Championship clubs ‘spending unsustainably’ to keep pace with parachute payments, report finds

A new report on the finances of the Championship has painted a bleak picture of a division hooked on unsustainable spending but dominated by clubs that receive Premier League parachute payments.

Commissioned by corporate restructuring firm Leonard Curtis, the Football Finance Report has been co-authored by Professor Rob Wilson, the provost of the University Campus of Football Business (UFCB), and Dr Dan Plumley, a senior lecturer in sports finance at Loughborough University.

Clubs relegated from the Premier League receive parachute payments for at least two seasons, with a year-one payment worth about £50million ($67.4m; €58.4m) and a year-two payment worth £40m. The intention is that they give clubs the security they need to invest in their squads when promoted, as the extra money will provide a soft landing if the club returns to the Championship.

However, the size of the parachute payments compared to the £5.5m “solidarity” payments given to the rest of the division, gives parachute clubs a huge advantage, drastically affecting the Championship’s competitive balance and incentivising non-parachute clubs to spend beyond their means.

According to the report, parachute clubs generated almost three times the average annual revenue of non-parachute clubs across 10 seasons from 2015-16 to 2024-25 (£59.7m versus £21.3m).

And these financial head starts have translated to the pitch. Over the same period, parachute clubs were more than four times more likely to be promoted than non-parachute clubs (31.4 per cent versus 7 per cent). In 2024-25, parachute clubs were almost 27 points better off than the average non-parachute club, with three of that season’s four parachute recipients, Leeds United, Burnley and Sheffield United, filling the top three spots in the table.

But as well as the negative impact on the division’s competitive balance, parachute payments create an arms-race scenario. Over the 10-year period studied by the report, the division’s total revenues grew from £547m to £920m, but the wage-to-turnover ratio never dropped below 91 per cent. In 2024-25, 13 of the 23 clubs that filed accounts (Sheffield Wednesday did not as they were in administration), spent more on wages than their entire turnover.

“The overarching story to emerge from this report is the growing structural inequality in the Championship, alongside a financial model that remains difficult to sustain,” said Leonard Curtis director Alex Cadwallader.

“The Championship is a near £1billion league that cannot control its wage bill. It is a financial paradox, with record revenue across the league, unsustainable spending and yet a promotion race increasingly tilted towards the richest clubs.”

The English Football League has been trying to rein in club spending for years, without much success, but has introduced new financial rules this season known as Squad Cost Rules (SCR). Under this regime, each club’s expenditure on players and coaching-related costs, including transfers and agent fees, is limited to 85 per cent of its turnover.

Wilson and Plumley applied the SCR limit to the 2024-25 Championship and found that 18 of the 23 reporting clubs would have breached the 85 per cent threshold, with 11 above 100 per cent, Oxford United at 152 per cent and Preston North End at 160 per cent.

Under SCR, club owners are allowed to inject up to £16m in equity each season. But even with these injections, three clubs — Burnley, Cardiff City and Leeds United — would have breached the limit in 2024-25.

“While SCR should encourage clubs to live more closely within their means, because permitted spending is linked to revenue, higher-revenue clubs retain the ability to sustain much larger playing budgets,” said Wilson.

“The rules may therefore improve sustainability without addressing the league’s competitive balance, with the Championship’s promotion race increasingly won in the balance sheet.”

The report comes at a time when the EFL and Premier League remain locked in talks over a new financial distribution deal. The last agreement between them, which set the formula for the Premier League’s parachute and solidarity payments, was made in 2019 and has been due for renegotiation for at least four years.

In fact, their failure to reach a new deal is one of the reasons why successive UK governments pushed for the creation of an Independent Football Regulator, which can impose a financial settlement on the game if the leagues cannot decide one themselves.

In July, the Premier League’s clubs finally voted to approve a formal offer to the EFL that would boost the annual solidarity pot by about £150m per season. However, the Premier League has refused to scrap parachute payments — trimming them slightly — and wants the Championship to adopt a more aggressive merit rake than it uses itself. This would see the Championship move to a performance-related distribution model, with the first-placed team earning more than double the bottom-placed team.

Championship clubs are currently split on whether to accept this offer, with several of them believing the proposal will not address the financial chasm between the leagues and will actually create new splits within the Championship.

Many in the game believe the window to agree a new deal will close when the IFR publishes the preliminary version of its “state of the game” financial report in October, as everyone will know then which way the IFR is leaning and there will be no incentive for one side or the other to reach a deal without asking the regulator to intervene.