Parachute payments have proven to be a controversial part of the world of football for some time. The English Premier League is one of the most popular and competitive leagues in the world, and with that comes many advantages. However, maintaining a place here can be fiscally difficult and parachute payments are one of the measures introduced to try to curb this. Let’s take a look at what these payments are and whether they should continue.
How did Parachute Payments Arise?
The Premier League is hard-fought by all teams. However, it is dominated by several clubs. It is rare to see teams like Chelsea, Liverpool, or Manchester United heading down the league tables. Even if they are not at the very top of the league, there is a chance that they will be in the upper half of the table.
Other teams in the Premier League therefore have the very real threat of relegation. If they do not perform well, there is a chance that they can drop out of the Premier League and down to the Championship, or even further down. It would be easy to pin this entirely on the performance of the players themselves, but the situation is actually more influenced by money than you might imagine.
How Does Relegation Affect Teams?
Many of the top teams have agreements in place with broadcasters to air their matches – especially now in the era of live streaming. If you are not able to pull on this revenue in the same way that a big team like Manchester City can, this can lead to a number of knock-on issues. A team will not be pulling in as much revenue as expected, so they then need to cut down on the costs.
An obvious cost is player wages, so you make some changes to the teams that mean you have players with lower wages. Pitching these players against a team that has the pick of top players from all over the world is simply no competition. The negotiating position, also, can be weakened. Teams know when others need to shed wages and generate income. Therefore, transfer fees are lower because the buying team needn’t pay over-the-odds.
An interesting case study is Emiliano Beundia, who, rumours suggested, could’ve been bought for under £10 million when Norwich went down in 2020. However, he was never sold despite his exceptional performances and obvious bargain value. Now, he’s been sold for £40 million after their promotion campaign was successful and they are back in the Premier League. Norwich’s squad wage was low, and could be maintained for a season in the Championship, and was built with the goal of returning immediately, which they achieved.
In general, teams that are relegated are often in the mix to be promoted. When searching for offers for patriotic England punters at sites like OLBG.com in the off-season, what’ll be noticed is that relegated teams are among the favourites to return. Again, squad strength dictates this, unless the club has undergone a firesale of talent. In some cases, the parachute payments allow the maintenance of higher wage bills, meaning that relegated teams can prioritise short-term investments so that they can attempt to get back into the Premier League as soon as possible, rather than rebuilding the team. This is what experts believe is a problem.
What are Parachute Payments?
Parachute payments were brought in as an attempt to cushion some of the fallout of relegation. They are paid over three years to teams, except if the team only played in the Premier League for one season as they are then entitled to just two years of payments. If a team then earns promotion to the Premier League before their payments run out, they have to give them up.
These payments are also pretty hefty. In the first year, a club receiving parachute payments will get 55% of what a Premier League team gets for broadcast revenue. In the second year, this drops to 45%, and is 20% in the third year. Though this might not seem like much, it is actually millions of pounds.
This then means that teams who have been sitting in the Championship for some time will be at a disadvantage compared to those who are receiving parachute payments. Understandably, they have led to a lot of criticism across different levels.
What Do the Experts Say?
Many experts and professionals in the world of football have denounced parachute payments and want them to be removed. They claim that having these funds in particular are draining resources, and that they should be removed so the funds can better be used elsewhere.
Solidarity money is paid out in the lower leagues too, but it really is nothing compared to some of the funds that can be found when receiving parachute payments. The solution put forward often is that of a complete reset in the leagues – allowing for salary caps and cost control.
It is no secret that the costs of transfers and player wages have massively inflated across the past few decades. This, in turn, is making it harder for the lower clubs to attract and keep talent. No one wants to see an unbalanced Premier League with the best of the best playing each other constantly – that goes against the spirit of the game of football. Sporting integrity always has to remain at the heart of football, and critics argue that this can’t be upheld while parachute payments are an option.
Others describe parachute payments as a “necessary evil”. There are few that flat out support the scheme, but there are some that do claim that it helps to keep football competitive, especially at the top levels. Without the payments, a relegated team could have to sell their best players to be able to stay afloat, and this could lead to them never being able to climb again.
Should We Get Rid of Parachute Payments?
One of the major issues surrounding parachute payments is that we can’t just dispose of them entirely. We need to make sure that there is some sort of scheme in place that could support teams in their absence. Letting top teams fall back through relegation means that they might not be able to recover financially and could end up struggling further.
It is true that the Premier League and the wider world of English football need reforming. With sensible wage caps and other cost-cutting measures in place first, club owners and managers would then be able to discuss a scheme that could replace parachute payments. They are something that should be removed from the world of football – but something is also needed to step into their place.