Change is needed - but the payments must stay
AS the top end of the Championship becomes increasingly predictable, there are growing calls for parachute payments to be scrapped or at least reduced significantly.
The payments were first introduced in 2006 to help clubs adapt to the financial trauma of relegation from the Premier League. During the four years leading up to that decision, four clubs had entered administration within 18 months of relegation to the Championship.
Saddled with players on lucrative contracts, which could not be paid without Premier League TV money, the handouts softened the monetary blow of falling into the second tier.
But as the years wore on and the TV deal continued to balloon, so too did the parachute payments. This year’s bottom three will receive a minimum of £40 million in their first season back in the Championship, with a further £30 million in their second year and more still in their third year for any sides which have been in the Premier League for more than a single season. It’s a cushy reward for failure. During the 2019-20 season Deloitte found that the average annual revenue for a Championship club with parachute payments was 160% higher than that of clubs which did not receive these payments.
That’s a monstrous gap and arguably for the first time ever, it’s ruining the competitive balance of the Chamgame-changing
pionship.
Last season saw Norwich and Watford comfortably return to the top flight at the first time of asking, having both been relegated in 2020. The Canaries had been able to hold on to the likes of Teemu Pukki and Emi Buendia, while Watford boasted a huge squad, full of big money signings including £30 million man Ismaïla Sarr.
They were joined in the top six by Bournemouth, who had also been relegated from the Premier League just 12 months earlier. This was only the second time since the introduction of parachute payments that all three relegated sides had either gone up automatically or qualified for the play-offs. But this success wasn’t really limited to one season. In 201920 four of the top six clubs in the Championship were in receipt of parachute payments. It was the first time it had ever happened but this pattern was repeated in 2020-21 and there is every chance it could happen again this year.
Two of the top three teams heading into the international break were relegated from the Premier League last season and the other is in its second year of parachute payments.
The top two, Fulham and Bournemouth, already look a cut above the rest of the league. There is a six point gap between the automatic promotion spots and West Brom in the highest play-off spot, which is the largest
gap between second and third at this stage of any season since 2005.
There are many reasons why Fulham and Bournemouth are so far ahead but their superior spending power is definitely a big factor. The only other clubs in the division who can pay comparable wages are other recently relegated Premier League teams.
Clubs like Coventry, the highestplace team which isn’t currently receiving parachute payments, could only dream of employing players like Aleksandar Mitrovic or Philip Billing.
These clubs can’t be blamed for pressing home their advantage. They’re just taking advantage of a beneficial situation. But the system is definitely skewed heavily in their favour. There are many who have argued for years that parachute payments give clubs like Fulham and Bournemouth an unfair advantage but that advantage is greater than ever for two reasons.
Firstly, parachute payments are bigger than ever, meaning the gulf in resources is so much wider these days.
Secondly, those who don’t have the luxury of parachute payments are no longer trying to compete financially with those who do. Spending in the Championship has fallen dramatically over recent years as clubs finally decided to cut their cloths accordingly.
Clubs such as Derby and Reading who gambled millions on expensive players in the hope it would lead to promotion are now being hit hard by Financial Fair Play. Add to this the substantial losses caused by the Covid-19 pandemic and the vast majority of clubs in this division seem to have wisely accepted they cannot match the wages and transfer fees of newly relegated clubs.
The result is a league where a handful of clubs are capable of offering Premier League terms while the others operate on a totally different level.
Money has always been a difference-maker in football and there has never been a time where all clubs battled it out on an even footing. There have always been haves and havenots but at any level of sport, the more chasmic the gap, the less entertaining the product becomes.
It may seem a bit rich for a Swansea City fan to question parachute payments. Without them, the Swans may very well have gone bankrupt after relegation. Years of over-spending on Premier League wages meant relegation hit Swansea particularly hard as they struggled to balance the books by offloading their highest earners and brightest prospects.
Swansea were in too much of a financial hole to spend these payments on flashy new signings but even with all their off-field problems, they were still able to pay one of the league’s most expensive players in Andre Ayew and brought in a string of
youngsters on loan, many of whom were not cheap. Pretty much none of the clubs just outside the top six over the past two seasons were in a position to bring in the likes of Rhian Brewster or Morgan Gibbswhite.
Swansea was a crisis club after relegation and a good example of why parachute payments are still sadly necessary. But these payments were so generous that as well as keeping their heads above water, they still granted Swansea a competitive advantage over most of the league.
It may be time to review the way parachute payments are allocated.
By now the Premier League has become too rich to justify scrapping them entirely. Without these payments the loss of income caused by relegation would bankrupt many clubs.
But the increasingly two-tiered nature of the Championship isn’t good for its brand. We don’t want to see the same handful of clubs going up and down each year, with the odd new face every now and then.
When they were first introduced in 2006 they were seen as a necessity to stop clubs from going to the wall. By now they are a subsidy to help them get back up as swiftly as possible.
Unless something changes, the disparity will only get worse and the crazy unpredictability which epitomises Championship football could be at risk.