For established Premier League clubs, relegation from the topflight is rarely the result of a single bad season or a momentary dip in form.
More often, it is the culmination of deeper structural issues that build quietly over time, misjudged recruitment, an imbalanced squad, manager churn, and financial decisions that fail to align with long-term strategy.
Even in an era of record revenues, the margins between survival and relegation remain surprisingly thin, and clubs that appear stable on the surface can quickly find themselves exposed. The modern game offers no guarantees of safety, no matter the size of the stadium, the scale of the wage bill, nor the club’s history or trophy cabinet.
English football has enough examples in history to underline that point. Recognisable clubs such as Leicester City, West Ham United, Newcastle United and Blackburn Rovers have all experienced relegation despite their size or status as previous champions.
With the likes of Tottenham, West Ham and Nottingham Forest all facing a danger of relegation in the 2025/26 season, football finance expert Dr Dan Plumley gives us a breakdown on what relegation means for the so-called bigger clubs in the modern age, including:
- The cost of relegation, with relegated clubs immediately losing £60m+ in broadcast revenue
- The importance of winning promotion at the first attempt after relegation, and the impact of parachute payments
- How Tottenham could lose upwards of £200m if they suffer relegation to the Championship
- Leicester City’s journey from Premier League Champions to League One in 10 years
- The changing financial regulations that make Premier League survival critical to a football clubs’ success
Relegation from the Premier League costs clubs over £60m
The biggest financial strain on any club relegated from the Premier League to the Championship is related to broadcasting income. Football clubs make money in three main categories (matchday, broadcasting and commercial). The gap in broadcasting income between the Premier League and the Championship is considerable. In the 2024/25 season, title winners Liverpool received £174.9m from the Premier League broadcasting income pot. The bottom club, Southampton, received £109.2m.
When a club suffers relegation from the Premier League, they are in receipt of parachute payments for the three years following relegation (unless they get re-promoted during that time). Parachute payments from the Premier League are designed to soften the financial blow of relegation. Clubs receive 55% of the equal share of broadcasting revenue in the first year, 45% in the second, and 20% in the third. Based on 2024/25 published broadcasting figures, this would put the total value of parachute payments at approximately £106.8m across all three seasons.
A club would receive £48.95m in year 1, £40.05m in year 2 and £17.8m in year 3. Using the Southampton figure as an example, this means that the net revenue deficit for a club following Premier League relegation is around £60m. We can also see a similar figure in Luton Town’s 2025 accounts (their first season post Premier League relegation). Their broadcast distribution money dropped from £116.6m to £56.2m – a difference of £60.4m. A club participating in the Championship (without parachute payments), by comparison, currently receives approximately £8m from central broadcasting distributions.
Parachute payments are therefore an exacerbating factor in the ever-growing financial gap between the Premier League and the Championship. In 2024, the average revenue of parachute payment clubs in the Championship was £90m compared to non-parachute payment clubs’ average revenue of £27m. Parachute payments may have been designed to soften the landing, but they are rapidly becoming a reward for sporting failure and are distorting competition in the Championship.
Nottingham Forest, West Ham & Tottenham are at risk of relegation, which could cost the latter over £200m
Let’s now place those wider numbers in the context of the clubs most at risk of relegation this season, focusing on the current bottom six of Wolves, Burnley, Tottenham, West Ham, Nottingham Forest and Leeds United. The biggest shock of all would undoubtedly be Tottenham. Relegation for them would be catastrophic.
Their revenue line in 2025 was £565.3m. £161.7m of that was from broadcasting, including UEFA distribution linked to European competition. It is highly likely that some commercial deals will have break or release clauses in them based on sporting performance and you would anticipate a drop in matchday revenue also so the true cost of relegation for Spurs might be north of £200m. That said, their wage bill has always been run on a tight budget considering their revenue and while relegation would put some acute pressure on that figure they are better placed than others to withstand the hit. In 2025, their wage bill totalled £255.8m (45% of revenue).
This would have to come down in the Championship, of course, and there would likely be a fire sale of some key players, but there is scope to tackle the wage bill if the worst-case scenario occurs. By comparison, the average wage bill in the Championship for 2025 (with three clubs yet to file accounts) is £36.6m which is almost seven times less than the total of Spurs alone. Put simply, Spurs should not be getting relegated. It would arguably be more of a sporting shock than Leicester City winning the Premier League in 2016.
The other clubs in the bottom six are not immune to the financial shock of relegation but again some would feel it more than others. Both Leeds and Burnley have yo-yoed between the two leagues in recent years and would arguably be more ready for another fall but Wolves, West Ham and Nottingham Forest would be hit hard. In 2025, Wolves revenue was £172.3m of which broadcast revenue totalled £125.6m (73%).
Their wage to revenue ratio was almost 95%, placing the importance of that broadcast revenue further into context. One would hope that they have mandatory wage reduction clauses in contracts to enable them some room to move. The wages to revenue ratios are slightly more manageable for West Ham (76%) and Nottingham Forest (75.5%) but even then, the £60m that they will lose off the revenue line will place further strain on costs. As we can from these numbers, relegated Premier League clubs are desperate to return within the three-year parachute payment window so that they can regain access to the Premier League broadcast pot.
Relegated clubs lose commercial leverage, and often their best players
Relegation from the Premier League also causes a loss of leverage in other ways. There is a potential that commercial deals suffer – both in the case of existing ones and the potential for generating new business opportunities.
The Premier League is broadcast in over 200 territories around the world. Corporate partners are buying into clubs for eyes on their brand and this would take a hit in the Championship. Tottenham would be shielded somewhat by the other revenue generating events they have at their stadium (e.g. NFL deal, concerts etc.) and West Ham would also benefit from the excellent financial deal they have with the London Stadium, but the loss of commercial value and income – whilst ultimately difficult to measure – is real.
As with any business, when revenue takes a hit, you may have to cut cost. For football clubs, this often means not just reducing wages but potentially selling players. Of the Premier League clubs in trouble, you would again expect Tottenham and West Ham to probably be hit hardest here – both in terms of needing to sell and having no choice but to sell given the make-up of their squad.
It is hard to imagine James Maddison or Jarrod Bowen, as two examples, being happy playing Championship football. It is also not realistic to try and set a target in terms of amount of money generated through player sales as the reality is the total amount is never paid up front anyway and plenty of clubs owe other clubs in respect of outstanding transfer fees. It is the wage savings that become the greatest gain for a football club when trying to manage cost.
From PSR to SCR, how the regulatory landscape is changing
Premier League clubs have recently voted to introduce a new set of financial rules from the 2026/27 season onwards, named Squad Cost Ratio (SCR) and Sustainability and Systematic Resilience (SSR). This is a major change from the Profitability and Sustainability Regulations (PSR) that have been in place for the best part of a decade – and have increasingly come under criticism.
PSR (in the Premier League) states that clubs are not allowed to lose more than £105m limit over the 3-year monitoring period (after excluding deductions for “healthy” expenditure), though the threshold is lower for clubs that have competed in the Championship in the season prior to promotion.
In the Championship itself, the allowable loss figure is £39m over three years but only £5m of this per year can be ‘true’ loss with the remaining £8m covered by secure funding (effectively an owner footing the bill).
The new changes represent a very different approach to financial regulation. At its simplest, SCR will limit a club’s squad spending to 85% of football-related revenue and net player trading profit, while SSR will introduce tests for short-term, medium-term and long-term financial health in a blatant nod to the new Independent Football Regulator.
The changes will see the Premier League follow in UEFA’s footsteps as the European football governing body has already introduced SCR across its competitions, albeit with a lower threshold of a 70% ratio. The Premier League proposal gives more scope for non-European competing clubs to push a little harder, but the reality is that, under a ratio based on spend against revenue, the biggest clubs will still win out.
There are also strong rumours that the EFL, and in particular the Championship, will switch to SCR in the future although that remains unconfirmed at the time of writing. This creates uncertainty around the current position of where clubs are at against PSR both in the Premier League and the Championship and conversations regarding headroom and allowable losses may soon be irrelevant. That said, a move towards a more joined up position on financial regulations should be viewed as a positive especially as clubs can move between leagues through promotion and relegation. Not that this is headache free from a club perspective given the financial gap between the leagues.
A fall from grace for a former Premier League champion – Leicester City
Leicester City are a good example through which to view some of the challenges of English football’s fragile financial ecosystem. Leicester’s trajectory, from Premier League champions in 2016 to relegation into League One (with a points deduction for breach of PSR thrown in) highlights how fragile success can be and demonstrates how quickly financial and sporting decline can set in.
Relegation in the modern game may have longer-lasting consequences than in previous eras and there are serious questions to be asked of club sustainability outside the ‘elite revenue’ tier. Leicester’s revenue as a Premier League club in 2023 was £177.5m. This dropped to £105.3m in 2024 when they spent a season in the Championship before jumping back to £186.7m in 2025 (a season in which they were again relegated from the Premier League). We can therefore expect their 2026 revenue to be back around 2024 levels (c.£100m). Their relegation into League One means this would drop further (possibly to around £60m) and put acute pressure on an already fragile financial position.
Their owners have been admirable with their financial commitment to the cause and at times have written off huge loans to boost the club’s balance sheet, but the wage bill would be a cause for concern and relegation to the third tier would have a substantial impact. In their last Championship season (2024) their wage bill (£107.2m) exceeded their total revenue (£105.3m) and while a Premier League season gave them some buffer, we would expect the wage bill to still be high for the current season (25/26). Relegation to League One would mean that wage bill needs to reduce further and many of their star players would likely have to be sold to cover some of the cost of relegation. They will remain reliant on their owners for the foreseeable future.
The Widening Gap between the Premier League and Championship
The financial gap between leagues has extended in recent years due to increasing Premier League broadcasting deals and the commercial power of the sport’s richest clubs. This shows no signs of slowing down and the numbers in this article linked to several individual clubs shows just how bleak the circumstances can become if the sporting scales don’t tip in your favour.
A tweak in financial regulation won’t turn the dial, unfortunately. A huge governance reset would be required to really shake things up, but the clubs would be unlikely to vote for this, favouring vested self-interest rather than collective action. The Independent Regulator may yet have a say and may be able to force some of these changes upon the clubs in the future although that very much remains to be seen right now.
In the short to medium term, in terms of English football’s finances and sporting order, we should expect more of the status quo with the cards stacked firmly in favour of the biggest and revenue richest clubs.