Leicester City's pending relegation from the Premier League, their second in three seasons, could have significant implications, according to Chief Business of Football Writer at LeicestershireLive Dave Powell.
The Foxes are odds-on favourites to return to the Championship after a disappointing 2024/25 season. Ruud van Nistelrooy's men sit 19th in the Premier League with nine games left to play and must overturn a nine-point deficit to Wolves.
It would see City drop down from England's elite division after doing remarkably well to return under Enzo Maresca last term. Unfortunately for the club, the financial consequence of missing out on Premier League football can be tough.
In January, Van Nistelrooy was only able to add Woyo Coulibaly to his squad despite the alarming requirement for further reinforcement. Chairman Aiyawatt 'Top' Srivaddhanaprabha acknowledged that January was a difficult month for the club, blaming Profit and Sustainability Rules (PSR) for the lack of recruits.
“January was a challenging month for us in the transfer window, where our ability to strengthen was limited by our PSR position,” Top said in his pre-Arsenal programme notes. “We were very pleased to sign Woyo Coulibaly and we explored a number of options to make further additions to Ruud’s squad during the month, but the space available in our PSR calculations did not enable us to add further quality we all felt would improve the team.
“We remain ambitious, have always been committed to investing in the squad and will continue to be in the future. But our ambition must be pursued within the laws of the game."
With the club starring relegation in the face, Leicester are set to battle with the English Football League over their financial practicalities in previous years. That will be compounded by the serious implications lost by no longer being a Premier League side.
“Relegation from the Premier League is hugely impactful on a number of levels for clubs from a financial perspective," Powell explains. “The implications for Leicester will be significant.
Dejected Leicester City players after Bruno Fernandes scored Manchester United's third
Dejected Leicester City players after Bruno Fernandes scored Manchester United's third (Image: Michael Regan/Getty Images)
"The Foxes haven’t yet released their accounts for the 2023/24 financial year, although we already know they haven’t breached the Premier League’s Profit and Sustainability Rules. Football finance expert Swiss Ramble had predicted a small £5million loss for the period.
“Relegation, for some players, sees wage cuts implemented, but that is not to say that it is uniform across the squad. The club would almost certainly move to drive down the wage bill and some of their more prized assets would likely be available for sale, as is often the case. The sale of these assets obviously softens the financial blow.
“But then there is the potential of having to factor in a new management team. Would the club retain the services of Ruud van Nistelrooy and his backroom team on the back of such a disappointing spell?
"To cut ties would be costly, but with the three-year clock ticking when it comes to financial support through parachute payments the need for success and a swift return is significant. Clubs that miss the window have historically found it difficult to rally again in a short timeframe.
“Staff cuts can often come into play, as it would with any business that suffers a significant blow to revenue streams, but that isn’t a hard and fast rule. Leicester have been down this route in recent years, and while not always an easy one to navigate, they have the nous and experience to know what is required to secure a return in the event of relegation.”
He adds: “There is the financial safety net of parachute payments in the event of relegation, a mechanism that is designed to stop clubs falling into financial ruin upon exit, but one that has its critics who feel it creates a yo-yo effect where the additional funds make promotion back to the top flight far easier.
“Parachute payments ensure relegated clubs get 55% of the central distribution that every Premier League club receives in their first season in the EFL, and 45% in year two. Clubs that had been in the Premier League for more than one season qualify for a final payment in year three at 20%."
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