Premier League Warned of ‘Cliff Edge’ Financial Disparity with Championship
The Premier League has been warned to be “absolutely worried” as the financial disparity between England’s top-flight league and the Championship continues to grow, threatening the competitiveness of the sport. According to Wales Online, Premier League icons Ian Wright, Gary Neville, and Roy Keane have voiced serious concerns over the expanding divide, highlighting a threat to competition as the lucrative Premier League becomes increasingly exclusive.
The newly-promoted sides seem set for an immediate return to the Championship, with Southampton already relegated, Leicester City appearing to be next, and Ipswich Town on the brink of having their relegation sealed. Recent Championship dropouts Leeds United and Burnley are flirting with a prompt return, while Sheffield United stand in third after last year’s demotion. With over £100 million cited as the ‘cliff edge’ financial disparity between the divisions, fears are mounting that this gap may become too great to bridge.
“We should be absolutely worried,” Ian Wright said on The Overlap, as reported by Wales Online. “There are 17 teams in that are continually getting money because three teams are coming in, whether it’s Leeds, Sheffield United or Burnley or whoever, and then they go again. Those 17 teams are constantly strengthening, even the mid-table ones. Look where Villa are now. Look at Brighton, look at Fulham having a go, Brentford, Bournemouth. All these teams are improving vastly compared to the trio that climbs up.”
Wright also commented on Wolves’ performance, noting: “You look at Wolves this season. They have been so bad this season but they have had nothing to worry about.” Neville highlighted the financial disparity between the Premier League and other leagues, a fact underscored by the recent disclosure of the fees each club has paid to agents this season. Chelsea’s payments equalled the combined total of all Championship clubs, with Manchester City trailing closely behind.
A Premier League club is guaranteed an income of £100m from broadcast revenue, while a Championship team can only expect just over £5m. Although a parachute payments system exists, the EFL argues that it exacerbates the problem by widening the gap between the wealthier and less affluent clubs in the Championship. Neville observed that promoted teams often panic about their spending for fear of relegation and the ensuing financial repercussions. He cited Nottingham Forest as an example of this, a club that spent heavily to beat the system, narrowly avoided relegation, and then faced penalties for breaching Premier League profit and sustainability rules.
Leicester also encountered difficulties in trying to bridge the income gap between the Premier League and Championship without violating any rules. In summary, a Premier League team is permitted to lose £105m over a rolling three-year period, compared to £39m in the Championship, with some allowance for cost of living increases. Relegated clubs receive approximately £50m in their first year down as a parachute payment, decreasing to around £35m in the second year and £16.5m in the third.
Cardiff City have been among many clubs in the football pyramid pushing for changes, advocating that owners should be allowed to match parachute payments with guaranteed investments. The club’s grievances are further intensified by the differing regulations in League One, where owner investment is considered income under Financial Fair Play rules, unlike in the Championship. However, with Cardiff on the cusp of relegation with four games to go, they could be subjected to different financial rules under the Salary Cost Management Protocol (SCMP), where clubs can spend 60% of their turnover on wages and transfer fees.
This situation highlights just how complex and perilous navigating football’s financial waters can be, with the £100m drop-off from the Premier League being merely the beginning of the challenges. Neville weighed in on the issue, noting both a footballing and financial aspect to why teams often get relegated soon after promotion: “There’s a football question (about why teams are going straight back down) but there is also the financial disparity between what’s happening in the Championship and Premier League and we’ve talked about this for years. It’s got to the point now where clubs who come up – Nottingham Forest spent a hundred-odd million pounds – you have those wages when you sink back. There are some levels to soften the impact but the risks you have to take to stay in mean that if you go back down with a parachute there is still a risk of going under financially.”
The EFL has been pushing for a revamp in the financial distribution system to mitigate the ‘cliff edge’ effect, ensuring clubs can manage the financial implications of promotion and relegation more effectively. However, their efforts are facing resistance from a group of 17 clubs who benefit from the current setup and are reluctant to alter the rules. EFL chairman Rick Parry expressed his views: “Our starting point was to say that the big challenge for everyone in the Premier League and the Championship is the cliff edge between the two divisions, which is in excess of £100m. It’s a challenge for the teams coming up and coming down, which is ostensibly why you need a parachute. Our proposal for revenue sharing – the 75-25 formula and introduction of steeper merit rates within the Premier League and the Championship – would have halved the cliff edge to £50m. Our position has been that if you halve the cliff edge, why do you need a parachute?” According to Wales Online, the issue remains a pressing concern for the football community.
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