What do the new Premier League financial rules actually mean for Sunderland and is it a good thing - explained

Premier League clubs voted through new financial rules last week, which will come into force from the start of the 2026/27 campaign.

The existing Profit and Sustainability Rules will be replaced by Squad Cost Ratio rules, which Sunderland will have to adhere to should they build on their promising start to the campaign and beat the drop. So what are the new rules and do they benefit Sunderland in the short and longer term? Here's everything you need to know...

So first things first, what are the new rules and how do they actually differ from PSR?

The current rules seek to limit a club's long-term losses by limiting them to a deficit of £105 million over a three-year period. The threshold is lower for newly-promoted clubs, and rises to that top level over time should they remain in the top tier. The new SCR rules differ in two fundamental ways. Firstly, they operate on a season-to-season basis. Secondly, they do not take into account a club's total losses but purely their level of spending on their first-team squad. Under the new rules, a club will be able to spend 85% of their projected revenues for the upcoming campaign on first-team costs.

So how is that limit decided and what costs are counted?

A club's projected revenue will be agreed in conjunction with the Premier League ahead of the season starting, based both on past revenues and formulas. All income a club generates will be included, from broadcast revenues to retail and net profits generated from events such as concerts. The Premier League say that costs will include player and head coach wages, agents’ fees and amortisation or impairment of transfer fees (amortisation is the accounting process by which transfer fees are spread over the length of a player's contract).

Why the change?

There are a few reasons. In short, the move is a response to criticism that PSR prevents ambitious owners from investing in their clubs to cut the gap to the teams above them. As teams participating in European competitions are already limited to spending 70% of their yearly revenue by UEFA rules, the Premier League say the move will both simplify the system and allow ambitious clubs to invest in order to try and bridge the gap. They also say this new system will give clubs greater scope and confidence to invest in important areas of the club away from the first team, and that the additional leeway built into the system (we'll come to this next) will allow clubs to avoid being pressured into short-term decisions (such as selling an academy prospect to comply with the rules as has happened on occasions under PSR) if there is a sudden dip in performance or if they are to miss out on a perhaps expected European qualification at the end of a season.

It's a fascinating debate and it's worth pointing out at this point that though the new rules were passed by Premier League clubs, it was not unanimous. It has been widely reported that a number of clubs voted against the rules, and the common denominator of those who did (Brentford, Brighton, Bournemouth) is that they have operated well in the PSR era. By investing well in young talent and consistently selling players for a profit, they have been able to punch above their weight against teams whose poorer decision making has led to heavy losses and potential breaches of the rules. These clubs will still be rewarded for strong player sales under the new rules, but their smaller revenues in other areas will count against them.

So how will the rules actually be enforced?

This is where you can see how the new system will in some ways be more lenient than the PSR rules. All clubs will have what the Premier League terms their 'green threshold', basically the 85% figure. But they will also put in place a 'red threshold', which will be 30% above that initial figure. Clubs who go above their green threshold but stay below their red threshold will be subject to a fine but not a sporting sanction, and the following season will have their red threshold reduced. So for example, a club that spends 95% of its project revenue on first-team costs one season would then see its red threshold reduced to 100% the following campaign. It's only at the point that a club goes beyond its red threshold that a sporting sanction (i.e a points deduction) is applied.

In terms of the practical application of the rules, a compliance test will take place at the start of March. If a breach is anticipated, an 'accounts confirmation test' will take place in June before any further necessary action is taken.

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OK - so what does this realistically mean for Sunderland? Is it good news?

Well, it's understood that Sunderland were supportive of the change and voted for it. While they have not explained their stance, we can speculate as to the reasons why.

With a hugely passionate fanbase and a stadium that can bring in immense match day revenues, Sunderland will feel that the new rules can help them stabilise at Premier League level. Their fanbase gives them a revenue base that will compare favourably to many of their rivals in the top tier, and certainly over the vast majority of clubs that could win promotion to the top tier. A category one academy with a proven track record of producing players also stands you in good stead in this system, both in terms of helping to keep first-team squad costs down and by increasing your chances of profiting on player trading. Sunderland will likely also feel that their strong recent record of managing and growing their wage bill sustainably will stand them in good stead moving forward.

The flip side of this is that Sunderland's strong record of player sales in recent years would have benefited them under PSR had they managed to maintain it going forward. While the new rules will have some benefits for Sunderland as they look to stabilise themselves in the Premier League, it will undoubtedly make it harder for them to chase and supplant the established top-half teams whose revenues are far larger, whether that be through playing regularly in European competition or because of the exposure their brands have enjoyed from a long stint in the top tier as interest both domestically and abroad has grown over the last decade.

So what does this actually mean practically for Sunderland - will they have to change how they operate?

Not massively. The reality is that these rules are a relatively subtle change to the system, rather than a fundamental overhaul. Premier League clubs voted down an additional measure known as 'anchoring', which would have limited clubs to a spend on first-team costs of five times the broadcast revenue of the team that finishes bottom. This would have been a far more significant measure with longer-term repercussions which to put it bluntly is exactly why it proved controversial and was voted down.

Sunderland knew under PSR that they simply grow their commercial revenues and consistently find a way of profiting from player trading if they were to compete with the established top-tier teams. That remains firmly the case under the new system, and so the general model of operating shouldn't change significantly as a result.

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