Earning a place in the Premier League is the Holy Grail for all 92 clubs in the English football pyramid, although most will never achieve it.
Never mind the footballing prestige – the financial rewards dwarf anything else available in English, European and world football.
For example, broadcasters in the UK pay around £5 billion over four seasons for the right to show live EPL matches, and international broadcasters bring in around the same amount, with most of the money distributed between the 20 sides in the top flight.
The prize money on offer is also huge, with the EPL champions receiving around £150 million in total, and even the team finishing in 20th place banking around £90 million.
So it is obvious why clubs in the Championship and below cast an envious gaze on the EPL, as do teams in other less-lucrative European leagues.
However, what happens when a team is relegated and the money pot suddenly dries up?
This is where the “parachute payment” comes into play, a handout that clubs relegated from the EPL to the Championship are entitled to in order to soften the huge financial blow.
Why do these parachute payments exist, and how much can a club receive after a disastrous season on the pitch?
What is a “Parachute Payment”?
A parachute payment is a payment allocated to the clubs that get relegated from the Premier League, and is designed to soften the blow of leaving the financial goldmine that is the EPL.
These payments are unique to English football, and have been criticised by the English Football League chairman Rick Parry as the cause of a widening gap between the finances of former EPL clubs and the other clubs in the Championship.
Why Do Clubs Get a Parachute Payment for Being Relegated?
Clubs receive a parachute payment for being relegated to make up for the huge shortfall in income they face after leaving the English Premier League.
There are a range of repercussions for teams who suffer relegation, from sustaining large wage bills to falling gate receipts and adapting to the TV revenue Championship teams earn compared to Premier League clubs.
For instance, during the 2019/20 season, the EPL’s total revenue was over £4.5 billion, while the Championship saw its total revenue decrease to £679m. This means the Premier League’s total revenue was over 6.6 times that of the English second tier.
Hence, the controversial idea of parachute payments was introduced to protect clubs falling out of the top tier of English football, many of whom have never been able to return to the EPL.
Many former Premier League clubs have struggled to adapt to life in the lower reaches of English football, and in 2022, Oldham Athletic became the first team to have played in the EPL to drop into non-league football after relegation from League Two.
How Much Are Premier League Parachute Payments?
Premier League parachute payments are worth millions of pounds to clubs relegated from the league. Clubs received an average of £33m in 2020/21, while the average revenue of clubs without parachute payments was around £20m.
The payments are made over three years, with the sums received decreasing each year. 55% (roughly £45m) of the amount each Premier League club receives as part of its equal share of broadcast revenue is given in the first year, 45% (£40m) in the second and 20% (£17m) in the third, though only if the club was in the Premier League for more than one season before relegation.
If a team wins promotion back to the Premier League while parachute payments are being made, they no longer receive the payments.
| Club | Season relegated | 2015/16 | 2016/17 | 2017/18 | 2018/19 | 2019/20 | 2020/21 | 2021/2022 |
|---|---|---|---|---|---|---|---|---|
| Bolton | 2011/12 | £10.5m | ||||||
| Blackburn Rovers | 2011/12 | £10.5m | ||||||
| Wolves | 2011/12 | £10.5m | ||||||
| Reading | 2012/13 | £10.5m | £16.3m | |||||
| Cardiff City | 2013/14, 2018/19 | £20.8m | £16.3m | £16.6m | £42.6m | £35.5m | £16.1m | |
| Fulham | 2013/14, 2018/19 | £20.8m | £16.3m | £16.6m | Promoted (£0) | Promoted (£0) | ||
| QPR | 2014/15 | £25.9m | £31.1m | £16.6m | £17m | |||
| Burnley | 2014/15, 2021/22 | £25.9m | Promoted (£0) | |||||
| Hull City | 2014/15, 2016/17 | £25.9m | Promoted (£0) | £41.6m | £34.9m | |||
| Newcastle United | 2015/16 | £40.9m | Promoted (£0) | |||||
| Aston Villa | 2015/16 | £40.9m | £34m | £15.5m | ||||
| Norwich City | 2015/16, 2019/20, 2021/22 | £40.9m | £34m | Promoted (£0) | Promoted (£0) | |||
| Sunderland | 2016/17 | £41.6m | £34.9m | £15.5m | ||||
| Middlesbrough | 2016/17 | £41.6m | £34.9m | Promoted (£0) | ||||
| Swansea City | 2017/18 | £42.6m | £34.9m | £15.8m | ||||
| Stoke City | 2017/18 | £42.6m | £34.9m | £15.8m | ||||
| West Brom | 2017/182020/21 | £42.6m | Promoted (£0) | £44.4m | ||||
| Huddersfield | 2018/19 | £42.6m | £35.5m | £16.1m | ||||
| Bournemouth | 2019/20 | £43.4m | Promoted (£0) | |||||
| Watford | 2019/202021/22 | Promoted (£0) | ||||||
| Sheffield United | 2021/22 | £44.4m | ||||||
| Total | £171.8m | £219m | £242.6m | £265m | £170.5m | £146m | £121m |
Premier League Parachute Payments 2023
Based on what has been handed out previously, it is likely that the three teams relegated from the EPL at the end of the 2022/23 season will stand to earn around £45 million each next season as a parachute payment.
Each club receives 55% of the amount that each Premier League team would pocket as an equal share of broadcast revenue, which is then reduced to 45% in the second year and 20% the year after.
That equates to around £45m in the first year, £40m in the second and £17m in the third.
If Nottingham Forest return to the Championship after only a season in the EPL, they would only be entitled to two years’ worth of payments, while the likes of Southampton, Everton, Leeds and Leicester would receive a payment for three seasons, unless they earn promotion back to the Premier League in that time.
How Long Do Parachute Payments for Relegated Teams Last?
Parachute payments for relegated teams used to last for four seasons, but are now limited to three seasons, and teams that earn promotion back to the EPL within that three-season period become ineligible to receive the payments.
Teams that only spend one season in the Premier League before being relegated now receive money for just two years.
Will Parachute Payments Be Scrapped?
Parachute payments represent a highly contentious issue in English football and there is much speculation that they might be scrapped in the future; however, the EPL and EFL remain in negotiations over the future of the payments.
An independent report covering 2016-2021 by Sheffield Hallam University found that 40% of clubs receiving the parachute payments were promoted back to the EPL.
It also found that clubs receiving parachute payments generated an average points gap of +16 in 2020-21, while the average points gap over the five seasons, for clubs in receipt of parachute payments, was +8.6
It stated that “parachute payments continue to distort Championship competition, fueling losses at clubs who are simply trying to keep pace”.
The Premier League has said it is willing to reform parachute payments but is unwilling to abolish them completely.
