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Parachute Payments: A Necessary Evil?

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You may not have heard of him, but Shu Takada is a championship yo-yoer. It’s a title he is most likely delighted to hold and something to proud of. For other Championship yo-yoers – Norwich, West Brom, and Fulham – it’s less of an honour. More of a curse.

There are a number of people out there who think that parachute payments are a bad thing; that they create an unfair playing field for relegated clubs. This isn’t an unfair criticism – the past two Championship seasons have seen three teams bounce back at the first time of asking and a fourth, in West Brom, do it at the second. Clearly, the teams dropping into the Championship are better placed to challenge right away. There are notable exceptions when ‘smaller’ clubs make it – the likes of Huddersfield, Reading, and Hull – but overall, teams drop into the second tier better than the season they left.

It should be clear to see that parachute payments give relegated sides an advantage; but is it an unfair one? Should they be scrapped entirely, or are they a necessary evil?

First off, they allow promoted teams to actually focus on rebuilding their squad. On promotion to the Premiership in 2018, Wolves completed the permanent signings of a number of their promotion winning squad – including Diogo Jota and Wily Boly; the same year, Fulham signed Mitrovic for £27m after impressing on loan the previous season. There’s scarcely a team in the Championship who go up without a loan player and – what with the money in the Premier League – they are held to ransom on promotion. Parachute payments allow promoted teams to pay these prices without having to worry about bankruptcy on relegation.

Parachute payments allow teams to be kept together for longer too. Take Watford during the 2020/21 season. After making Ismaïla Sarr their record signing, they were able to hold onto the Senegalese international as a suitable offer did not come in for him. He went on to score thirteen goals for the Hornets as they finished second and, generally, looked a cut-above the rest of the players in the league.

But it’s not just Saar that falls into this category. Aleksander Mitrovic is Serbia’s all-time top-scorer and is keeping Real Madrid’s Luka Jović out of the national side – he scored 26 goals as Fulham bounced back at the first opportunity; at Norwich, Teemu Pukki, Max Aarons, and Todd Cantwell made an impact at the top level and all remained at Norwich to help them bounce straight back.

There are countless examples of stars who have been relegated and remained in the Championship to help with the promotion push but that is not the only advantage. They also allow teams to splash out on players where Championship clubs can’t compete. To date, this season, Fulham have spent £12m on Liverpool’s Harry Wilson. Wilson has averaged a goal involvement every 91 minutes at Championship level and Fulham’s ability to splash the cash in that regard gives them an edge in the transfer market. Fulham have taken full advantage of parachute payments on relegation to the Championship. The signings of Knockeart, Cavaliero, McCormack have all been seven figures the season after relegation (albeit with payment deferred until clauses had been met). It’s just a playing field that other clubs cannot compete upon.

But there are obvious upsides to parachute payments and many clubs would argue that they are a necessity.

Parachute payments have meant that relegation from the top-flight is no longer the death sentence it was so long as teams spend within their means. The cost of Premiership football is so high that, without parachute payments, clubs are left with difficult choices as far as investment is concerned.

Take this summer’s transfer window for example. Fulham may be the only club to have spent over £10m, even cumulatively, 16 Premier League clubs have spent over that mark, and one of the clubs that hasn’t, Chelsea, are allegedly preparing a mammoth bid to bring Lukaku back to Stamford Bridge.

The fact of the matter is, with the money that is in the top flight, all that financial fair play has done is create more of a closed shop. Sean Dyche may be a broken record as far as his complaints about what Burnley can afford are concerned, but even they have spent over £100m in the past five seasons. Simply put, any team that wants to compete in the Premier League, has to spend big money in order to do so.

And it’s getting worse. In two seasons from 2003 -2005, Chelsea spent £300m in order to move from fourth place to champions. Since the summer of 2018 (and not including a further £75m this summer), Arsenal have sent the same amount to move from fifth to eighth and, whilst this can be put down to poor transfer dealings, there is evidence of inflated prices throughout the leagues: Fulham were famously lauded for spending over £100m upon promotion in 2018 and still being relegated, but since then, only Sheffield United have spent less than £100m and survived with Norwich, West Brom, and Fulham (again) returning straight back to the Championship, whilst Villa and Leeds both spent above that threshold upon returning to the division.

In these instances, parachute payments work exactly as planned. Teams are able to go up and match their league counterparts in spending without having to worry about bankruptcy upon relegation. The fact that the Premier League is becoming less competitive for promoted teams is a worrying concern and parachute payments are the only thing standing in the way of a ‘closed shop’.

Last year, we saw the short-lived introduction of the European Super League (the fallout from which is far from over); it was borne out of pure greed from club owners and a need to monetize absolutely every aspect of the game but there is a deeper-rooted problem within the league and that is that the product is becoming stale. The fact that teams coming up either spend £100m or face impending relegation, is beginning to get boring and teams in that position will be very grateful for parachute payments in order to slow their descent into administration.

Whilst there is no doubt that they give a massive advantage to recently relegated teams, they also give recently promoted teams the incentive to spend and compete at the top level. The problem isn’t necessarily those specific payments, it’s that the increasing cost of running a Premier League football club is getting further and further away from that of a Football League club. Where you stand on them might entirely depend on whether you support the likes of Fulham who depend on them to remain financially solvent and still able to spend on players nd compete for promotion, or the Bristol Citys’ of the world who put together a string of finishes not far outside of the playoffs.

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