The thorny issue of parachute payments has been brought into sharp focus this season, writes James Shield.
Wolverhampton Wanderers, who signed Kevin McDonald from Sheffield United on Wednesday, entered the new League One campaign armed with a £16m subsidy following successive relegations. A small army of clubs in the Championship receive similar help.
The advantage they afford is expected to become even more significant next term when the figure increases from £48m spread over a four year period to £60m.
Robert Wilson, a sports finance specialist from Sheffield Hallam University, told The Star last night that such payments can serve a legitimate purpose. But, he acknowledged, their existence does make it “difficult” others to compete unless, like United, they possess a well-developed youth system.
“Parachute payments are designed to soften the financial landing for relegated clubs,” Wilson said. “Ostensibly it was designed for clubs relegated from the Premier League to the Championship because of the significant revenue gap between the two leagues in terms of TV revenue and commercial incentives.”
“In my opinion clubs rarely use them appropriately,” Wilson added. “Most sign players to relatively long contracts on big wages. “Consequently when they get relegated they use the money to subsidise these. The possible exception in recent times is Blackpool who used FAPL earnings and parachute payments to clear debts and jump start their balance sheet.”
United received 24 month’s worth of assistance when they were relegated in controversial circumstances six years ago. Now competing in the third tier of English football - David Weir’s side entertain Colchester tomorrow - Wilson outlined the arguments for and against a system which former Barnsley manager Keith Hill once described as “a reward for failure.”
“Many argue they help bridge the financial gap between leagues, offering clubs the safety net of investing in their playing structure to become more competitive.
“You could argue it’s a bit like a game of black jack where you bet all your money on a hand knowing you’ll never lose all of it at once.
“Many people disagree with them because of the way that they are abused. Rather than invest sensibly, clubs get carried away and sign players that they can’t really afford then use the parachute payments to retain them to help get promoted at the first time of asking.
Wilson continued: “If I was allowed to sit on the fence parachute payments are more important to so called bigger clubs to continue as a going concern. Think about the financial pressure Sheffield United were under when they moved from the FAPL and then onto League One.
“They have a structure and staff to play higher up the divisions which League One revenues simply could not sustain. The running costs at clubs like these, even net of players, are significantly higher than others.”
So how do United compete with the likes of Wolves? Wilson identified the Redtooth Academy, which saw four if its graduates included in the squad that faced Brentford last weekend, as an important weapon but insisted parachute payments do not guarantee success.
“Through better academies and imagination in the transfer market to unearth a gem,” he said. “That’s one way but, at any level, the financial health of a club is of greater importance than the fact it receives a parachute payment because a financially stable club without them can be more competitive than one in poor health with payments.”