Debates about financial regulation in sport often begin with salary caps: strict, transparent cost-control mechanisms common in North American and Australian leagues.
They’re credited with improving competitive balance and financial sustainability, so many might assume English football would follow suit.
While England’s Premier League is preparing the most significant overhaul of its financial rules in a generation, it is avoiding a hard salary cap in favour of a bespoke framework designed for Europe’s promotion and relegation ecosystem and globally fluid transfer market.
So why have these rules been implemented, and will they help address football’s financial arms race, given one of the world’s richest and most financially unequal sporting competitions still refuses to introduce a salary cap?
What’s changing in the Premier League?
The Premier League recently announced that from 2026–27, clubs will move away from the Profitability and Sustainability Rules (PSR) introduced in the 2015–16 season, and towards a model centred on controlling football-related spending and ensuring long-term financial health.
The league’s stated aims are clarity, predictability and resilience. They shift focus from backward-looking accounting to real-time cost control and robust balance-sheet strength, with closer alignment to the approach of the Union of European Football Associations (UEFA).
Owners will retain freedom to invest in stadiums and infrastructure, but will face tighter constraints on wages, agent fees and “transfer amortisation” – an accounting practice where clubs spread the cost of a player’s transfer fee over the length of their contract to reduce annual costs and stay within spending limits.
Introducing the ‘squad cost ratio’
At the heart of the reforms, the squad cost ratio (SCR) caps how much a club may spend on its first-team squad (wages, agent fees and transfers) relative to its football revenue.
The headline limit is 85% of eligible income, with a small buffer for newly promoted sides to ease the transition.
In practice, a club generating £300 million (A$609 million) from match day, commercial and league distributions could spend around £255 million (A$518 million) on its squad.
Overspending can result in sanctions, including points deductions.
Unlike PSR’s three-year, business-wide profitability test, this squad cost ratio isolates football costs and is monitored during the season, making it easier to understand and harder to game.
Infrastructure and academy investment sit outside t