The use and abuse of financial regulation in professional team sports: the case of parachute payments in the English Football Championship
A paper has been published by the Birkbeck Sport Business Centre that tests the impact of parachute payments and abuse on sporting performance.
Dr Richard Evans, Honorary Research Fellow at the Birkbeck Sport Business Centre, Birkbeck, and doctoral alumnus of Birkbeck, University of London, in March 2025, published a paper (together with Dr Nicolas Scelles (Manchester Metropolitan University) and Professor Geoff Walters (University of Liverpool and formerly of Birkbeck) in the Birkbeck Sport Business Centre Working Paper Series, on a topic currently of very intense debate in the football governance policy arena - parachute payments:
- Evans, Richard and Scelles, N. and Walters, G. (2025) The use and abuse of financial regulation in professional team sports: the case of parachute payments in the English Football Championship. Working Paper. Birkbeck Sport Business Centre, London, UK.
Parachute payments are payments made by the English Premier League to clubs relegated from the competition to the English Football League Championship designed to cushion the financial impact of relegation to a lower-revenue division.
The paper has been referenced in the wider media debate on the efficacy of parachute payments e.g. Slater, M. (2 April 2025). The Business of Football: Premier League cuts £75m in funding, Reading in crisis. The Athletic.
Key points
There is a debate in the football industry regarding the desirability and effects of parachute payments made to clubs relegated from the Premier League in England. The debate is due to the dichotomy between the role of parachute payments in providing financial stability for individual clubs and the impact on the wider sporting competition in the Championship league.
The research by Dr Evans and his colleagues assesses the appropriate amounts and duration of parachute payments with data for 18 seasons from 2004/05 to 2021/22. It also makes an original contribution to an understanding of the system by identifying abuse of the system whereby clubs use the payments to subsidise rather than reduce their wage spend. The research uses regression analysis to test the impact of parachute payments and abuse on sporting performance and to compare the actual competitive balance and intensity of competition in the Championship with simulated levels without parachute payments and abuse. It finds that:
- Parachute payments are financially necessary for clubs for up to two (not three or four) years following relegation from the Premier League.
- Parachute payments are excessive and should be reduced to 25% (not 55%) of the equal share from the EPL broadcast rights for the first year, then again 25% (not 45%) for the second year.
- The impact of parachute payments on promotion and relegation in the Championship is mostly attributable to abuse of the system
Overall, the paper concludes that there is clear evidence that abuse of the system largely explains the impact of parachute payments on both the competitive intensity of the league and the effect on promotion, play-off and relegation places. If the abuse was removed the impact on these dimensions would be small and could be reduced further if the amount of payment was reduced.
The implications are that parachute payments do not need to be abolished to increase competitive balance in the Championship but they are in need of reform to reduce abuse and reduce both the amount and duration of payments.
Author biographies
Dr Richard Evans is an Honorary Research Fellow at Birkbeck, University of London with an MSc in economics from the London School of Economics and a PhD in sports economics from Birkbeck, University of London. He has published academic journal articles on the economics and finance of football in England in the Journal of Sports Economics, Corporate Governance, Accounting, Auditing and Accountability Journal and Managing Sport and Leisure. He has supervised and taught postgraduate students' strategic management and research methods and was formerly a professional economist and qualified management accountant.
Dr Nicolas Scelles is a Reader in Sports Economics in the Institute of Sport and the Business and Law Faculty at Manchester Metropolitan University and a member of the Faculty's Sport Policy Unit. Nicolas has published over 70 articles on the business, economics, management and policy of football and other sports in leading academic journals such as European Sport Management Quarterly, Journal of Business Ethics, Journal of Sports Economics and Sport Management Review. He is the most cited researcher over 2014-2023 in the topic 'Sport; Major League; Baseball' (that is, the economics of professional team sports) as per SciVal data.
Geoff Walters is a Professor in Sports Business and Director of the Centre for Sports Business at the University of Liverpool Management School. He has published extensively on the governance of sport and on financial regulation within the professional football industry. His research has been published in leading sport management journals as well as journals within the business and management field. Geoff works with a range of organisations in the sport sector to influence board practice and his research has also contributed to policy developments. He also teaches on various executive education programmes that support the continuing professional development of practitioners working within the sports industry.
Contact name: Sean Hamil