How relegated clubs bouncing back to the Premier League makes the rich richer

The Guardian

03-05-2025

For the second year running, all three clubs promoted from the Championship to the Premier League will make an immediate return to the second tier. It would be tempting to say this is the natural order of things given the financial challenges faced by clubs suddenly thrown into the world's richest domestic football competition.
Even when they do spend huge amounts in order to give themselves a chance of survival, as Southampton and Ipswich did, respectively spending £62.8m and £106m net in the summer of 2024, the gap appears too big to close. Yet what has happened to them used to be an exceptional occurrence.
Only once before this season and last had all three promoted clubs immediately returned whence they came, in 1997-98. It was more common for them to remain in the top division together, which has happened four times since 2002, last and most remarkably in 2021-22 when Fulham, Bournemouth and Nottingham Forest not only survived but prospered and grew into contenders for a place in European competitions. This, however, looks like an aberration.
The parachute payments system introduced in its current form in 2015-16 by the Premier League, the only major league in the world to have adopted such an arrangement, was not just meant to cushion the fall of relegated clubs but enable them to hang on to the core of their squad. And in that regard, it did what it was supposed to do, at least for some.
Newcastle rejoined the elite at once in 2017-18 after receiving a first payment of £40.9m, one of several example of how the scheme could benefit clubs who knew how best to make use of these extra resources. Aston Villa, Norwich, West Brom, Bournemouth and Sheffield United were others, all in the past seven years.
While not hostile to the principles of the system, the Football League has been unstinting in its criticism of the Premier League's version of it, arguing that the sums involved and the way they are split distort competitiveness in the Championship. But the EFL's efforts to have this system modified, or even scrapped, have been fruitless.
Its hope that the new football regulator would intervene in the debate were also dashed when the sport minister, Stephanie Peacock, said in October that the government 'absolutely [doesn't] want [parachute payments] to be abolished'. It is understood that the system would be reviewed only if the regulator could establish a 'direct causal link' between those payments and the risk of clubs facing insolvency. In other words, the arrangement is here to stay.
Not everyone will be disappointed by this. Burnley, say, have done well out of the system, to the extent that it is now part of the economic model of the Lancashire club, one of the most profitable of the Premier League era. The Clarets have been relegated or promoted in seven of the past 12 seasons, picking up tens of millions in parachute payments each time they dropped to the Championship, sharing in the riches of the top tier while they were there, spending well within their means.
As a result, they posted a cumulated profit of £111m in the past six years they played in the first tier – their accounts for the 2023-24 season are yet to be published – while minimising losses when they were in the second, with the sole exception of the 2022-23 season, which saw them promoted again. If you know how to play the system and are not obsessing about punching above your weight, it can work for you.
Yet this is only part of the story. There is a little-known provision in the regulations which directly benefits elite clubs when beneficiaries immediately go up from the Championship. Parachute payments, which constitute more than half of the £1.6bn over three years which the Premier League devotes to 'solidarity payments' to English football, are not awarded as a lump sum but over three seasons.
Relegated clubs receive 55% of the allocated money in the year after their demotion, then the rest over the two seasons after that. The catch is that should the club be promoted in the interim, it will cease to receive those payments.
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The money 'saved' that way, the amount of which is calculated as a proportion of the broadcasting rights shared on an equal basis by all 20 Premier League clubs, is not channelled back into the budget set aside for solidarity payments and distributed to less privileged clubs through a separate scheme.
Instead it goes back into the pot which Premier League clubs share between themselves. So it is in the interest of elite clubs that those relegated bounce back as quickly as possible and rejoin the top tier within three years.
This is not to say that the system was devised to produce such a result but rather that the cycle self-perpetuates through a mechanism which was meant to level the field but does not do anything of the sort, and has ended up being yet another rampart built around the closed circle of the Premier League.
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