Squad Cost Ratio: Rules Leeds United, Hull City, Sheffield United & Middlesbrough FC must follow explained
Squad Cost Ratio explained following its implementation for the likes of Leeds United and Hull City
Squad Cost Ratio (SCR) rules have been permanently implemented for the 2026/27 Premier League and Championship seasons.
Football clubs at the elite level have to adhere to financial rules, with the aim being to keep clubs sustainable and prevent reckless spending in the pursuit of glory. SCR was brought in on a shadow basis last term - and is now officially here to stay.
These rules can often be tough to understand, with financial jargon rarely put in layman’s terms by those at the top of the game.
The switch from Profit and Sustainability Rules (PSR) to SCR was recently brought under the spotlight by Leeds United’s managing director Robbie Evans, who discussed the possibility of new rules being breached by the Whites.
The Yorkshire Post has put together a handy explainer of SCR rules for fans of Leeds, Hull City, Sheffield United and Middlesbrough to get their teeth into.
What is Squad Cost Ratio?
SCR limits clubs’ on-pitch spending to 85 per cent of their football-related revenue and net profit/loss from the sale of players.
UEFA’s SCR system only allows clubs to spend a maximum of 70 per cent of their total revenue, therefore Premier League clubs in European competitions must adhere to this limit. Those not competing in Europe do not have to adhere, giving them headroom to compete for qualification against clubs who benefit from UEFA’s competition revenues. The 15 per cent headroom also provides support for clubs who fail to quailify for Europe, with the hope being clubs do not have to make sudden cuts that prove destabilising.
How does it differ from PSR?
Under PSR rules, clubs were judged on their total losses over a three-year period. SCR puts a cap on squad spending during each season, with monitoring of financial outlays now done more actively in the moment.
What are on-pitch squad costs?
Income generated by women’s teams and academies are included within the SCR calculation - but costs are not. Stadium infrastructure and non-playing staff wages costs are not included either.
Squad costs only relate to on-pitch spending for a club’s senior men’s first team. Player and head coach wages, agent fees, impairments and amortisation all come under the SCR umbrella.
Adjusted revenue
Clubs are limited to spending a percenatage of their adjusted revenue - the total core income generated by the club. This includes matchday income, broadcast revenue, commercial revenue, stadium events and player trading profits.
In the top flight, accounting profit or loss on player sales is averaged over three seasons. In the Championship version of SCR, there is an ‘allowable P&M (players and manager) trading amount’ measured across one season on a net cashflow basis. Amorisation costs do not come into the equation in the second tier, nor do accounting profits. There is a focus on the inflows and outflows of transfer instalments.
Can clubs exceed the limit?
Premier League clubs have a multi-year rolling allowance of 30 per cent. When a club goes beyond 85 per cent in the accounts confirmation test, the 30 per cent allowance is decreased for the following campaign by the same percentage as the breach, until the 30 per cent is exhausted.
There is an 85 per cent limit in the Championship, although second tier-clubs instead have a flexible equity top-up allowance of £33m over a three-year period, up to a maximum of £15m per season.
Non-compliance
Clubs are proactively monitored and will be expected to make changes to boost their financial health if required.
Potential ways of doing so include voluntary spending limitations, cash injections of the rebalancing of debt. If clubs do not take action to fix issues, or have a consistent track record of unsustainable behaviour, there will be intervention from authorities. If enhanced monitoring does not suffice, there could be sanctions and point deductions can be applied for those who exceed their ‘red threshold’.
Spending above 85 per cent but under the additional allowance will result in a financial penalty, while going over both will result in a points deduction.