It is goodbye PSR and hello SCR for Newcastle United.
The Premier League reforming and reshaping its financial regulations.
Towards the end of 2025, 14 out of the 20 Premier League voted to replace PSR (Profit and Sustainability Rules) with a new SCR (Squad Cost Ratio) framework.
The Premier League voted against introducing an American-style salary cap.
This shift alters spending habits and financial sustainability in the Premier League.
What is SCR?
• Premier League clubs will be permitted to spend 85% of their income on squad costs each season. Squad costs include wages, transfers, and agent fees. However, costs of staff outside of the playing squad are excluded from the calculation.
• Revenue that is generated relating to women’s and youth teams are included in the overall calculation, but the costs aren’t, providing Premier League owners with an added incentive to inject their cash into these teams.
What’s less widely reported is that the Premier League’s SCR framework is basically a non-factor for any club with European aspirations. UEFA’s SCR rules are far tighter: clubs can only spend 70% of revenue on squad costs over the span of three seasons. Fail to comply and you’re fined. Keep failing to comply and you’re banned from UEFA competitions altogether.
Newcastle United were recently fined £5.2m for breaching UEFA’s financial sustainability regulations. If Newcastle breach UEFA’s rules and overspend by £20m or less, they will receive another fine. If they overspend by £20m or more, the club will be banned from UEFA’s competitions next time they qualify.
The sales of Anthony Gordon and Sandro Tonali (and now Bruno Guimaraes) give Newcastle room to bring squad costs down relative to revenue, which is exactly what UEFA’s strict rules demand.
Under the previous PSR guidelines, clubs were only allowed to lose up to £105m over a three-season period. Here, the focus was on profit and loss and enabled Premier League clubs with higher revenues to have a huge advantage.
The Premier League have said that SCR “enables more timely enforcement and encourages clubs to manage their finances responsibly in real time, rather than relying on longer-term financial balancing”.
Under SCR, clubs can exceed the 85% threshold by up to 30%, although breaches of the threshold will result in punishment.
The 85% mark is known as the ‘Green Threshold’, whilst the 115% mark is called the ‘Red Threshold’.
If a club breaches the 85% threshold, its threshold for the following season will be decreased by the same percentage as the breach.
If a club’s SCR exceeds the Green Threshold in both the Compliance Test (which evaluates the squad cost ratio of a club using the clubs projections) and Accounts Confirmation Test (which recalculates the squad cost ratio using the club’s actual accounts at the end of the season), the club will face financial punishment. The fine is calculated by multiplying the percentage that the club spent above 85% by the overspend figure
Alongside SCR, the Premier League has also introduced ‘SSR’ (Sustainability and Systematic Resilience Proposal).
These are a set of tests designed to improve the sustainability, health, and overall structure of a football club.
The tests are:
• Working Capital Test (Short-Term Test): In simple terms, each Premier League club must demonstrate that it has sufficient funds available. Every single month, each club must show that it has at least £12.5 million to pay its immediate bills.
• Liquidity Test (Medium-Term Test): Here, the Premier League will conduct a ‘stress test’ on every Premier League club. Each club must prove that it is capable of absorbing a sudden, shock loss of £85m. Each club must provide evidence that were this to happen, the club could stay afloat by having enough liquid assets at hand.
• Positive Equity Test (Long-Term Test): This test looks to ensure that each club’s debts are manageable. Each club must show that its ‘Positive Equity Ratio’ (debts / assets) is less than 90% in the upcoming 2026/27 season, 85% in the 2027/28 season and 80% from the 2028/29 season onwards.
The Premier League has also closed a murky loophole that allowed clubs to sell their assets to owner-linked entities in order to boost their revenues and remain compliant with the previous PSR rulings. For example, it is well documented that the Chelsea ownership sold hotels and their women’s teams to companies linked to Todd Boehly.
To summarise, whilst I think the shift from PSR to SCR is a positive one for the Premier League, the league’s squad cost threshold is essentially pointless for clubs like Newcastle United who have ambitions to qualify for UEFA competitions regularly.