The Premier League is set to make a decision on whether to scrap the controversial profit and sustainability rules (PSR) in replacement for a structure similar to that used by Uefa in European competitions such as the Champions League.
The league's chief executive, Richard Masters, has revealed that discussions are underway to potentially replace the existing PSR with an alternative framework, a squad cost ratio system (SCR).
The existing PSR framework, operational since the 2015-16 season, permits clubs to register losses not exceeding £105million across a three-year period.
Instead, the proposed SCR directly relates directly to revenue, and would permit clubs to allocate as much as 85 per cent of their income towards squad-related expenses.
This represents a considerably more generous threshold than UEFA's current 70 per cent limit for European competitions.
Nine English clubs currently compete in one of Europe's three major competitions, meaning they already have to comply with Uefa’s tougher financial regulations. Aston Villa and Chelsea were both recently charged in breach of said regulations.
The Premier League is set to make a decision on whether to scrap the controversial profit and sustainability rules
| PAHowever, Masters confirmed if the Premier League were to adopt this methodology of financial regulation, it would not be as harsh in order to encourage investment.
Speaking at the Leaders sports conference in London, Masters addressed the potential changes: "We are talking to our clubs about an alternative system. That's not to say we don't think the PSR system works," he said.
Premier League CEO Richard Masters confirmed a decision is 'coming up'
|GETTY
"It's about closer alignment with European regulation, which is squad cost ratio, which is a revenue test. In Uefa, it's now set at 70 per cent. Our system will be 85 per cent because we always want our clubs to have the ability to invest.
"The Premier League has been built on the back of investment in which international capital flows [are] coming in. We don't want that to be stifled off.
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| GETTY"The PSR is a look-back profitability test and has its own strengths and weaknesses. No system will be perfect.
"We have to keep these things balanced and continue the conversation with our clubs, and that's an important decision, so we should take the time to get it right. But that decision is coming up."
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The current regulations have faced substantial opposition from various Premier League sides who argue that the rules constrain their spending capabilities.
Both Everton and Nottingham Forest suffered points penalties during the 2023-24 campaign for violating PSR requirements, although in both cases had their penalties reduced.
Aston Villa's co-owner, Nassef Sawiris, declared in 2023 that the regulations "do not make sense" and favoured the largest clubs, whilst contemplating legal proceedings against the framework.
Newcastle United boss Eddie Howe has voiced concerns that PSR encourages clubs to sell their academy graduates.
This is due to their 'pure-profit' status, meaning that as the club paid no money for them, they enter the finances as more profit.
Newcastle sold youth prospect Elliot Anderson to Nottingham Forest two years ago. Aston Villa also recently sold youngster Jacob Ramsey to Howe's side.
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Aston Villa spent less than £30million this summer despite finishing fifth last year
|REUTERS
Villa and Newcastle, in particular, have been the most serious challengers to the traditional ‘top six’ in recent years, however, they have had their spending limited due to the current PSR rules.
Aston Villa spent less than £30million this summer after finishing fifth in the league last year. Newcastle spent £60million the season prior.
The Tyneside club argue they have money to spend from the owners, but the current financial regulations restrict them from doing so.
The Premier League's proposed modifications could also incorporate a "top-to-bottom anchoring" mechanism, which would establish spending limits based on a multiple of the lowest-earning club's revenue.
Should the changes receive approval, implementation would commence from next season.
The potential reforms follow record transfer window expenditure, which intensified concerns about maintaining competitive equilibrium as certain clubs benefit from expanded Champions League and Club World Cup revenues.
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