The Championship’s new SCR financial regulations and what they mean for Boro

This summer sees Middlesbrough and other Championship clubs facing one of the biggest changes to how they run the business side of the club in years.

With England’s second-tier under ever-increasing financial pressure, gone are the previous profit and sustainability regulations (PSR), and in their place comes the new Squad Cost Rules (SCR).

The new financial controls have caused a complete revamp of how Championship clubs try to balance the books while remaining competitive on the pitch, having immediately come in at the start of this summer.

So what are the new SCR rules, what do they mean for Boro specifically, and are they a good thing? We enlisted the help of the University of Liverpool’s professor of football finance Kieran Maguire, and a number of sources who work in football recruitment, to find out.

After operating an SCR system in the shadows last season to offer clubs a chance to see how it works, it was voted in at an AGM in May. They keep the Championship largely in line with the Premier League, who’ve also introduced an SCR model this summer.

In announcing their change, the EFL explained that SCR will allow Championship clubs to spend 85% of their revenue on Player and Manager-related costs (which includes transfer fees, wages, agent fees etc.) Any other club cost not related to the players and manager (including any other staff member) is not included in calculations. Players under the age of 21 who've yet to make ten first-team appearances are also excluded from the calculations.

Owners are able to boost the spending power of their clubs by £33m over three years, but to a maximum of £15m in one season.

The EFL say the new rules allow for ‘real-time monitoring during the season, rather than reviewing ‘after the event’, with the aim of giving Clubs greater clarity and the Club Financial Reporting Unit earlier visibility over Clubs’ financial position.’

Putting an emphasis on the amount of money you generate, the new rules are good news in particular for clubs relegated from the Premier League. In receipt of parachute payments, which are estimated to be worth around £40m a year, they are included in your revenues and offer those clubs far more spending power. That isn’t really a change from PSR, but there are fears it could widen the gap further still.

Speaking to a source who works in football recruitment, Teesside Live has been told that, generally speaking, the new financial frameworks mean most Championship clubs have more money to spend this summer, however.

It’s something Kieran Maguire - a professor of football finance at the University of Liverpool - agrees with. He told Teesside Live: “Because your non-football costs are now being disregarded, and because owners can put in this £33 million over three years, it does give you a bit of scope to invest more on the footballing side of things.

“My understanding, if I’m not mistaken, is that it's very much concentrating on the ability of the club to manage cash. So, without getting too technical, you ignore amortisation.

“Previously, if I sign a player for £20 million on a four-year contract, normally it would be £5 million a year in the calculations. But in the EFL now, it's all based on how much cash you have physically paid. So, you look at the cash installments.”

Boro have already dealt with these changes this summer. Paying and receiving transfer fees in installments is no new thing, but now takes on increased significance.

It’s why it was particularly important in relation to the structure of the deal with Everton in the sale of Hayden Hackney, with the fee they receive from their sell-on clause for Morgan Rogers, and in signing Will Lankshear from Tottenham.

Kieran continued: “Good cash management becomes increasingly significant. I know when I've spoken to one or two people connected to clubs, they fear relegation because the gap between the Championship and League One, which was always pretty big, has just got bigger.

“I think most can probably spend a wee bit more. You've got this injection which comes in from the owners, you've got the 85% rule, and you don't have to worry about, if you're Burnley, for example, the £300,000-350,000-a-week it’s costing them in interest costs on their loans. That kind of thing gets disregarded under SCR.

“So, I think a well-run club can benefit from this. It's still going to cost the owner money, that's that's never going to change. But you can potentially invest more.”

Two big winners from the rules change are likely to be Wrexham and Birmingham who, despite not necessarily having the wealthiest owners, have maximised commercial opportunities to increase the money coming in to their clubs.

Their 2024-25 financial figures - the most recent available - cover their promotion-winning seasons in League One, and yet both had bigger revenue streams than Boro (Boro £32.5m, Wrexham £33.3m and Birmingham £36.5m) despite the fact that the Championship TV deal is worth £10m more than in League One.

The early signs are that Boro can still be a huge benefactor. As far as revenues are concerned, they will never compete with clubs in receipt of parachute payments.

But excluding those teams, from the last set of financial figures released - which cover the 2024-25 campaign - Boro were sixth in the revenue table, generating £32.5m (excluding money from player sales).

It’s one area where Boro are perhaps a bit disadvantaged. Another financial expert explained how clubs like Stoke City and Boro, for example, who have benevolent owners who have traditionally been willing to put money into the club, are now more limited in how much they can. It makes maximising revenue opportunities crucial moving forward.

One area where Boro can steal a march on their rivals, however, is player trading. There’s a risk in relying on boosting revenue through player sales because it’s not guaranteed. Having said that, Boro have, in recent years, been one of the best in the division for selling players at a profit.

It’s perhaps not the most appealing tag for supporters, but Boro have, for the last five seasons now, made at least one major sale of over £10m. Losing key players is never nice, but it does, as we’ve seen this week, allow Boro to reinvest in their own squad.

Pointing to another major advantage for Boro, Kieran noted: “Boro should be okay. They have a good solid fanbase and an owner who will put money in.

“I was at Wembley for the play-off final against Hull. They came in their numbers, and given that you only had a very small time in which to sell the tickets, it's a testament to the passion of the fans.”

Moving forward, increasing their revenue will now become such a key focus for clubs like Boro. Their player trading will help massively if it continues being as successful as it has been. But there are no guarantees in recruitment.

But what about guaranteed revenue? That’s split in the financial accounts into four main categories, with broadcast revenue the most lucrative at £12.2m in the 2024-25 season. Boro aren’t in control of that figure, however.

Success in competitions will help. Their prize money revenue is guaranteed, but will naturally fluctuate year to year, depending on the success of the team on the pitch. After a season with no play-offs or cup runs in 2024-25, their revenue on this front was less than £750,000, compared to over £2m the year before. That was thanks to their run to the semi-final of the Carabao Cup.

Match-day income is another that is ultimately linked to success on the pitch. As Kieran pointed out: Happy fans are far more likely to engage with, and back the club, through attending more games and buying more merchandise.

The latter falls under the final bracket: commercial and sponsorship money. Boro have this summer started a new sponsorship deal with Midnite, while the launch of their four new kits for the upcoming season were said to have generated record sales for the first couple of days. It should be noted that Boro have rarely launched three kits at the same time, however.

Boro, like most Championship clubs, could do more, however. The Riverside was, of course, once known as the Cellnet Riverside Stadium thanks to a commercial deal in place when it first opened. Another stadium-naming-rights partner has been mooted as a potential new revenue stream.

Such is the need to maximise the money coming into the club under the new rules, some Premier League clubs are even making naming rights deals on their training grounds! Anyone up for a round of golf at Apple Iphone’s Rockliffe Park?

Bristol City have been touted by many as one of the big winners of the rule changes. In the 2024-25 period, they earned the highest amount of revenue in the Championship aside from clubs earning parachute payments.

They earned £7.5m more than Boro that season (excluding player sales). And although they did qualify for the play-offs during this accounting period, they are successful on the revenue front because they maximise their facilities at Ashton Gate, after owner Steve Lansdown invested heavily into the ongoing redevelopment of the ground and attached amenities.

Kieran believes that’s a route many clubs might start to go down, and has long being an advocate for maximising a ground’s potential by making it a hub of activity more than just on match-days. And with Boro’s passionate fanbase in mind, it makes it a particularly lucrative option for them.

The leading football finance expert said: “They've got to work on the commercial side, but all clubs have to do that. The broadcast deal is out of their hands, as it is for the other 23 clubs in the division.

“But the club has a solid fanbase and these new rules should make all clubs focus more on engaging with fans more. The last thing you want to do is to p*** them off so that they stop coming, because that will have an impact upon your ability to recruit in the longer term.

“Because the focus is on revenue to begin with, what can the club do to generate more revenue? Well, happy customers, or should I say happy fans, means more people who will spend more money.

“Can the club offer them better facilities? If you spend money to offer them more, or better facilities, that doesn't hit your SCR because it's all based on player costs only. So you can see some merits in putting money in.”

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Gibson has put in over a quarter of a billion pounds over the years to try and ensure Boro stay as competitive as possible.

Not unsurprisingly though, his ambition in more recent years is for the club to be competitive without the need for his bailouts. To be more self-sustainable.

That’s ultimately why Kieran Scott was brought to the club in 2021, and why, since then, the Boro head of football has set about completely revamping Boro’s strategy and model - particularly with regard to how they recruit players.

As far as SCR is concerned, Gibson can still invest up to £33m over three seasons into the club, with a maximum of £15m in any one year. In terms of how much to invest and when, that’s the dilemma.

Kieran points out: “It’s wise [to invest the maximum £15m in one season over the first two years], IF you get promoted within those two years. That’s the risk. That’s exactly what we saw Chansiri do at Sheffield Wednesday.

“But if it doesn't work in a couple of years, then you really have to slam on the anchors, and that can put the club back for a period of possibly three, four or five years.

“You suddenly have to operate at completely different and lower levels, which creates frustration, angst and bitterness amongst the fanbase regardless of who the club is.

“So, it's a risky approach, but football is full of risk-takers. I often describe the Championship as being the casino of English football, in the sense that the rewards are so big that you're willing to gamble the club's future in the medium term on trying to get them up in the short term.”

How much Gibson decides to invest this year remains to be seen. But it’s clear that, whether through funds they’ve raised on player sales, or through Gibson’s input, Boro appear to be really stepping things up this summer. More big signings are expected after the recent statement capture of Will Lankshear.

The ultimate object of any financial regulation should be the long-term protection of football clubs. Or so you would think. The Championship has, for too long, been a basket case when it comes to finances.

To remain competitive, clubs have been regularly spending more than 100% of their revenue on staff wages alone for many years now (that’s all club staff, however, not just playing staff).

Despite how unsustainable that is - and how dangerous it proved for the existence of a number of clubs - for most, such cost control still saw them stay compliant in the framework for PSR.

So will SCR offer more long-term protection of the future of clubs? Kieran, who co-hosts the twice-weekly Price of Football Podcast, has his doubts.

“No, I don't, I'll be honest,” he admitted. “There's no focus on your other costs. What happens if you've taken out huge loans this year and have got huge interest charges? What happens if you've spent money poorly elsewhere at the club? That gets completely disregarded.

“I've always been a bit skeptical about the aim of these rules, because under the old rules, we had a system in which losing 400 grand a week in the Championship became the norm. That was deemed to be in compliance with PSR.

“So, for me, if that was the objective, it's not achieved it. I think the objective is to try to prevent individual owners from being able to buy promotion to the Premier League in an individual season, and I think it's achieved that particular aim.

“But the broader aim of sustainability, you've only got to look at the car crashes we had at Sheffield Wednesday and Derby County. The Championship remains the biggest red flag for lack of financial control in not just English football, but in my view, in European football.”

Middlesbrough are preparing for a big summer as they look to rebuild from the heartarche of missing out on promotion to the Premier League.

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