Almost 15 years have passed since the introduction of UEFA's Financial Fair Play Regulations at the start of the 2011/12 season. UEFA's stated intention for those regulations was to promote financial sustainability amongst clubs across Europe who, at the time, were accumulating large losses while aiming to remain competitive amongst the European elite.
UEFA's own analysis indicates that the regulations contributed to an improvement in club finances. UEFA quantified 2009 net losses across Europe's top-division clubs at EUR 1.6B, which had evolved to an accumulated profit of EUR 140M by 2018.1 Balance sheets across European football were therefore repaired across this period, in line with UEFA's ambitions, as clubs responded to the requirement under the rules to move towards a break-even position in order to compete in UEFA competitions.
Perhaps unsurprisingly, this good work was undone during the COVID-19 pandemic, which created unprecedented losses for European clubs (estimated at EUR 7B). The Premier League was less affected than other European leagues, cushioned by its bumper TV deals and less reliant than rival leagues on match-day revenue, which was heavily impacted as stadia across Europe remained empty through lockdowns.
Appreciating the changed dynamic, UEFA revisited the Financial Fair Play regulations and proposed its updated UEFA Club Licensing and Financial Sustainability Regulations (FSR), which reiterated its focus on financial sustainability. The new FSR was subject to significant consultation with the European Club Association (ECA is the member body for over 100 major clubs across Europe) and was approved by UEFA's Executive Committee in June 2023,2coming into effect from the 2023/24 season.
The Premier League
UEFA is not alone in adopting rules relating to sustainability. Since the introduction of the FFP rules in 2011, domestic leagues across Europe have themselves introduced local financial regulations to monitor professional clubs competing within the relevant jurisdiction, also with several changes since their first iterations.
Perhaps the highest profile are the English Premier League's (PL) Profit and Sustainability Rules (PSR), due to various enforcement actions against member clubs over the last two years. In June 2024, the PL proposed changes to its PSR,3 which currently allows for clubs to incur acceptable losses of up to GBP 105m4 over a 36-month reporting period.5
In a statement in June 2024, the PL announced proposed changes to the rules with the aim to improve and preserve clubs' financial sustainability, maintain the competitive balance for clubs (both domestically and internationally), align more closely to UEFA's existing regulations and provide increased certainty for clubs, fans, and other stakeholders.6
The proposed changes are being trialled alongside the existing PSR in the current PL season. However, the formal introduction of the revised regulations was postponed for at least one season in February 2025,7 to ensure the PL and its clubs are fully prepared for the transition.
This article will look at what the proposed changes are, how they align with UEFA's existing regulations, and what impact they may have on different types of clubs.
What are the proposed changes?
Squad cost ratio (SCR):
The proposed new PL rules link a club's squad cost to a proportion (85%) of its relevant revenue (SCR Revenue).
Compliance with this ratio will be judged on an annual basis, compared to the current three-year PSR reporting period. This eliminates the possibility of excessive expenditure in one year, followed by reduced spending in the subsequent years to remain compliant - effectively a gamble on success - which has caught out several PL clubs under the existing rules.
Under UEFA regulations, a club's SCR is calculated as:
|
Squad Cost Expenses |
| Player and Head Coach Wages |
| Amortisation and Impairment of Player Registrations |
| Cost of Agent's Fees and Other Intermediaries |
| Severance Costs for Players and Head Coaches |
|
As a proportion (85%) of SC Revenue |
| Operating Revenue |
| Net Profit from Player Sales |
| Other Transfer Income/ Expenses |
Top to Bottom Anchoring (TBA)
TBA is an additional measure that introduces a cap on the maximum football costs that PL clubs can recognise in their SCR calculation. This cap is a multiple of the lowest amount the PL provides to any club in a year from its Central Distribution (i.e. broadcasting revenue and PL Merit Payments, or prize money).
This means that the maximum football costs some clubs can incur will be restricted to the cap amount and not to a proportion of the allowable revenue generated. In practice, it is likely that this will only impact a small subset of the highest revenue-generating clubs.
According to the PL, TBA rules are "designed as a pre-emptive measure to protect the competitive balance" of the competition.8 The effect of the TBA is therefore to prevent one or more clubs from being able to spend significantly more than other PL clubs by having significantly more income, instead being allowed to spend only up to the capped amount.
How do the changes align with UEFA?
For clubs participating in UEFA's European competitions, SCR is a familiar concept. The PL's proposed SCR could operate similarly to UEFA's recently implemented equivalent, which caps spending on player and coach wages, transfers and agent fees to 70% of a club's relevant income. UEFA chose to introduce the new threshold progressively (90% in the 2023/24 season, 80% in 2024/25, and a permanent 70% ceiling from 2025/26).
However, UEFA does not currently have any provisions in its regulations relating to anchoring. Any TBA cap imposed by the PL would therefore be unique to PL clubs.
What about other costs?
The PL has been trialling the SCR in parallel with the existing PSR rules, allowing acceptable losses.
The PL could choose to fully integrate SCR with the PSR rules, similar to UEFA requiring clubs to comply with its Aggregate Football Earnings (AFE) provision, which restricts losses to an acceptable amount.9 Retaining both types of regulation to restrict losses would ensure that clubs consider their financial sustainability across the board.
What about other revenue?
Revenue generated from the sale of tangible assets is considered allowable revenue under the current PSR. Various PL clubs have taken advantage of this by selling assets, including stadiums, training facilities or their women's team. UEFA's regulations on the sale of tangible assets are more complex, which has resulted in operating revenues and losses for clubs recognised by UEFA varying significantly from the figures reported in the clubs' financial statements and PSR.
Allowable Investments
The PL and UEFA allow clubs to spend on certain activities that are relevant to the long-term sustainability of a club. This spending is excluded from metric calculations, meaning clubs are not penalised for spending in areas that enable them to build for the future. Allowable investments include youth (i.e., academies) and women's football, alongside spending in the community.10
Additionally, costs associated with long-term capital projects, including interest payments incurred during the construction phase, can be capitalised as a fixed tangible asset and do not affect compliance with PL or UEFA regulations. The introduction of SCR and TBA as part of the new PL rules would also not impact potential investment in these areas.
PL clubs are increasingly seeing the benefits of maximising revenue from stadia – a lesson learned from U.S. franchises - and the allowances for such spend could drive long-term increases in revenue, with multi-use stadia, renewals of concession deals and the sale of naming rights deals. Manchester United will certainly be hoping for a boost from their proposed new £2bn stadium.11
How are breaches penalised?
A big criticism of the PSR has been how the sporting penalties imposed have been determined by Independent Commissions. Whilst the Commissions have set precedent on points deduction amounts based on the level of breach, the PL regulations do not have a predefined matrix to determine the penalty imposed.
This is something that UEFA has implemented regarding breaches of their SCR. Within their regulations, UEFA stipulate that the financial penalty is calculated based on the level of breach and historic compliance of the club.12 In severe cases, additional sporting sanctions can be imposed on clubs.
Adopting a similar method, which could also be a set of points deduction based on the level of breach, would give PL member clubs more clarity over how penalties are determined.
What does that mean for different clubs?
The PL has yet to settle on the specifics of these suggested new rules, including, crucially, the multiplier of the PL Central Distribution, which would be used to calculate TBA. However, some key conclusions can still be drawn regarding how these rules might impact Premier League clubs, depending very much on their current SCR.
Squad Cost Ratio
The introduction of SCR would have a limited impact on clubs that routinely compete in European competitions and are already required to comply with UEFA Regulations. Whilst the PL is yet to provide final guidance on how the ratio is calculated, if this aligns closely with UEFA's, it will reduce the current reporting burden for clubs that are subject to both systems.
Who does it benefit?
It stands to reason that the new rules will enable the clubs with the highest revenue to spend the most. For this, read the traditional "Big 6" of Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham Hotspur.
For challenger clubs, the impact of SCR will depend on their current squad costs. Those clubs with higher squad costs will face limitations under SCR, potentially requiring them to reduce their wage bills or increase transfer profits to meet the thresholds.
Conversely, those who have been historically more conservative with their spending will have scope to increase their squad costs significantly whilst still complying with the PL's limits. This will include clubs that currently operate a "player trading model," buying promising players at relatively low cost on modest wages, aiming to generate a profit once the player has had PL exposure and proved their ability.
So-called "yo-yo" clubs (i.e., clubs which move often between the PL and the second tier of English Football, the English Football League Championship) usually have lower revenue compared to established PL sides. The proposed introduction of SCR would limit the amount that these clubs would be able to spend in the year following promotion. Whilst some may argue this impacts these clubs' ability to compete in the PL, the counter argument is that the SCR encourages sustainable spending – reducing the urge to gamble on staying up.
Top-to-Bottom Anchoring
Competitive Balance in the PL
TBA will impact the amount that the largest clubs can spend "on the pitch," as their "allowable" football costs for SCR purposes are effectively capped. Any increases to the cap amount are largely restricted to changes in broadcasting deals, through which central distribution revenue is predominantly generated. Given that the broadcasting deals are negotiated on a cyclical basis, it is likely that there will be seasons in which their "allowable" football costs remain relatively static.
Clubs whose football costs are below the cap will not have the same limitations. Their allowable football costs will increase in line with any growth in total revenue – meaning that lucrative commercial deals, naming rights for stadia, etc., will help them to close the gap with their larger rivals, at least until the next broadcasting rights deal comes into force. This may, in turn, increase the competitive balance of the PL and is certainly an incentive for clubs to aggressively pursue alternative revenue sources.
Ultimately, the level of impact is contingent on the multiplier applied by the PL, which has yet to be announced. Whilst it is widely speculated to initially be 5x the central distribution revenue, it is, of course, possible for the PL (and the clubs that make up its membership) to revisit and adjust the multipliers or tweak the rules over time – something that UEFA has done where necessary.
What about in Europe?
As there is no TBA in UEFA regulations, there is a risk that it would have an adverse impact on competitiveness against European clubs in other leagues. Major European clubs with comparable revenues to larger PL clubs would not face the same fixed limit to their squad cost and could continue to increase those in line with the growth in their revenues.
This may put PL clubs at risk of not being able to compete with European counterparts for talent, potentially limiting player wages and the ability to attract star names. However, we should acknowledge that most other major European leagues have their own domestic regulations focused on financial sustainability. Whilst not in the form of TBA, those parallel regulations serve to limit the impact that TBA may have on competitive balance in Europe.
Additionally, English clubs have featured seven times in the last seven UEFA Champions League finals, including two all-English showdowns and three English victors. Given the PL's financial strength compared to continental leagues, its global popularity, and outsized TV deals, it seems improbable that these clubs will become uncompetitive in European competitions anytime soon.
In fact, if the PL becomes more competitive as a result of TBA, it could become an even more appealing product, further driving up broadcasting rights deals.
Conclusion
The initial impact of the proposed changes to PSR is dependent on clubs' current financial position. The SCR as a standalone entity would have limited impact on the larger clubs with higher revenues, or those clubs that have lower squad costs and scope to increase revenue. The impact of adding TBA to the mix is contingent on the (as yet unknown) multiplier applied by the PL. However, it could, if set at a lower level, serve to increase competitive balance by reducing the gap in allowable squad costs of the traditional "Big 6" and other PL clubs.
Local variations to UEFA's SCR rules are being introduced in other leagues, and the discussions on their impact on the European football ecosystem will continue. Importantly, the introduction of new rules will not hamper investment in infrastructure and tangible assets across Europe. This focus on infrastructure could lead to long-term benefits, enhancing the financial health and sustainability of clubs – which is, after all, the aim of these rules.
Footnotes
1 Financial sustainability | UEFA.com
2 Financial sustainability | UEFA.com
4 The PL rules stipulate a base acceptable pre-tax loss of £15m across a three-year period (or £5m per season). This figure can be increased by up to £90m across a three-year period (or £30m per season), if covered by Secure Funding from the owners (i.e. Investment into Club Shares and not Loan Funding).
5 PL_Handbook_2023-24_DIGITAL_26.02.24-v3.pdf – E.50 and E.53
7 Premier League's profit and sustainability rules to remain in place next season | Reuters
9 UEFA allows for clubs to incur up to EUR 5m acceptable losses over a three-year reporting period, rising to EUR 60m if covered by capital injections or equity, and to EUR 90m if the Club satisfies set criteria.
10 TM1603-PL_Handbook-and-Collateral-2024-25_11.12_DIGITAL.pdf – Rule E.49.3 (Form 3A).
11 Statement: Man Utd confirms ambition to build a new stadium at Old Trafford | Manchester United
12 UEFA Regulations Annex L3.3
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