Are Parachute Payments Under Scrutiny?

The independent football regulator (IFR) in England has initiated a comprehensive review of financial practices in football, including a reassessment of 'parachute payments' to relegated clubs. This review, detailed in the forthcoming State of the Game report, aims to address the financial pressures and governance issues facing the sport, promising to be the most extensive examination in the industry's history.

Last updated: 19 October 2023 (BST)

What’s happening now

The IFR has announced its intentions to conduct a thorough analysis of the financial landscape of English football. This includes reviewing the controversial parachute payments that provide financial support to clubs relegated from the Premier League. The regulator asserts that this review will bring clarity to the financial practices within the game, which have been a point of contention between the Premier League and the English Football League (EFL).

Key takeaways

The IFR's State of the Game report will assess financial pressures and governance in English football.
Parachute payments, currently worth millions, will be critically evaluated for their impact on competition.
The report aims to promote long-term sustainability and fairer wealth distribution in football.

Timeline: how we got here

Since the inception of the IFR, several key milestones have occurred regarding financial scrutiny in English football:

November 2021: The government announces plans to establish an independent football regulator.
April 2022: The IFR is officially launched to oversee financial practices in football.
October 2023: The IFR reveals the scope of its State of the Game report, set for draft publication later this year.

What’s new vs what’s known

New today/this week

The IFR's announcement marks a significant step towards transparency in football finance. The regulator's review of parachute payments and other financial mechanisms aims to address ongoing disparities between leagues.

What was already established

Parachute payments have been a longstanding feature in English football, designed to cushion relegated clubs financially. However, they have also been criticised for perpetuating inequality within the football league system.

Impact for the UK

Consumers and households

The review could lead to changes in ticket pricing and how clubs manage their finances, affecting fans directly. If financial disparities are addressed, this may result in a more competitive league structure, ultimately benefiting consumers.

Businesses and jobs

Changes in financial distribution could impact clubs' ability to hire and retain talent, affecting job security within the football industry. The review aims to create a more equitable system that could lead to improved job stability across various clubs.

Policy and regulation

The IFR will have the authority to mediate financial settlements between the Premier League and EFL if negotiations fail. This could lead to new regulations ensuring fairer financial practices within the game.

Numbers that matter

£40 million: Approximate value of parachute payments per relegated club over three years.
5: The top five tiers of men's professional football that will be assessed in the report.
2027: The final report publication year, indicating a long-term commitment to reform.

Definitions and jargon buster

Parachute Payments: Payments made to clubs relegated from the Premier League to support them financially.
Independent Football Regulator (IFR): The body established to oversee financial practices in English football.
State of the Game report: The comprehensive analysis that will evaluate financial and governance issues in football.

How to think about the next steps

Near term (0–4 weeks)

The consultation period for the State of the Game report will begin, allowing stakeholders to provide input on its terms of reference.

Medium term (1–6 months)

Draft findings may be released, prompting discussions among clubs and governing bodies about potential reforms.

Signals to watch

Feedback from the consultation process that may influence the final report.
Reactions from clubs regarding the proposed changes to parachute payments.
Financial settlements or agreements reached between the Premier League and EFL.

Practical guidance

Do

Stay informed about the developments in the State of the Game report.
Engage in discussions about financial practices within clubs.

Don’t

Dismiss the importance of financial equity in football.
Ignore the potential implications of the report on your club’s future.

Checklist

Review your club’s financial health and governance practices.
Follow updates from the IFR and related discussions.
Consider how changes might affect ticket prices and club engagement.

Risks, caveats, and uncertainties

While the IFR aims to bring significant change, the outcomes of the review are uncertain. The proposals could face resistance from clubs benefiting from current financial systems. Additionally, the time frame for implementation may lead to further delays in addressing existing issues.

Bottom line

The independent football regulator's initiative to review parachute payments and overall financial practices in English football represents a pivotal moment for the sport. As the State of the Game report unfolds, it holds the potential to reshape the financial landscape, promoting fairness and sustainability within the game.

FAQs

What are parachute payments?

Parachute payments are financial support given to clubs relegated from the Premier League, meant to help them cope with lost revenue and maintain competitiveness.

When will the State of the Game report be published?

The draft of the State of the Game report is expected to be published later this year, with a final version projected for 2027.

How will the IFR impact club finances?

The IFR aims to create a more equitable financial framework, which could lead to changes in how money is distributed across leagues, potentially benefiting all clubs.