What is SCR and why does it matter?

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2:10Alan Shearer:Hello and welcome to The Rest is Football with Alan Shearer and me, Gary Lineker. Mike had to rush off because he's quite friendly with David Beckham. But joining us, we've got a special guest. We've got Kieran Maguire, one of the most respected voices in football finance. He's the author of The Price of Football, host of the podcast of the same name, and has just launched Value Ball, an app that puts real financial data at your fingertips with clear visuals, allowing you to explore the numbers for every single club. Talk us through that first, Kieran. Give your app a plug. Well, I've been spending sort of 20 years messing around on a spreadsheet.

2:50I'm very old school. But then a guy called Jason got in contact with me and said, can I have all of the work that you've done? And I said, I don't mind, but what are you going to do with it? And he said, well, I've got this idea for an app. And it is good in the sense that it's got every single club in England. We're working on France and Scotland as well. If you want to know how much money they made, how much they spent on transfers, how much money they borrowed, how much the wage bill is, how much they've been paying in interest, it's all there. So it's a nerd's delight. I wouldn't recommend it's a Christmas present unless you're with a nerd.

3:28Alan Shearer:You're not selling it well here, Keel. Come on, you can be better. I mean, does it go down to League One in Leicester? Because I don't know. I just don't want to read about it anymore. It's too depressing. It does, yeah. If you've got£200 million spare, I'll show you how Leicester is worth that amount of money. So we do valuations as well. Well, let's hope somebody does think it's worth that amount of money. Thank you for doing this for us. Because, I mean, I think like most people involved in football, Alan and myself, we're sometimes kind of gobsmacked by the whole situation around football, football's finances, PSR and SCR.

4:05Alan Shearer:Can we start by explaining, please, the difference between PSR and SCR? OK. PSR, the profitability and sustainability rules, it's effectively you're looking in the rearview mirror of the club and say, what's it done over the last three years? So if you're in the Premier League, you're allowed to lose£105 million over three years. if you're in the championship, you're allowed to lose 39 million. And if you're being promoted or relegated, they got sort of messing around with that. And under PSR, if you spent money on infrastructure, so if you built a new stand, if you built a new stadium, if you built new training facilities, that would be excluded.

4:45They're trying to encourage women's football. So if you're losing money on the women's game, that's excluded. We want to encourage kids coming into the game and to have a pathway. So your academy costs were excluded and so on. So there There were various ways of increasing those losses. And then what we found is that there were a bunch of accountants and a bunch of lawyers whose job it is to find loopholes. And they found some quite spectacular loopholes. So therefore, we had Chelsea selling the women's team to itself. We had a lot of clubs selling the stadium to itself. So the rules became sort of discredited.

5:19So they decided they're going to choose something else. And UEFA, a couple of years ago, said, what's football about? It's all about players. It's all about squads. So SCR stands for your squad cost ratio. And broadly, if you are playing in Europe, for every£100 you make through your ticket sales, through the broadcasting, through the commercial deals, you can spend£70 of that on your player costs. That will be player wages, transfer fees, agent fees. And if you're playing in the Premier League, because you've not got the benefit of that extra money coming in through European participation, you can spend£85 on player costs for every£100.

6:00So that's sort of more forward-looking, and you've got to give budgets. And it's all the stuff none of us are interested in, apart from me, in the sense that the focus is on trying to ensure that you don't have a new owner comes in and replicates what we saw with Roman Abramovich, where the Chelsea wage bill doubled in a year. It was similar at Manchester City. It was similar with PSG in Paris. It's really there to sort of preserve the status quo.

6:30Alan Shearer:Yeah. Is that fair, though, in the sense that the elite are kind of the big six, as we like to call them, are protected because they've already done all that. And then the newbies, Alan would cite Newcastle. Other people would cite someone like Aston Villa who were doing particularly well. Is it possible now for someone to compete with the clubs that are already there? It's very, very difficult because the clubs, which are the global brands, who have already established fan bases in Asia, in Africa, in South America, wherever that's going to be, on the back of success over the course of the last 20, 25 years, so we're looking at Manchester United, Liverpool, Chelsea, Arsenal and so on, they've already got their extra money coming in because they can have those additional, sponsorship deals and so on.

7:19They've already got the big stadia. I think it's really challenging. So if we take Alan's case in terms of Newcastle United, what's the problem that they've got there? Well, yes, St. James' Park is a fantastic stadium and it's right in the centre of town. But if you take a look at the amount of money they're making from ticket sales, it's probably around about a third of that of Manchester United or Spurs. So we know that they want to build a new stadium to take it up to 60 ,000, 65 ,000. But that's going to take time. And until you do that, you don't have the additional money coming in from the boxes, from the sponsorship and so on.

7:55So it sort of creates a vicious circle because in the next three to four years, you'd expect the usual suspects to be qualifying for Europe. You get a minimum of£40 million from being in the Champions League. If you win it, you could be talking 150 to 200 you qualify for the FIFA Club World Cup and that Chelsea made 80 million and it's very difficult to play catch-up it's a bit like doing a 400 meter race where you've got to go and start 100 meters behind everywhere I'm not saying it can't be done but it's going to be a very very slow process and it does feel that clubs such as Newcastle, Villa perhaps you could say Forest, Everton have got new owners Leeds are very ambitious as well there's a case for saying they're on the wrong side of history because they can't do what Roman Abramovich did.

8:41They can't do what Shake Man saw and just say, I lose£200 million this year. So what? It's small change for me. So it has made it far more difficult. And on that point of view, you would say it's unfair in the sense that you can't have an even playing field. If they said we have a wage cap, which is£200 million,£300 million,£400 million for every club, then if the owners want to cover those losses, then they should be free to do so. That's the counter argument.

9:09Gary Lineker:I think it is a bit anti-competitive. You can have a challenge for two years, three years maybe, but you can't have a sustained challenge. You can't stay in their big house, if you like, and outstair. You're welcome, unfortunately. You have a little look in and then you have to go back in your little house and go back where you belong, such as. Kieran, you know what you said about the rules? They want to promote academies and that doesn't go on to building an academy or spending on the academy, that's not part of the laws. But then once you build that academy and you bring in a brilliant academy player through, it seems wrong that the best way is then you have to sell that academy player.

9:43Gary Lineker:I mean, it's just backward, isn't it? It is. And because player sale profits, and profit is the difference between the sale price of the player's registration compared to what it costs you to buy the player, because an academy player, by definition, they've come through from the ages of 7, 8, 9. Therefore, there's no physical cost for when they sign that first contract. You get 100 % profit. So when Newcastle sold Elliot Anderson, it was£30 million in the bank. If they'd sold another player for£30 million, who they bought for£40, and his accounting value might be£20, you've got a lower profit.

10:19So it has created these ripples. And clearly, that has caused a lot of bad feeling. and we saw the dissents at Everton a week ago when they were thinking about selling one of their academy players by working the city of Liverpool, such was the ferocity of feedback from the fans that they didn't do that. But that's why that particular rule exists. And it does seem wrong because there's that extra close bond between the fan base and the local player, as you know yourself, in representing the city or the town with which you've grown up in, which was your academy. It's part of your identity and history and heritage and it's part of the fans as well.

10:56Gary Lineker:You know, you said the clubs have hired these huge lawyers to find a way around it. They're spending this summer between Premier League clubs. Am I right in thinking that the clubs have already found a way around and selling for huge fees between each Premier League club? Because the vast majority of big deals has happened in the Premier League this season and stayed in the Premier League. I think there's two issues here. There's a case for saying that we now have the best recruiting in world football, which is going through perhaps four or five Premier League clubs who are acting as a Petri dish, as a sort of development area for the big six clubs.

11:37So if you take Bournemouth, Palace, Brighton, Brentford and so on, they are sort of the smart kids who use the money ball approach, who use the algorithms. And they're recruiting the players from South America and Africa and elsewhere who then play a couple of years in the Premier League and then move on to bigger clubs. Now, they've got the software, they've got the designs, the algorithms that work for that. So I think that's been a factor. But yes, I think there have been one or two eyebrows raised. They're not player swaps, because player swaps, you don't tend to make a profit, but where players have been moving in opposite directions.

12:16And we certainly saw that in 2024 when the rules were a bit more relaxed in the sense, yeah, we go back to the Elliot Anderson transfer and Forrest sold their third choice keeper to Newcastle, made a big profit on that. And we saw other swaps between, I think it was between Villa and Chelsea and Everton and Leicester and so on. And this did cause eyebrows to be raised. UEFA have said that we're not going to allow that, but the Premier League do allow that. So the number of transfers, I think, has taken people by surprise over the course of the summer. At the same time, you look at the justification from the club's point of view, we've got a record number of clubs in Europe.

13:00And you know, as professionals, Sunday, Thursday, Sunday, Thursday or Saturday, Wednesday means you can't play 65, 70 games in a season. So you need bigger squads. You're getting extra money from Europe. So you've got more clubs who are playing in Europe. You've got more clubs with a manager who is in his first window. And that manager might want a slightly different philosophy, a slightly different style of player. So you've got nine new managers. They will be putting pressure onto the club, onto the recruitment team. So I think there are a series of factors. And on a net basis, the spending this year is no greater than it was in 2025, because we're seeing a greater proportion, as you highlighted, there's a greater proportion of club transfers going from Premier League to Premier League, because the Premier League is now the Super League of Europe.

13:50A club such as Bournemouth can outspend everybody, with the exception of Real Barcelona and clubs of that nature.

13:57Alan Shearer:How is that possible? How has Premier League become this wealth in terms of the amount of money that they can spend against other leagues? I mean, obviously, there's the TV rights are much bigger in this country and different countries have different rules. I'm going to ask a question on behalf of Mike here as well. I know he's not here, but I know what he'd ask because he always talks about it. He says, I presume the Premier League clubs determined this and decided that they go with these rules because normally they have that 14 club. Is that actually the case? And why do we differ so much from the big European leagues outside of the Premier League?

14:35First of all, you're absolutely right. These rules have been voted for by the Premier League clubs. And what was unusual for this, the introduction of the rules which have just come in, is that normally it's a unanimous vote. Occasionally, it used to be a shock when it was 19 to 1. This one just scraped through. You need a two-thirds majority. This was 14 to 6 in favour. Do you know which six voted against it? Do you know? Well, it was. It was Bournemouth, Brighton, Palace, Brentford, Leeds and West Ham, I think. And those are the clubs who say, we want to spend more of our activities on player sales.

15:11And under the new rules, the player sales, you take the average profit over three years. So it's reduced the impact of the benefits for those clubs. It could also be argued that those clubs are also always a little bit nervous at the start of the season about being relegated. And the new rules certainly benefit the clubs which have just been promoted from the championship compared to the rules that they replace. So I think there was two factors in there. as to why the Premier League is so successful. I think you've got to give the Premier League, and I think this was Rick Parry and his team in 1992 when it started.

15:50They went out to Indonesia, they went to Nigeria, they went to the United States and Australia and said, we've got this new competition. We're old enough to remember when English football was not popular. And we know the reasons why. I am, I certainly am. We've got this new competition. We're going to give it to you for nothing for five years. And this was at the start. This was at the birth of satellite television. And all of a sudden, the broadcasters found they were getting fantastic viewing figures. And then five years later, the Premier League says, do you want to renew? And the broadcasters said, yeah, we love this.

16:24They said, well, this time we're going to charge for it. And the broadcasters knew it was so valuable that they got in there. And by the time La Liga and the Bundesliga and Syria and so on, At the time those leagues realised, actually, there's loads of money to be made from outside of our domestic environment. The Premier League had already got its talents. It had that first mover advantage. And the thing about being a football fan, it's a lifelong commitment. So Manchester United already had a huge fan base in Asia. Liverpool had one as well. And therefore, it was that much more difficult to try to persuade people, you know, it's Brescia versus Udinese.

17:01Well, if I'm a Hong Kong football fan, I've already chosen my preferred football team, and it's a Premier League team. And that's why today the Premier League makes more money from the international TV deals than it does from the ones with Sky and TNT and the BBC and so on. And that's unique in European football. Germany, they might get 10 % of the money. So it's the globalisation of the Premier League. It's one of our biggest and most successful exports.

17:29Gary Lineker:Do you see that carrying on? Because I reckon for the last 20 or 25 years, people have been saying, it can't keep getting bigger. The signing on fees, the salaries, the transfers, it can't keep on. But every year, it keeps on going and going and gets bigger and bigger. Can it sustain and go on and carry on? It can certainly carry on. The rate of growth can't be maintained. And if you take a look at the deal between the Premier League and Sky, which is sort of our main deal, the Premier League is getting 4 % more money in 2029 compared to 2017. And it's had to give an extra 100 games a season. So I think the domestic growth is limited, but we're still seeing the Premier League announcing deals, whether that's Thailand or the United States or wherever, where the fascination with the Premier League continues.

18:25So I think there will be growth, but not the extent of growth. But the levels are so high. I've got every single wage bill from every single Premier League club going back to 1992. And if you compare that to domestic inflation, domestic inflation is up 130 % since 1992. The revenue of the Premier League is up 3 ,100, which is absolutely brilliant. The wage bill is up 3 ,500. The transfer bill is up 4 ,500. So I'd expect there to be a little bit of cutback because you can't continue at those rates. But we're already at very high levels compared to the rest of European football.

19:05Alan Shearer:Is there any danger, Kieran, of the whole thing imploding? The bubble could burst. I think unlikely because Carlo Ancelotti says that football is the most important of the unimportant things in life. And what does that mean? It means that if times are tough at home, what am I going to give up? I'll go to the pub once a week instead of twice. We'll downgrade the holiday this year. Will I give up my season ticket? That's my birthright. You know, I'm a Newcastle fan. I'm a Leicester fan. I'm a Manchester United fan. I've had that for 30 or 40 years. And as my wife says to me, the thing about football with you, you've been doing it for 50 years.

19:45It's the same pub with the same table with the same blokes, they're talking the same nonsense. And that's part of your identity. And that's something which you will be loathe to give up. you cut a football fan and they they bleed the colors of their club and as such it's the most addictive product in the world if i've got an iphone and i'm stick stick to my iphone if samsung come along and say we'll give you an iphone we'll give you one of our phones for nothing i'll say i'll take it if another football club comes to me if steve parish from from crystal palace says give up your brighton season ticket and come to selhurst park and you can watch palace for nothing for the next 10 years, I'm not going to do it.

20:25A Newcastle fan wouldn't do that to Sunderland. So it is this most addictive product in our life. And that's why I think it's the last thing that we will sacrifice as football fans.

20:35Gary Lineker:How many clubs are in danger in terms of breaking the rules now? We've crunched the sums and we reckon that most of them are OK. Remember, the Premier League voted for these rules, so they're not going to vote for rules, which is going to make it difficult for them to satisfy them. Because if you spend between 85 % and 115 % of the money coming in on your player costs, you effectively pay a tax, you pay a fine. If it goes above 115%, you get an immediate six-point deduction. So the clubs aren't going to vote to punch themselves in the face. And whilst the clubs are losing money, the owners are sufficiently wealthy to absorb those losses.

21:23And the owners, they've got big egos. They want the related success that comes with being a successful club. So therefore, we are seeing the owners treating the clubs as sort of trophy assets as opposed to businesses a lot of the time.

21:39Alan Shearer:let's take a little break there's plenty more to discuss when we come back

21:53Alan Shearer:welcome back to the rest is football special episode with kieran maguire talking about the finances of the game gives a few examples of of the loopholes that they've they will always find these clever people? Well, the one I think which caused a lot of concern at the time was Chelsea's approach. When you sign a player, you spread the cost of the player's transfer fee over the life of the contract. So if I sign a player for£100 million on a five-year contract,£100 divided by five, that's costing me£20 million. That was going into my PSR calculations. What Chelsea did was said, well, let's sign him on an eight-year contract.

22:34100 divided by eight is 12 and a half. And immediately, I've saved myself seven and a half million pounds. If I do that for half a dozen players, I've just sold myself 45, 50 million pounds. And that allows the clubs to spend more money on wages, more money on other costs and so on. So that was one. The other issue, which we saw quite regularly, was what we refer to as a related party transaction. It's where the owner of the club sets up another business. So we saw, I think it was Birmingham City, Sheffield Wednesday, Derby County, Aston Villa, Everton, and other clubs, and Chelsea in particular.

23:12They said, right, we've got a car park, we've got the stadium. It cost us£20 million because it was built years ago. We're going to sell it to ourselves for£100 million. That£80 million profit went into the books.