Championship clubs have voted overwhelmingly to adopt a new financial framework called Squad Cost Rules (SCR), set to take effect from next season. This marks a significant shift in how second-tier clubs will manage their finances, bringing them more in line with the Premier League, which approved its own version of SCR in November.
Under the new system, SCR will replace the existing profit and sustainability rules, which previously limited clubs to losses of £39 million over a three-year period. Instead of calculating profit and loss, the assessment will now focus on a club's total earnings from football operations and how much of that is spent on the squad. In essence, clubs will be able to spend up to 85% of their income on player and manager-related costs, including transfer fees.
The vote required 16 of the 24 Championship clubs to approve the change, a threshold that was comfortably met. This comes at a time when financial pressures are mounting across the division. Just three Championship clubs recorded a profit in the 2024-25 season, and one of those—Stoke City—only did so because a £90 million loan was waived by new owner John Coates, offsetting what would have been a £29 million loss. Excluding that adjustment, the 22 clubs that submitted their books lost a combined £317 million.
The new rules aim to provide greater clarity and real-time monitoring, rather than reviewing finances after the fact. An English Football League statement highlighted that SCR allows for "real-time monitoring during the season," giving clubs and the financial reporting unit earlier visibility into financial positions. This proactive approach is designed to prevent clubs from spiraling into unsustainable debt.
For clubs with larger stadiums and lucrative sponsorship deals, SCR could be a game-changer, as it effectively creates a larger budget to spend on players. Owners will also be permitted to make a flexible equity top-up allowance of £33 million over a three-year period, with no more than £15 million used in any single season. Safeguards are in place to regulate commercial deals linked to owners or associated parties, ensuring fairness across the board.
In addition to the Championship changes, modifications have been made to the Salary Cost Management Protocol (SCMP) rules in League One. The percentage of turnover that clubs can spend on wages will be reduced from 60% to 50%. Clubs relegated from the Championship will be allowed to spend 65% of turnover on wages during their first season in League One, down from the previous 75%. However, a vote among League Two clubs to adopt the same SCMP calculation did not gain enough support, leaving that division's financial framework unchanged for now.
These sweeping changes signal a new era of financial discipline in English football's second tier, with a focus on sustainability and long-term health. For fans and clubs alike, the message is clear: the days of unchecked spending are numbered, and smart financial management is the new playbook.