclusion:
While SCR shows an improvement on PSR due to its direct link between spending and revenue whilst placing a greater emphasis on cost control, it still does not address the revenue inequalities within the Premier League. In contrast, the NFL’s combination of revenue sharing, and salary caps actively reduces financial disparities between teams before spending occurs and although SCR includes safeguards against related-party transactions, artificial revenue expansion and intra-group player trading, the mechanisms rely heavily on fair-value assessments and regulatory oversight which makes them difficult to enforce perfectly. Therefore, SCR may improve financial sustainability but is unlikely to enhance competitive balance to the same extent as the model presented in the NFL.
The NFL combines a salary cap with an almost equal distribution of broadcasting revenue amongst clubs, limiting the financial advantages of larger market teams and promotes competitive parity across the league creating unpredictable outcomes, a wider range of title challenges and a more balanced competitive environment.
Premier League model = SCR + partial redistribution:
The Premier leagues SCR seeks to improve financial sustainability by limiting squad expenditure to a fixed percentage of football related revenue, however, unlike the NFL, TV revenue is only partially redistributed, leaving significant revenue disparity between clubs. This can be seen with Manchester City not playing a single Saturday 3pm kick-off away from home benefiting from increased broadcasting exposure and commercial income. This allows them to spend more under the new SCR rules and consequently, clubs with higher revenues continue to enjoy a substantial financial advantage.
Furthermore, while SCR is designed to safeguard against financial manipulation, these measures may not completely eliminate potential loopholes. Additionally, UEFA applies fair-value assessments to related-party sponsorship transactions to help reduce the risk of artificially inflated commercial deals, however, determining a fair market value can be subjective, creating opportunities for clubs to maximise reported revenues within the regulatory limit. Similarly, SCR does not fully prevent artificial revenue expansion, particularly where clubs possess strong ownership networks or global commercial structures as higher reported revenue directly increases spending permitted under the SCR framework and therefore reinforces existing financial advantages.
Further to this, multi-club ownership models create opportunities for intra-group player trading, although they can be scrutinised for their valuations and strategic use to generate profit or to manage squad costs, leaving concerns that sophisticated ownership structures could exploit areas that are difficult to regulate and monitor. Multi-club ownership is a model that many owners are now embracing in order to get around rules that Leagues are developing in order to control some of the power abuses that the wealthy clubs have developed.
Direct comparison conclusion:
While SCR shows an improvement on PSR due to its direct link between spending and revenue whilst placing a greater emphasis on cost control, it still does not address the revenue inequalities within the Premier League. In contrast, the NFL’s combination of revenue sharing, and salary caps actively reduces financial disparities between teams before spending occurs and although SCR includes safeguards against related-party transactions, artificial revenue expansion and intra-group player trading, the mechanisms rely heavily on fair-value assessments and regulatory oversight which makes them difficult to enforce perfectly. Therefore, SCR may improve financial sustainability but is unlikely to enhance competitive balance to the same extent as the model presented in the NFL.
Conclusion
Overall, the introduction of the SCR is unlikely to significantly improve the competitive balance in the Premier League. Whilst SCR improves financial governance by directly controlling spending and reducing excessive expenditure, it does not address the underlying revenue inequalities between clubs and since spending limits are linked to revenue, wealthier clubs retain a significant financial advantage and therefore greater spending power. However, competitive imbalance is driven by structural economic inequality, not just spending behaviour. SCR is necessary but fails to alter the competitive balance of the hierarchy of the Premier League. As a result, SCR improves financial sustainability and efficiency but is unlikely to alter the existing competitive hierarchy of the Premier League.