How effective are the Premier League parachute payments?
By Sean Walsh
Are you tired of seeing the same old teams relegated from the Premier League only to be promoted again the next season?
If you're from Norfolk, please disregard that question. If you're not, then we may have some ideas on why these teams keep bouncing back.
What are Premier League parachute payments?
Parachute payments are sums of money teams relegated from the Premier League receive in the three seasons following their demotion to the EFL. The Premier League says that parachute payments "allow clubs to invest in their teams, and wider operations, in the knowledge that should they be relegated they have provisions in place to re-adjust their finances."
In the three years following relegation, teams will receive 55%, 45% and 20% of the amount each Premier League club received in broadcast revenue (if they aren't promoted again in that time, in which case these payments will cease).
However, because the Premier League's TV rights deal spiked from the 2016/17 season onwards, parachute payments are worth a lot more now than when they were first devised in 2006.
To try and level the playing field, the remaining EFL clubs who don't receive parachute payments instead receive solidarity payments, but these have been criticised for not being as beneficial.
How effective are the Premier League parachute payments?
However, just because teams receive this extra cash doesn't mean that they will use it wisely. They have a slightly better chance, sure, but you still need to build a team correctly in order to make your way back to the Premier League.
Let's look at the teams who have been relegated since this lucrative TV deal kicked in and how they've fared using parachute payments.
Premier League relegated teams 2016/17
Hull City
2017/18: Finished 18th in Championship
2018/19: Finished 13th in Championship
2019/20: Finished 24th in Championship, relegated to League One
Summary: Hull were a lower-standard Championship side following relegation and were then relegated again in the final year of their payments. Take notes here on how not to construct your team.
Middlesbrough
2017/18: Finished 5th in Championship, beaten in play-off semi-finals
2018/19: Finished 7th in Championship
2019/20: Finished 17th in Championship
Summary: Progressively got worse as parachute payments dwindled, culminating in lowest second-tier finish since 1990. Not great.
Sunderland
2017/18: 24th in Championship, relegated to League One
2018/19: 5th in League One
2019/20: 8th in League One
Summary: Sunderland were relegated to the third tier for just the second time in their history when they received their first parachute payment. In their third season after relegation from the Premier League, they recorded their worst ever league finish. You tell me if they worked.
Premier League relegated teams 2017/18
Swansea City
2018/19: 10th in Championship
2019/20: 6th in Championship, beaten in play-off semi-finals
2020/21: 4th in Championship, beaten in play-off final
Summary: Swansea managed to earn respectable finishes in the years following their relegation, but notably suffered in the 2021/22 season once they stopped receiving parachute payments, falling to 15th in the Championship.
Stoke City
2018/19: 16th in Championship
2019/20: 15th in Championship
2020/21: 14th in Championship
Summary: Stoke established themselves as a solid Premier League side for nearly a decade but have desperately struggled in the Championship despite some heavy spending. A prime example of poor team-building.
West Bromwich Albion
2018/19: 4th in Championship, beaten in play-off semi-finals
2019/20: 2nd in Championship, promoted to Premier League
2020/21: 19th in Premier League, relegated to Championship (did not receive payments)
Summary: West Brom spent wisely to remain competitive, but were unable to build a squad capable of surviving in the top flight again.
Premier League relegated teams 2018/19
Cardiff City
2019/20: 5th in Championship, beaten in play-off semi-finals
2020/21: 8th in Championship
2021/22: 18th in Championship
Summary: A steady slide down the table for Cardiff, who have returned to their status of a team who sometimes challenges for a play-off place but not too consistently.
Fulham
2019/20: 4th in Championship, promoted to Premier League via play-offs
2020/21: 18th in Premier League, relegated to Championship (did not receive payments)
2021/22: 1st in Championship, promoted to Premier League
Summary: Fulham are the perfect example of parachute payments working for those who receive them - they've been promoted three times in the last five years and for the most part have managed to keep key players after being relegated. Aleksandar Mitrovic literally scored 43 goals in the 2021/22 Championship season.
Huddersfield Town
2019/20: 18th in Championship
2020/21: 20th in Championship
2021/22: 3rd in Championship, beaten in play-off final
Summary: After some really rough seasons back in the Championship, Huddersfield finally have a sense of direction again, though they're not exactly spending their way out of trouble - 12 of their 13 permanent incomings for the 2021/22 season were on free transfers.
Premier League relegated teams 2019/20 (only two seasons factored)
Bournemouth
2020/21: 6th in Championship, beaten in play-off semi-finals
2021/22: 2nd in Championship, promoted to Premier League
Summary: Like Fulham, Bournemouth were able to keep hold of several stars who are clearly of Premier League talent and have now achieved promotion back to the top flight. Another example of parachute payments working for those in need.
Watford
2020/21: 2nd in Championship, promoted to Premier League
2021/22: 19th in Premier League, relegated to Championship
Summary: Now we're starting to notice a pattern. Watford and Bournemouth were established Premier League sides who kept their cores together thanks to the help of parachute payments.
Norwich City
2020/21: 1st in Championship, promoted to Premier League
2021/22: 20th in Premier League, relegated to Championship
Summary: But Fulham, Watford and Norwich have all been guilty of thinking the sides who help them achieve promotion are fit to survive relegation. We'll touch on this more a bit later.
Conclusions
When the new TV deal came into place, teams relegated from the Premier League and inundated with unprecedented levels of parachute payments seemingly didn't know what to do with the money.
Hull, Middlesbrough, Sunderland, Swansea and Stoke made sweeping changes to their squads but couldn't find the right formula to achieve promotion, with two of these sides suffering another relegation. In those first two seasons, West Brom were the outlier and eventually achieved promotion.
All six teams relegated from the Premier League in 2018/19 and 2019/20 have managed to at least reach the play-offs once, with four achieving promotion. However, none of them have been able to survive for one year back in the top flight (good luck for 2022/23, Bournemouth).
What we can take away is that these relegated teams are becoming wiser on how to use their bigger budgets to get out of the Championship. In that sense, yes, parachute payments are working for those impacted.
But there are also too many other key factors to determine whether they're a clear success. The pandemic hit a lot of clubs hard financially and playing behind closed doors felt like more of an anomaly.
If the current trend continues, teams will eventually figure out how to survive back in the Premier League once they stop receiving parachute payments. But, you know, we'd like to see that to believe it first.