English Football League (EFL) clubs are set to vote on significant changes to their financial regulations on Friday, which would widen the spending power gap between the Championship and League One.
Championship Proposals
Championship clubs are voting on a proposal to align with the Premier League from next season by replacing their profitability and sustainability (P&S) rules with a squad cost ratio (SCR) system. This new system would cap spending on player costs at 85% of football revenue. The proposed change would permit an annual equity injection of approximately £10 million to count towards a club’s revenue, increasing spending capacity. Under current P&S rules, losses are capped at £39 million in the Championship over a three-year period.
Championship clubs desire greater freedom to invest and speculate in pursuit of promotion to the Premier League. The existing P&S rules were introduced at the start of the 2017-18 season. Recently, West Bromwich Albion were docked two points by an independent commission for exceeding loss limits by about £2 million in the three-year period to June 2025. Other clubs such as Leicester City, Sheffield Wednesday, Derby County, and Reading have also faced penalties for P&S breaches in the past.
League One Proposals
In contrast, League One clubs are voting on whether to increase alignment with League Two by reducing permitted spending under the salary cost management protocol (SCMP) from 60% to 50% of turnover. A number of League One owners had sought to introduce a salary cap backed by a luxury tax for clubs that breach it, but those proposals will not be put to a vote. The reduction in the SCMP limit is seen as a compromise, with clubs in the division largely agreeing on the need to reduce costs.
The average investment by League One club owners this season was £9.6 million, up from £2.6 million four years ago, and many owners are reluctant to continue funding such losses. A League One source stated that controlling costs would increase the value of clubs in that division in the medium term, leading to greater interest from potential buyers, with the ultimate goal of attracting more external capital into the EFL.
Voting and Implementation
At least sixteen of the 24 clubs in each division must vote in favour of the proposed changes for them to be introduced. A source at a Championship club expected both votes to be tight, as there are differing views on financial regulations in both divisions. The Championship clubs have been trialling SCR in shadow form this season, so they are prepared to make the transition despite the vote taking place at the end of the campaign.
Premier League clubs voted last November to introduce SCR in place of their own profitability and sustainability rules (PSR), which limited club losses to a maximum of £105 million over three years. Adopting SCR brings the Premier League in line with Uefa’s financial regulations, although the spending threshold for clubs competing in European competitions is 70% of football revenue rather than 85%.
