Leicester City and Southampton tap into £1.6bn fund as relegation Parachute payments explained

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Parachute payments – the sums given to cushion the fall of clubs relegated from the Premier League to the Championship – are one of the most contentious topic in football finance.

Depending on who you ask, they are either a miracle of Premier League benevolence or a corrupting force that is destroying the competitive balance of the Championship and the wider EFL.

Each season, several Football League clubs receive parachute payments. Leicester City and Southampton will be among that number in 2025-26 having been relegated with a whimper this term.

It’s true that there are very few industries that give away a huge chunk of their revenue every year despite the fact they are not technically obliged to. That’s the argument Premier League’s argument.

The EFL’s riposte is that the Premier League does not exist in a vacuum. Without the EFL, the Premier League would be a closed-shop, US franchise sport-style competition, is the view.

There are a million semitones between the two arguments too, of course.

Some clubs in the EFL do very well out of parachute payments and, naturally, are quite happy with the current system.

Others – including EFL chairman Rick Parry – say it is distorting competition in the Championship, creating a league within a league, out of which the same few clubs go up to the Premier League each year.

We’ll leave you to make your own mind up – but suffice to say it’s an argument which has deepened the divide between the top flight and second tier.

Position	Team	Played MP	Won W	Drawn D	Lost L	For GF	Against GA	Diff GD	Points Pts
1	LeedsLeeds	44	27	13	4	89	29	60	94
2	BurnleyBurnley	44	26	16	2	61	15	46	94
3	Sheff UtdSheffield Utd	44	27	7	10	60	35	25	86
4	SunderlandSunderland	44	21	13	10	58	41	17	76
5	Bristol CityBristol City	44	17	16	11	57	49	8	67
6	CoventryCoventry	44	19	9	16	62	57	5	66
7	MiddlesbroughMiddlesbrough	44	18	9	17	64	54	10	63
8	MillwallMillwall	44	17	12	15	45	46	-1	63
9	BlackburnBlackburn	44	18	8	18	50	46	4	62
10	West BromWest Brom	44	14	18	12	52	44	8	60
11	SwanseaSwansea	44	17	9	18	48	52	-4	60
12	WatfordWatford	44	16	8	20	51	58	-7	56
13	Sheffield WednesdaySheffield Wednesday	44	15	11	18	58	67	-9	56
14	NorwichNorwich	44	13	14	17	67	66	1	53
15	QPRQPR	44	13	14	17	52	58	-6	53
16	PortsmouthPortsmouth	44	14	10	20	56	69	-13	52
17	Stoke CityStoke City	44	12	14	18	45	60	-15	50
18	PrestonPreston	44	10	19	15	45	55	-10	49
19	Oxford UnitedOxford United	44	12	13	19	44	62	-18	49
20	Hull CityHull City	44	12	12	20	43	52	-9	48
21	DerbyDerby	44	12	10	22	47	56	-9	46
22	LutonLuton	44	12	10	22	41	64	-23	46
23	CardiffCardiff	44	9	16	19	46	69	-23	43
24	PlymouthPlymouth	44	10	13	21	48	85	-37	43

And with the Premier League and EFL in talks over a revised version of the parachute payments agreement, the government could even step in via an independent football regulator.

But how much are parachute payments really worth to individual clubs?

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How much Premier League parachute payments are worth in 2025

The Premier League used to officially disclose the breakdown of parachute payments each years, but they now haven’t done so since the 2018-19 season.

That season, the top flight paid just shy of £250m in parachute payments, which are paid out over three years, meaning as many as nine Championship clubs can be receiving the payments at any one time.

It has been reliably reported that the three clubs relegated last season – Burnley, Sheffield United and Luton – have each received £49m in parachute payments this season.

That is a 10 per cent increase increase on the previous year. It’s also what Leicester City and Southampton can expect next season.

For clubs that have spent one season in the Premier League, 55 per cent of the total parachute payment is paid in the first year following relegation, with the remaining 45 per cent in year two.

So for Luton, they will receive £49m this season and, if they aren’t relegated to League One by then, a further £40m next season.

If a club has spent more than one season in the top flight before relegation, there is an extra £20m in year three.

The Premier League does, however, save cash if relegated teams are promoted back to the Premier League while still in receipt of parachute payments.

This season, top-flight clubs will share around £50m between them because Leeds and Burnley have been promoted while still receiving parachute payments, which they now no longer need next season.

The parachute payments are part of a £1.6bn solidarity fund that the Premier League ringfences for the EFL over a three-year media rights cycle, as well as charitable causes and community initiatives.

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Will an independent football regulator scrap parachute payments?

The Premier League and EFL have been in talks for some time about a so-called ‘new deal for English football’ that would, in theory, see more money trickle down from the top flight.

The EFL want the Premier League to increase the base solidarity payment each of its clubs receives each year. Every Championship club received around £6m this year, with reduced amounts in League One and League Two.

Instead of setting aside most of the £1.6bn pot for parachute payments, the EFL want parachute payments either scrapped or dramatically reduced in favour of a bigger basic cut.

The two sides have been unable to reach an agreement.

As such, the proposed independent football regulator could be given backstop powers to intervene.

The regulator has broad support and the bill is currently making its way through Parliament. It may also have the power to prevent breakaway leagues, block club colour or badge changes and more.