EFL warns of insolvency amid PFA wage cap lawsuit

The English Football League (EFL) has warned of what it described as a systemic insolvency risk across its clubs, pointing to persistent losses and heavy dependence on owner funding. The alert comes as the Professional Footballers' Association (PFA) has launched legal action against new Squad Cost Rules (SCR) that are due to begin in the 2026-27 season.

The EFL, which runs the professional divisions below the Premier League, said the financial stability of the wider football pyramid is being put at risk by recurring deficits. The dispute places the league’s financial reform plans in direct conflict with player representatives concerned about the effect on wages.

New Squad Cost Rules face union challenge The English Football League The proposed SCR framework is designed to reduce the share of turnover clubs can commit to player wages, with the stated aim of limiting spending. The EFL has positioned the rules as a long-term sustainability measure intended to reduce the risk of future insolvency events. Under the plan, the wage cap in League One would fall from 60 percent to 50 percent of club turnover. The EFL has argued that tighter controls are necessary because it considers current financial practices structurally unsustainable, particularly as operating costs rise while revenues across its divisions remain static. The EFL has said the SCR will replace the existing Profitability and Sustainability (P&S) framework from the 2026-27 season. The league’s broader message is that cost controls are central to stopping losses from becoming embedded across the competition structure.

It said average losses for League One clubs PFA says rule changes require formal agreement The English Football League The PFA has said the changes cannot be implemented without full consultation and agreement through the Professional Football Negotiating and Consultative Committee (PFNCC). The union’s position is that the proposed rules could reduce player pay and restrict investment in playing squads. The legal challenge also draws on recent history. The PFA previously succeeded in challenging salary caps in League One and League Two, which were then withdrawn in 2021, creating a precedent for union intervention when pay structures are affected. Loss figures cited as evidence of a worsening model The EFL has pointed to league financial data to support its claim that the current approach is not sustainable. It said average losses for League One clubs increased from £2.3 million to £7.3 million over the past five seasons. In the Championship, clubs recorded average losses of £21.6 million last year, according to league figures. The EFL said such shortfalls are frequently covered through capital injections by owners, a reliance it considers risky over the long term. EFL pushes for a new revenue arrangement EFL management has also said that litigation alone will not fix the underlying financial weaknesses affecting its clubs. Alongside cost controls, the league continues to argue for a revised revenue distribution model with the Premier League as a key part of addressing the systemic risks it has identified.

For now, uncertainty remains over how the legal proceedings will shape the rule-making timetable and what final form the SCR will take before its planned introduction in 2026-27.