Premier League Profit & Sustainability Rules (PSR) Explained

What is PSR?

PSR is the Premier League's 'Profitability and Sustainability Rules' as defined in Section E.30 of the Premier League Handbook, which governs the rules for the 'P&S Calculation' that underpins PSR

.

What is the P&S Calculation?

This is the aggregated sum of a club's Adjusted Earnings Before Tax for the relevant assessment period.

What is the relevant assessment period?

The Premier League terms the relevant assessment period as the accounting period within which the currently active season ends.
 They term this "T".

What is Adjusted Earnings Before Tax?

Well, in normal accounting practice, Earnings Before Tax (EBT) is the profit or loss of a business after depreciation and interest but before, you guessed it, tax. That, in other words, is the revenue generated by the company, minus the costs, and additionally subtracting depreciation and interest.

Is that what the Premier League uses?

Kind of, but not really, no. The Premier League approach is different because, although the broad initial calculation mirrors accounting conventions, the Premier League then includes 'treatments' that would not ordinarily appear in a business's financial statements.

Treatments?

Yes, this is where the Adjusted part comes in.

The 'adjusted' part represents the Premier League's practice of applying a series of "add-backs" to the business's reported EBT. These "add-backs" are costs that the Premier League deem to be in the general interest of clubs and football itself and are therefore categorised as allowable expenses. These costs are loosely categorised as investment in:

• infrastructure,

• community,

• women’s football,

• youth development

  
  

as well as the the depreciation of tangible fixed assets.

In other words it's ostensibly supposed to be the stuff we all agree is good for the game, safe for the game, and accounting fundamentals.

The idea being that any spending in those areas, but strictly not beyond is deemed to not be a contributory factor to a club's potential losses.

It seems a bit woolly doesn't it?

Yes, indeed, probably because it is. Intentionally or otherwise the loose headings, with no accompanying detail or definition, offers the Premier League wide latitude to subjectively decide what can and cannot be included on a club by club basis.

When does all this happen?



By the 31 March each year every Premier League club has to provide the following:

1. Their estimated profit & loss and balance sheet for the ongoing financial year (the one defined as T). For some clubs this might perfectly match the production of accounts for their own Financial Year, in the most part however this unlikely and so the 'estimated' figures are writ large at this point.
   

2. The club's published accounts for T-1 for the previous financial year. Essentially so the Premier League can validate the prior period's estimates.

   
   

3. And a completed proforma known as Form 3A. This is effectively the club's calculation of their own performance against PSR detailing their Estimated EBT for the current period (T), the Adjusted EBT as calculated by the Premier League for the two previous PSR periods (T-1 and T-2) summated into an aggregated P&S Calculation for the Adjusted EBT for that three year period.

What's the point?

Well the idea is to give the Premier League an early indication of who may in the latest period be likely to fall foul of their PSR rules. Although what would stop a club massaging their estimates is unclear.

OK so if clubs are honest and show an issue what then happens?

If the Estimated P&S Calculation provided indicates a loss of up to £15m then so long as the club is deemed by the Premier League to be in a position to meet its liabilities and obligations under Rule E.16.9.1 through to the end of the following season (T+1) then no action is taken.

What liabilities and obligations?

Basically that the club can cover its bills, fulfil its fixtures and do what the broadcasters require of them.

This is just the Premier League looking after its own income stream isn't it?

Yes, exactly. It's trussed up as encouraging sound financial management by its member clubs but ultimately it is designed to provide protection upwards for the Premier League, and most controversially, it is designed, intentionally or otherwise, to prevent 'new kids on the block' breaking into the cartel of clubs that the Premier League views as most valuable.

So nothing really comes of this then?

Not if the clubs losses are less than the £15m mark and there is confidence in the running of the club.

But if those losses look likely to be in excess of £15m then further reporting requirements are triggered.

In such an event the club must provide more detailed financial information and an EBT forecast covering the current season and the next two seasons. This includes a requirement for the club to provide proof of funding to the Premier League.

I thought it was £105m?

Ah yes, this is just the start. We're nowhere near the £105m point yet. This is just the beginning. The Premier League's early warning system if you like.

If the Premier League are not satisfied with the proof of funding or the club are unable to provide such proof, the Premier League impose a budget against which the club must operate for a period until the Premier League is satisfied the club is able to meet its obligations. This isn't administration per se but it's getting pretty darn close.

This can also include a bar on transfers and contract awards.

 The concern here is that this is almost a pre-administration, administration, which is a little strange given there is a well-trodden path and process for businesses of all shapes and sizes who suffer difficulties. But again PSR is really about protecting the Premier League itself, rather than it's member clubs.

But isn't all this based on estimates still? Why would a club ever voluntarily disclose troubles if they can hide behind dodgy forecasts?

That's a great point, in reality it will just come down to how realistically unrealistic an estimate can be especially given by the end of that year, clubs will have all had to have submitted their actual accounts. This must be done by 31st December each year and only a club's published accounts will do.

These and the figures therein will direclty replace the Estimated EBT and balance sheet submitted back in March and crucially clubs will now have submitted their updated P&S Calculation complete with actuals, not estimates.

There's no hiding behind forecasts any more, not least because this is where the infamous £105m rears its head for the first time.

So explain the £105m

Well if you take the £15m as the early warning system for the Premier League that has allowed them to take a closer look at a club's finances and impose restrictions if felt necessary, then the £105m is confirmation that something has gone awry. But that really isn't necessarily the case.

The problem here is that the £15m can be dismissed easily as an issue where a club, as most can, provides proof of funds. In total contrast, the £105m takes no account of the 'affordability' of the loss and just simply deems it as bad.

That makes no sense

Yes, indeed, this is one of the major issues with PSR. A club might have incredibly wealthy backers, be in no danger of financial collapse but have a relatively low income stream and so prove more susceptible to breaching the £105m loss despite being far less of a risk than the highly indebted, but strong revenue generating clubs that dominate the Premier League.

So debt doesn't count?

No, not in that sense, indeed PSR positively encourages those models.

The Premier League are far more concerned about losses, regardless of affordability, than they are indebtedness. The simple reason is that the like of Manchester United are so heavily indebted that the Premier League cannot afford to sanction their model, despite its precarious nature, in fear of losing a global brand from their roster. Instead they have surmised that wealthy, debt free clubs, still building their brand and their revenue streams are the real danger and their progression must be stopped. Nonsensical doesn't do it justice.

So PSR is just a complete waste of time simply there to protect the Premier League and their favoured clubs from competition?

A cynic would say that for definite, and looking at it as objectively as possible the imposition of PSR in the rigid form it has been designed has done exactly that.

That said there is a third section of clubs that aren't indebted, but neither are they in posession of bottomless wealth and who could prove to be embarking on an unaffordable and unsustainable model in an attempt to compete in the Premier League. The likes of Leicester City have flown high, over spent, and proved to be running wrecklessly. It is to these scenarios that the Premier League can point and provide some justification for PSR.

Whether PSR, its rigidity, its questionable limits and its punishments, are the best way to achieve this is a moot point indeed.

And the £105m? Why that figure? And what does it mean?

The Premier League have decided that acceptable losses across the three year period in the P&S Calculation are £105m.

A club could make this loss in a single season, or aggregate it over the full period, it doesn't matter. The £105m is a line in a sand and if that is exceeded in any three year period, the club will be in breach of PSR. Which brings us full circle back to March 31st... If the club, or any club, breaches the £105m loss then the Premier League can impose a budget against which the errant club must operate for a period until the Premier League is satisfied the club is able to meet its obligations and may also place a bar on transfers and contract awards.

 Far more significantly however is the fact that the Premier League can impose point deductions, undoubtedly the worst punishment PSR can bring.

But the £105m, why is that deemed bad? It's only the cost of a middle of the road English midfielder a season!

Well yes, and here is another major issue with PSR.

We have already seen that clubs like Manchester United who have a strong revenue stream but spend heavily entirely funded by debt are green lighted by the Premier League.

An conversely clubs who prudently manage their business based on self-funding are not Yet even then there is an even more fundamental question mark over PSR.

No-one knows or at least no-one is telling where the £105m came from and why that figure is deemed unsustainable by the Premier League.

Even more extraordinary is that the figure was Introduced in 2013 without any published methodology to explain or justify what many see as an entirely arbitrary figure.

What? They've never published the reasoning or methodology for the £105m?

No, they haven't. Hardly encouraging is it. Not only that but despite the intervening decade and a half, the £105m has never been subject to review, inflation, market changes or any of other variable factor. When it was first introduced the £105 meant that against the average revenues of Premier League clubs in 2013, the acceptable losses were 29% of revenue. Ignoring other variables, and simply focusing on the growth of Premier League clubs' revenue over that period, that figure in 2025 has fallen to 14%. So due to the lack of oversight from the Premier League the acceptable losses have halved.

That's madness, surely clubs are being caught now at a far lower level of losses?

Absolutely, following the simple growth in club revenue it is an incontrivertible fact that clubs should, in 2025, be allowed to lose £220m over three years.

Yet the figure remains at £105m

How can they get away with justifying that?

Well they don't.

It is not, and never has been addressed by the Premier League which makes their decision to not detail the methodology behind the original calculation all the more questionable.

Surely, if the Premier League deemed acceptable losses being 29% of revenue was sustainable on PSR's introduction then so it should be today.

Yes that is what any non-partisan, non-vested interest observer would say, without question.

What a mess!

Yes indeed. It's difficult to find any justification for PSR in its current form.

Its pernicious effect continues to distort the League. It unfairly punishes wealthy clubs, able and willing to invest in success in the Premier League. It totally fails to curtail massive indebtedness amongst the biggest clubs. It simply kicks those who fall foul when they're already down and at a time they can least afford the punishment. And it no longer has any connection with the reality of the finances of the Premier League - if it ever did.

Can it get any worse?

Unfortunately it does.

And that comes in the form of Squad Cost Ratio, UEFA's version of PSR, and one which entirely contradicts the Premier League's acceptable financial positions and makes life for new European entrants almost impossible. That though is for another time.

UEFA Squad Cost Ratio (SCR) Explained