Premier League teams agreed Friday to introduce spending caps in England's top flight from next season.
Clubs' on-field spending will be restricted to 85% of their soccer revenue and net profit or loss on player sales. There will also be an allowance of an extra 30% - but if clubs exceed that limit they face a points deduction.
English soccer's top clubs voted to implement the new “Squad Cost Ratio” (SCR) and “Sustainability and Systemic Resilience” (SSR) financial rules. They replace the “Profitability and Sustainability Rules” (PSR), which resulted in points deductions for Everton and Nottingham Forest in recent years.
The League said the new regulations were more closely aligned to those used by European soccer's governing body UEFA.
It said the new rules "promote the opportunity for all of its clubs to aspire to greater success, while protecting the competitive balance and compelling nature of the League.“
Squad costs cover the salaries of players and the head coach, as well as agents’ and transfer fees, The AP news reported.
Soccer-related revenue relates to total earnings from soccer operations - including revenues from the league and other competitions.
The league said club-generated revenues can include commercial deals and net profits from non-soccer events hosted at the stadium, such as concerts.
Under PSR, clubs' profit included all revenues and costs, rather than focusing on on-field spending.
“By concentrating on squad costs, SCR gives clubs greater freedom to invest in other aspects of their operations,” the league said.
SCR will also set spending limits each season, rather than assessing financial performance over a rolling three-year basis, as was previously the case.
There will be fines for exceeding the 85% cap within the extra 30% threshold. If a club goes beyond that into what is dubbed the “Red Threshold,” sporting sanctions will be imposed.
The second part of the new financial rules is based around “Sustainability and Systemic Resilience”, which is intended to “support short, medium and long-term financial sustainability of all clubs.”
It will test the working capital, liquidity and positive equity of each Premier League club.
