Financial Fair Play or Financial Protectionism?

I’ve spent quite a bit of time looking at the Premier League’s new Squad Cost Ratio rules (with the help of AI) and I keep coming back to one question.

Has anybody actually challenged them?

From 2026/27, Premier League clubs operate under an 85% Squad Cost Ratio, or SCR. In simple terms, what a club can spend on its squad is tied to its football revenue, with player wages, transfer-fee amortisation and other relevant costs counting towards the calculation.

UEFA operates a similar system but at 70%, which we have already fallen foul of!

On the face of it though, it all sound sounds reasonably sensible and even noble.

Stop clubs spending money they don’t have. Stop reckless owners gambling the future of historic football clubs. Stop clubs going bust chasing success. I have absolutely no argument with that. Except SCR doesn’t actually measure whether a club can afford to spend the money. It measures revenue. And they are not the same thing.

Firstly we need to understand that the Premier League is “The Football Association Premier League Limited”. It is a private company and its shareholders are the football clubs themselves. Each club gets a vote and major rule changes generally require 14 of the 20 clubs to agree. Those clubs within the league obviously need rules, just as any company has policy and procedure, you couldn’t run the Premier League without them. But they are exactly that – rules, not laws! This distinction matters.

The Premier League cannot pass an Act of Parliament (obviously!), so its rules must operate within English law and that includes the Competition Act 1998. We know this because Manchester City has already tested it when they challenged the Premier League’s Associated Party Transaction (APT) rules. Elements were found unlawful and the previous APT regime was ultimately found unenforceable.

That established an important principle, namely:

Fourteen clubs voting for something doesn’t automatically make it lawful.

The Premier League can make its rules but the law still sits above them.

So what is SCR actually testing?

I want to make this real so we will take two example clubs. We’ll call them the Established Club and the Challenger Club, but the figures aren’t invented. They are based on the latest reported revenues of a well known “rival” and ourselves, although I have had to make a few assumptions in there as well, but it’s the principle that matters.

Before anybody buys or sells a single player, the Established Club starts with approximately £312 million more annual spending capacity. Why? Because it already makes more money. Not because it is more solvent, has more cash or has less debt and most definitely not because its owners can better afford the investment.

Simply because its revenue is higher.

That is NOT a test of solvency. The Premier League already has sustainability tests which are rarely discussed and this is the bit I find difficult to reconcile. Alongside SCR, the Premier League has introduced separate Sustainability and Systemic Resilience rules which include a Working Capital Test, Liquidity Test and Positive Equity Test.

In normal English I see this translating as:

Can you pay your bills?
Have you got enough cash?
Is the business financially sound?

All are good rules and measures, I think. Test them to death, no argument from me! If an owner wants to borrow hundreds of millions against a football club and gamble it all on reaching the Champions League then the sensible thing is to regulate it. If a club can’t demonstrate that it can meet its future obligations, then stop it from spending.

But, now let’s consider another important variable… Suppose our Challenger Club has £5 billion sitting in the bank, no debt and an owner willing to inject another £500 million as permanent equity – not a loan or sponsorship, actual cash. In that scenario the club easily passes its liquidity test. It easily passes its working capital test. It essentially has positive equity and can demonstrate that every commitment it makes is fully funded.

So the question then should be, what exactly is financially unsustainable about it spending £500 million on players and wages?

SCR says it can’t do that. Why? Because its revenue isn’t high enough! And that is where, for me, the argument starts to fall apart.

But wait…. then look at what happens when the Challenger Club sells players, so let’s use another real-world example.
Our Challenger Club recently sold three major players for roughly £245 million combined. Because those players still had accounting value remaining on their contracts, £245 million isn’t pure profit, but a reasonable estimate puts the accounting profit at somewhere around £200 million.

As part of that transaction the Challenger Club has also removed roughly £24 million a year in wages, plus the remaining annual amortisation associated with those players.

Now suppose it replaces those three players with six new younger, cheaper players. Average transfer fee of around £50 million. Average salary of around £100,000 per week. Four-year contracts. That adds up to about £300 million of actual transfer spending. But under the accounting rules, the £300 million transfer cost is spread across the contracts at £75 million per year. Add £31 million of annual wages and those six players create an SCR cost of roughly £106 million per year. Sounds ok doesn’t it except, now compare our Established Club.

It also signs six players. But it pays more for each player, say £75 million each and more in wages, say £200,000 per week. This them makes the financials look like this:

The Established Club has spent 50% more on transfers. It is paying its players twice as much. Yet those six expensive players consume about 29% of its base SCR envelope. The Challenger’s cheaper players consume about 37% of its envelope. Yep, read that again! The richer club can buy more expensive players, pay them twice as much and those players still consume a smaller proportion of its permitted spending capacity. Add onto this the ongoing salaries and running costs for the entire squad – I might do another article on this – but the outcome is that it absolutely destroys the Challenger Club and it becomes very clear why the Challenger Club simply cannot compete whilst these rules are in place.

So…. How exactly does that level the playing field? Success pays for more success and that is the fundamental problem I have with SCR.

But, why does the Established Club have £702 million of revenue in the first place? Because decades of success without financial constraints created an enormous supporter base. Success created commercial income. Success created sponsorship. Success produced European football and European football created more revenue. That revenue now creates greater spending capacity. All of which makes future success more likely.

Meanwhile the Challenger faces the opposite, lower revenue, lower spending power, harder to compete, lower future revenue.

It essentially becomes circular and cannot be broken under the current rules. That most definitely is not levelling the playing field, but it does it looks suspiciously like protectionism.

So why hasn’t somebody challenged it?

And this brings me back to where I started. As far as I can establish, nobody has yet challenged the Premier League’s new 85% SCR itself under competition law, which specifically states:

“agreements between undertakings, decisions by associations of undertakings or concerted practices” which “have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom” are prohibited, provided they may affect UK trade.”

Maybe it is perfectly lawful. Maybe the Premier League can demonstrate that restricting the investment of a completely solvent football club according to its historic revenue is necessary and proportionate to achieving competitive balance. I’m not a competition lawyer, but what I do know is that courts don’t answer questions nobody asks. Manchester City asked the question about APT rules and they established that Premier League rules are not above competition law simply because the clubs voted for them.

So perhaps somebody needs to ask the question about SCR and who better than a club with an awful lot to gain and relatively little to lose? Lose the challenge and, aside from undoubtedly annoying Masters and a few Premier League chairmen, we’re basically where we started.

The 85% rule remains.

But if the challenger club wins?

That could fundamentally change the competitive landscape of English football.

Financial sustainability absolutely matters. But revenue is not solvency, nor liquidity, nor cash and a system that gives the greatest spending power to the clubs already generating the greatest revenues does not create competitive balance.

In my view, it risks doing precisely the opposite. So perhaps it is time somebody started the ball rolling.

Challenge it.

We may lose.

But at least we’ll finally know the answer.

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