As all three promoted teams once again were sent crashing back to the Premier League Ian Wright and Gary Neville are ‘absolutely worried’ about an increasing gulf with the Championship that is making the top flight as good as a closed shop.
That is a concern shared by Coventry City owner Doug King who has revealed in the past that the club are still losing £5-6million a season amid the financial “distortion”, something, he says, is “not sustainable” unless the club continues to rely on owner funding.
For a second season in a row, the teams who won promotion were relegated. This time Southampton, Leicester City and Ipswich Town are all back in the second tier.
Leeds United and Burnley, who have been relegated in the last couple of seasons, went back up and will hope to buck that trend in 2025/26.
The ‘cliff edge’ between the two divisions is now said to be more than £100m and is in danger of being unnavigable.
“We should be absolutely worried,” said Wright in an episode of The Overlap in April. “There are 17 teams 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.
“These 17 teams are continually getting stronger, the middle teams even. Look where Villa are now. Look at Brighton, look at Fulham having a go, Brentford, Bournemouth. All these teams are getting so much better than the three teams who are coming up.”
He added: “You look at Wolves this season. They have been so bad this season but they have had nothing to worry about.”
Neville pointed to the financial disparity between the Premier League and the rest, highlighted this week by the release of the fees each club has paid to agents this season. Chelsea had paid as much as the whole of the Championship combined, with Manchester City not far behind.
A Premier League club has a guaranteed income of £100m due to broadcast revenue whereas a team in the Championship can bank on just over £5m. There is a parachute payments system in place but the EFL argue that is making the problem worse, partly because it accentuates the gap between the haves and have nots in the Championship.
Neville can see promoted teams panic about how much they can spend in case they go down and face the financial consequences – and an anomaly like Nottingham Forest, who wrote big cheques to beat the system, both still almost got relegated and were then hit by penalties for breaking Premier League profit and sustainability rules.
Leicester have also hit a brick wall by trying to bridge the differences between income in the Premier League and Championship at the same time as not breaking rules.
In short, a Premier League team is allowed to lose £105m over a rolling three-year period while it is £39m in the Championship, or a bit more with a leeway for increase in cost of living. Relegated clubs receive about £50m in their first year down as a parachute payment, going down to about £35m in the second and £16.5m in the third.
Coventry City, like many of its second tier rivals, have been trying to force change. Stoke City have argued that owners should be able to at least match parachute payments by guaranteed investments. There own frustrations are exacerbated by different rules also in play in League One, where owner investment counts as income from a Financial Fair Play perspective, which it doesn’t in the Championship.
It makes the £100m cliff edge just the tip of the iceberg when it comes to navigating football’s financial landscape.
Sky Blues owner King told Coventry City Supporters’ Forum in March: “The club is still losing £5-6million each season at an EBITDA level (EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s a financial metric used to evaluate a company’s operating profitability, essentially looking at how much money a company generates before considering non-operational expenses like interest, taxes, and depreciation/amortization. It’s often used as a proxy for cash flow from a company’s operations.).”
He continued: “Given the distortion to the Championship from the Parachute payment regime, to be competitive warrants, as it stands, a negative operating environment that is not sustainable unless owner funded.”
King added that he, “…hopes that the new football regulation bill will, firstly, increase appropriately funds from the Premier League through the pyramid and, secondly, address once and for all the hugely distorting sums paid to relegated clubs from the Premier League.”
Neville said: “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.”
He added: “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.
“You’re frightened then to go for the risk. What you’re seeing now is teams coming up and thinking, ‘There’s no point in going for it that much, we’ll try to outperform it and then at least we’re not going under financially.’
“It’s getting to a point where the gap is getting bigger.”
The EFL has lobbied for a change in how finances are distributed to address the cliff edge and make sure clubs can realistically cope with the cost of going up or down – but they are being continually blocked by several of the 17 clubs who do not want a change to the rules why they are cashing in.
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