Scottish clubs competing in European competition will have to ensure they have their finances in order by the end of next season, as a football finance expert warned that they could face UEFA sanctions if they do not comply with the governing body’s Financial Sustainability Regulations.

Dr Dan Plumley is a senior lecture in sport finance at Sheffield Hallam University, and he explained that changes to UEFA’s rules around spending – which used to be known as Financial Fair Play regulations – will be coming into effect soon, with the way that squad expenditure is calculated being the biggest difference between the old rules and the new.

From the end of season 2025/26, a club must ensure that their ‘squad cost ratio’ – the amount they accumulatively spend on transfer fees, wages, player amortisation, agent fees and manager fees – must be equal to or less than 70 percent of their turnover. This season, as UEFA phased in these new benchmarks, this figure was allowed to sit at 80 percent.

“Obviously there's no kind of FFP per se in Scotland, but Rangers and Celtic and a couple of clubs on the fringes of Europa League and Conference League will have to have their eye on it,” Plumley said.

“What UEFA have done is changed to something they've titled Financial Sustainability Regulations and it is broadly similar principles, but with a few kind of significant changes as well.

“So, there's a 'no overdue payable' rule within that, which basically means just pay your bills on time, which is common practice.

There is an acceptable loss rule still with this new one as per the old one, and they've actually doubled the acceptable losses that clubs can make. So, you can cumulatively lose €60 million over three seasons now. It used to be €30m.

“Then the biggest change is this new squad cost ratio, and what that's going to measure is transfer fees, wages, amortisation charges linked to transfers and contracts, agent fees and manager fees as a kind of catch-all number that covers squad costs.

“What they're going to set that against is a club’s revenue, and we're in a transition period at the minute, but it has to be down to 70 percent by 25/26 season end, and they're going to measure that over the course of a calendar year rather than a season and financial year.

“Which again, makes it slightly tricky for the clubs because they've got to adjust to a January to December reporting period for UEFA. Their accounts will usually run May to June. In a nutshell, that's the kind of summary changes.

"So, for Rangers and Celtic - because it's likely that both of them will be in a European competition, it's just whether or not that's the Champions League or Europa League - what they've got to set their budget against is that they need that squad cost ratio to be down to 70 percent of revenue by 25/26 and they need to be making sure that they're not losing over €60 million cumulatively in the three-year cycle.

“That’s the nuts and bolts of it. And with those two clubs, that that can swing quite significantly on which one is in the Champions League, because that's going to generate you probably an extra €20-30m at least.”

This may explain why Rangers in particular have been looking to cut their wage bill this summer.

The last available figures showed that Rangers’ wage bill was a club record £64m against revenues of £84m, leaving their ‘squad cost ratio’ at around 76 percent at the end of last season.

This will have reduced in the period since with high earners like Connor Goldson leaving the club, but with other factors now taken into consideration when this figure is calculated, it is no surprise to Plumley to see some cost-cutting taking place.

“It’s not just wages now, it's going to be transfer fees, agent fees and the way that contracts are amortised as well, so it's going to be a little bit higher than that wage figure,” he said.

“So, if you are in that sort of percentage already, you're going to have to run some calculations and just make sure when everything is thrown into the mix that you're OK against that.

“We are in that period of transition where clubs can do that. They set the transition period at 90 percent, 80 percent and then 70 percent by the end of next season.

“What they have done there is said ‘look we'll monitor this, we'll transition it so that we're not kind of hitting everybody hard straight away’.

“They're have been no penalties during this transition period, but they'll expect clubs to have it at 70 percent by the end of the 25/26 season.”

At which point, penalties for falling outside of those parameters will come into play.

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While the severity of punishments for flouting the Financial Sustainability Regulations have yet to formally be set, Plumley says that they could range from financial penalties to sporting ones.

“It will be a little bit of everything,” he said.

“What they said in the wording of this is they have the kind of power to deliver these sanctions, but they're not formally set in stone yet.

“But it's usually the case of we can either look to fine a club, we could look to limit the squad size, we could look to penalise with a points deduction, which would come into play for the new expanded league stage of Champions League and Europa League.

“So, now it's going to be a bigger group stage and maybe they could dock points or they'll relegate teams from competitions. I've not seen the detail on that yet, but my guess would be that could be you drop down from Champions League to Europa or Europa to Conference.

“So, it's all kind of manner of sporting and financial functions, but as always they'll kind of determine that on a case-by-case basis as we move forward.”

An unintended consequence of abiding by FSR may be that the gap between the biggest clubs in football and the smaller clubs will actually widen, in Plumley’s view, which is the opposite intention of what they were originally introduced to achieve.

So, as hard as it is for the likes of Celtic and Rangers to compete on the European stage already, it is only going to get harder.

“I think the biggest challenge for the industry at the minute, and across European football, is that we're just at a point now where there is a kind of built-in hierarchy, whether that's in individual leagues or, you know, across the European game," he said.

“You've certainly got that in Scotland, and then look how hard it is for Celtic and Rangers to compete in the Champions League. You've certainly got that in England. And then and then look at how the biggest clubs filter out of that Champions League group stage into the knockout stages.

“My general take on that is unless you do something drastic to really change, either change the regulations, rip them up and start again or don't have them, you know, go really nuclear the other way, it's very difficult to change that status quo because it's so embedded.

“The rules were there to level the playing field and that's absolutely not happening. And again, when you kind of roll that through, logically it was never going to happen. We've oftentimes termed it in the research we've done as the unintended consequence.

“It's those that earn more who can spend more and so on and so on. And you're seeing some of the noises around clubs in England like Aston Villa, their owners have been very critical of those regulations and have really gone at the Premier League in a verbal way to say this is not fair.

“But as I say, unless you rip it all up, start again, change it completely, you can't get out of that cycle.”