What Are the Costs Of Promotion To The Premier League?

Owners, players, and fans of lower league clubs want nothing more than to secure promotion to a higher division. Especially promotion to the Premier League, and the subsequent financial windfall, causes Championship clubs to invest heavily. Even to such an extent that it is financially unsustainable when they fail to secure promotion.

In other leagues and at lower levels there is the same desire to go up. In April 2023, Wrexham AFC won promotion from the English National League to League Two. A story suitable for the owners Ryan Reynolds and Rob McElhenney. The Hollywood-pair invested their money in the struggling Welsh club with the goal, among others, to climb the ranks.

Clubs invest money because they want the prestige and increased income that comes from playing at a higher level. However, it is not only revenue that increases once promotion is secured. Generally, clubs also see their costs rise. What kind of costs do promoted clubs incur? And how do these higher costs affect them, especially when they are unable to preserve their presence at the higher level?

Promotion bonusses

The first cost clubs incur when securing promotion is bonuses. Oftentimes, players have performance related bonuses stipulated in their contracts. In case they win the league or a cup, qualify for European football or get promoted they receive an amount on top of their fixed wages. These amounts vary widely amongst clubs and leagues depending on the owners, the club’s financial state and the increase in revenue the following season.

2022/23 Championship winner Burnley FC, for example, paid promotion bonuses of £8 million back in 2013/14 when the club secured promotion to the Premier League with a second place finish.

In 2015/16, the Clarets were able to secure another promotion to the Premier League, which saw them pay out £11.3 million in bonusses to players and playing staff. A 41 percent increase compared to two seasons prior. The promotion-related pay-out played an important part in the losses (before tax) of respectively £8 and £5 million incurred by Burnley in those two seasons.

Burnley FC bonuses and financial performance in previous two promotions

Promotion leads to significant increases in income, especially from broadcasting rights, but this amount comes only into play in the new season. Bonuses must be paid during the season of promotion, where revenue is still at the ‘old’ level.

Bonuses must be paid with Championship-level revenue

This could be a real problem for some promoted sides. In April 2023, Sheffield United also secured a spot in the 2023/24 Premier League. However, throughout the season the Blades were involved in several off-field issues. There was the proposed takeover by Nigerian businessman Dozy Mmobuosi and a transfer embargo during the January transfer window.

The latter was imposed by the English Football League because of the default of payments to another club. The club was unable to spend money on player recruitments before the matter was resolved. The financial statement published in April 2022, stated that the club owed £18.25 million in outstanding transfer payments in June 2021.

This embargo in combination with other late payment issues gave way to rumours that the club would be unable to pay the generous promotion bonuses. As a reward for securing promotion, Blades players were said to receive anywhere between £250,000 and £400,000 depending on their contribution. Adding up to a total promotion pot of £8 million. To compare it, Manchester City’s bonus pot for winning the Premier League and a possible FA Cup is reported to be around £15 million.

By April of 2023, the transfer embargo was lifted, after the club found an agreement to defer the payment to the future. At which time the club can likely use their Premier League income to pay for this and other deferred payments (to suppliers). Despite the financial struggles, the club does not foresee any problem in paying its players their bonuses in time.

Bonuses for achievements at different levels in English football

Wrexham AFC promotion bonus

Offering high promotion bonuses with future income in mind is not an uncommon practice. At Wrexham AFC, implementation of a generous promotion bonus scheme was one of the first acts of businesses from Reynolds and McElhenney after taking over in February 2021. The pair wanted to bring the club back to the Football League as soon as possible.

According to executive director Humphrey Kerr, a promotion pot of £250,000 would have been distributed amongst the players had they been successful that season. In addition, players received an extra £200 per win and £50 per draw on top of their fixed wages whilst being ranked amongst the play-off places.

The Welsh club was unable to secure promotion at the time. They were successful during the 2022/23 season though and secured direct promotion to League Two by winning the league. Reports claim a generous bonus fund of £200,000 was available for the players. With the average weekly wage estimated to be between £1,000 and £1,500 in the National League, it would mean a significant extra on top of the players’ fixed income.

Establishing a competitive squad

After promotion, clubs want to establish a competitive squad so they can compete and avoid immediate relegation. This requires investments in the right, quality players, resulting in an increase in the salary bill. Especially for promoted sides in the Premier League, transfer sums and wages will rise significantly given the current market.

Nottingham Forest experienced this when the club won promotion to the Premier League after 23 years by beating Huddersfield Town 1-0 during the 2022 Championship play-off final. By winning the match, Forest secured at least £170 million in extra revenue (across three seasons), according to Deloitte. An amount mostly made up of higher broadcasting revenue distributed amongst Premier League clubs compared to those in the Championship.

Promoted side brings in 22 players for €157 million

However, Forest needed to invest in both quality and depth to establish a squad capable of competing in the 2022/23 Premier League. From the play-off final starting 11, only three players started in the club’s 2022/23 opening match. The club brought in a record-breaking 22 players during the summer window, spending €157 million in the process. This made them the highest spending promoted club. They ranked fifth across Europe, behind Chelsea (€279 million), Manchester United (€238 million), West Ham (€183 million) and Tottenham (€170 million), in gross transfer expenditures during the 2022 summer.

Forest also spent more than the £86 million the Championship clubs spent on transfers combined. Apart from being a major financial investment, the high number of new recruits was also risky from a performance perspective. Getting so many new players to jell can be tricky and makes it difficult to further develop the successful strategy implemented the season prior.

Since five of Forest’s players in their play-off matchday squad were on loan during the 2021/22 season, the club had no other choice though. With the players remaining the club would likely not have been competitive in the Premier League. Even with all those investments, the 2022/23 season became a nervous affair for Forest. The club secured safety on the penultimate match day by winning 1-0 at home to Arsenal. Making the initial financial pay-off from promotion to the Premier League rise to £300 million and thus off-setting some of the high costs.

Salary cap for Wrexham

In addition to high promotion bonuses, Wrexham paid several players significantly above the average National League wage in a bid to secure promotion. Paul Mullin reportedly earned a salary of £4,000 per week, while central defenders Aaron Hayden and Ben Tozer are said to have made £3,000 per week.

To establish a squad that can also compete in League Two, the club will need to invest in quality and thus spend even more. Meaning higher wage costs and probably transfer sums. However, League One and League Two have a financial constraint that prevents clubs from spending more than 50 percent of their revenue on player salaries. A measure to, amongst others, protect clubs from financial mismanagement in a bid to win promotion. During the COVID-19 pandemic, a fixed salary cap was even implemented in League One (£2.5 million) and League Two (£1.5 million).

Such a cap would have limited Wrexham from ‘overspending’ to compete or even get promoted like they did in the National League. The current financial constraint of being able to spend only half of incoming revenue should not pose too much trouble for the club though. After the takeover of Reynolds and McElhenney, and the subsequent documentary they released, the club’s worldwide popularity has increased enormously. Sponsorship and merchandising income will only continue to rise. Add to that the increased broadcasting revenue and Wrexham could probably spend enough to be competitive in League Two as well.

Wage costs rise after promotion to the Premier League

How much a club is willing to invest in squad additions and the additional wages is up to the club. Some clubs are more reserved, while others take the risk to end up with contracts too expensive if they are unable to stay up the following season.

In 2019/20, Fulham, Leeds United and West Bromwich Albion were the three sides that secured promotion to the Premier League. The increase in their wage costs in the year following promotion differed though. West Brom’s wage costs increased by 15 percent to £76.9 million. This made them only second to Sheffield United (£57.4 million) with the lowest wage costs amongst Premier League teams that season. Leeds United increased their total wages by 38 percent to £108.3 million. While Fulham’s £113.9 million in wages were 57 percent higher than during their successful Championship campaign the season prior.

The promoted sides spent not even a third of the wage costs of the highest spender in the Premier league, Manchester City (with £354.7 million). West Brom spent only 22 percent, while Leeds and Fulham spent respectively 31 and 32 percentage of City’s expenditures on wages. Yet, they all spent more than Watford, who had the highest wage costs in the Championship in 2020/21 with £70.3 million. West Brom, the most frugal one of the three, only nine percent more. While Fulham and Leeds’ wage costs were respectively 62 and 54 percent higher than Watford’s.

Wage costs of 2020/21 Premier League promoted sides
and compared to leagues’ highest spender

Player investments indicator of avoiding immediate relegation?

Of the three sides, only Leeds United was able to stay up. For West Brom the lack of investments compared to other Premier League sides likely played a role in their relegation. In addition to the second lowest wage costs, the club reported only £50.3 million in players’ registrations in 2020/21. The third lowest amongst Premier League teams. And while Fulham’s wage costs increased significantly, they were more frugal with spending on player transfer sums compared to, for example, Leeds United. Fulham booked only £77.1 million in players’ registrations, while Leeds recorded £116.4 million. Over 50 percent more.

High investments risky for the future?

Promotion to the Premier League thus requires investments. Expenditures that dampen the joy of the major revenue increases. It is particularly the trade-off between investing enough to be able to compete and avoiding immediate relegation, and being able to financially survive if the club does get relegated again.

In a bid to incentivise Premier League clubs to invest in talented players and wider business operations there are parachute payments to relegated clubs. These should make it easier and less risky for (promoted) clubs to offer competitive wages, without the risk of financial hardship due to employing players with expensive, Premier League level contracts, when relegation does happen.

Major gap in wage costs between leagues

Causing this trade-off is a major gap between the two leagues in terms of both revenue and (wage) costs. The three sides that got relegated from the 2019/20 Premier League, had the highest wage costs in the 2020/21 Championship. Despite reducing wages by 33 percent, Watford still had wage expenditures of £70.3 million. The highest of all Championship sides. Norwich had the second lowest wage costs (£88.9 million) in the 2019/20 Premier league, but even after reducing their wages with 25 percent they had the second highest wage bill in the 2020/21 Championship. Bournemouth had the highest wages of the three in the Premier League but was able to reduce their total wages by 47 percent (the most) to £57.4 million.

It shows that despite major cuts to expenditures, relegated sides are still spending more than (most of) their Championship counterparts. The parachute payments are therefore a welcome source of extra revenue for relegated sides. At the same time, it highlights the risky financial position of promoted clubs.

Infrastructure requirements at higher levels

It is not only the squad that requires investments to compete at a higher level.

Infrastructure needs to comply with league requirements as well. Sometimes this means clubs need to renovate their facilities to make it safer and more suitable for VAR or broadcasting. There have also been leagues that specified that clubs needed to invest in their digital channels, since a club is part of the product the league is trying to sell.

Especially the Premier League is said to have strict broadcasting and facility regulations. When a club has been going back and forth between the Premier League and Championship, these investments will likely be small. However, when a club promotes to the highest level after a while it could lead to major and unwanted expenditures. Such would be the case for Luton Town if they win the play-off match for the final spot in the 2023/24 Premier League against Coventry on May 27th.

Up to £10 million in renovations required

According to Chief Executive Gary Sweet, Luton Town must “pretty much rebuild” one of their stands to comply with Premier League regulations. The renovations could cost the club somewhere between £8 and £10 million and must be completed before the start of the 2023/24 Premier League season on August 12th.

An enormous investment, especially considering the club is planning to start building a new 23,000-seater stadium within the year. The budget for the new venue is set at around £100 million. Meaning that the required renovation costs if Premier League promotion is secured, is almost 10 percent of that budget. An investment Luton Town could only be profiting from for two to three years. By that time the new stadium should be ready.

Cost of infrastructure investments for Luton Town

If it is financially possible, clubs should foresee and plan for required infrastructure adjustments in case of promotion. To an extent this is what Wrexham has done. The club already started on renovating the Racecource Ground while in the National League to grow and prepare the club for the next decade. In addition, they wanted to make the ground UEFA Category Four compliant so they could bring back international football to the stadium.

Not all clubs are financially solid enough to make such investments. So, even though promotion is fantastic from a fan and player perspective, and it leads to a major revenue boost, there are cost increases that can make it less desirable for clubs. The need for major investments can even be risky for a club when it is not accompanied by on-field success (e.g., avoiding relegation). Financially clubs must thus be smart and make a solid plan in case of promotion, so they reap the rewards of it for a long time.