Premier League finances: What does relegation mean for Leeds and Leicester? How key is survival to Everton?

After Everton secured Premier survival while Leicester and Leeds were relegated on the final day, football finance expert Kieran Maguire explains to Sky Sports News what the future may have in store for the trio…

Leicester and Leeds have been relegated – what does that mean financially for those clubs?

Leicester had the seventh-highest wage bill in the Premier League at £182m. Brentford’s was only £68m.

They are going to have to have a significant belt-tightening exercise. They do have eight players who are out of contract. The squad that was relegated cost over £400m and I think they will be looking to move some of those players on, simply because they do need to make ends meet in the Championship.

Their revenue is likely to go down, even with parachute payments, by around two thirds.

Please use Chrome browser for a more accessible video player

FREE TO WATCH: Highlights from the Premier League match between Leicester and West Ham

Leeds are probably in a slightly more advantageous position. Their wage bill was around £60m lower than that of Leicester but even so, it will be a significant challenge.

Transfer Centre LIVE! Real Madrid step up Bellingham pursuit
Bayern look to step up Rice pursuit | West Ham captain is top target
Our verdicts: Every Premier League team’s season assessed
Man Utd transfers: Maguire must make decision on his future, says Ten Hag
Chelsea hold talks with Sporting star Ugarte
‘Motivation, Le Mans, winning’ – Verstappen’s doubts over F1 future
Why Pochettino is the right fit for Chelsea
Papers: Maddison could be first to depart in Leicester fire sale
Jadeja heroics win thrilling IPL final for Chennai
Were Barnsley unlucky with VAR? | Windass repeats dad’s Wembley heroics

Video
Latest News

Watch free Premier League highlights
PL Weekend Wrap: Everton survive on dramatic final day | Leicester and Leeds relegated
Get Sky Sports | Get NOW to stream big moments

Relegated clubs receive parachute payments – but what’s the best way to spend them?

The purpose of parachute payments is to allow clubs to acclimatise to life in the Championship. A perfect example of how it can be dealt with was Burnley last season.

Please use Chrome browser for a more accessible video player

FREE TO WATCH: Highlights of Leeds against Tottenham in the Premier League

It’s notable that none of the four clubs that were in the play-offs were in receipt of parachute payments. They are not a guarantee but they certainly do help.

In the case of Leicester in particular, they are going to have to use those parachute payments on those players who are perhaps towards the end of their careers, only have one year remaining on a contract and are unlikely to want to go elsewhere as that would mean a substantial wage reduction.

Leeds were set to be sold to the owners of the San Francisco 49ers – will relegation affect the takeover?

There will be an impact. That will have been factored into the price the 49ers were willing to pay.

Please use Chrome browser for a more accessible video player

Sam Allardyce says he is grateful for the opportunity to manage Leeds and feels they tried everything they could to avoid relegation from the Premier League

There are rumours Andrea Radrizzani, the Leeds owner, is looking to buy Sampdoria. I think we will see an announcement in terms of Leeds accelerate.

Whatever’s going to happen to Leeds over the summer, it’s absolutely essential we have owners in place who can set a budget, stick to that budget and make key decisions in terms of management and player recruitment.

What about the loan Leicester took out with an Australian bank?

Yes, that is a danger. Macquarie have given what we tend to refer to as factored discounting loans.

Please use Chrome browser for a more accessible video player

Dean Smith says Leicester’s relegation to the Championship feels raw and he believes he failed in his part of the Foxes dropping out of the top flight

These days, transfers are usually paid in instalments and what Leicester have done is cashed in on some of the future instalments due. That’s less of an issue.

In terms of the parachute payments, it looks as if they have borrowed so the payments will not actually go to Leicester but will go towards repaying these loans.

That’s going to add to the challenges the club faces over managing its cashflow over the course of the past 12 months.

Everton had been struggling to meet Financial Fair Play rules and are building a new stadium, so how important was it to stay up?

I think it’s absolutely crucial.

Please use Chrome browser for a more accessible video player

FREE TO WATCH: Highlights from the Premier League match between Everton and Bournemouth

In the small print of their most recent accounts, they did mention that, should the club be relegated, there was a clause in one of the loans they have taken out that they would effectively be called in for a chat. We don’t know the extent of that.

But that’s not going to be an issue for Everton. It does give them some additional breathing space and they can carry on with the progress on the stadium. It looks absolutely magnificent.

Please use Chrome browser for a more accessible video player

Everton boss Sean Dyche says his side showed fighting spirit to beat Bournemouth to stay in the Premier League And finally, Luton are in the Premier League for the first time – how much is that worth to them?

Luton will earn next season in the Premier League the equivalent of that they have generated over the last 17 or 18 years, so it is very much transformative.

Please use Chrome browser for a more accessible video player

Highlights of the Sky Bet Championship play-off final between Coventry and Luton

It’s £100m guaranteed in terms of TV money and they will have extra money from commercial deals.

In terms of the upgrades, we’re probably talking somewhere in the region of £10-15m. You’ve got to get the floodlights HD-ready, you’ve got to improve the quality of the cabling and the facilities, because you’ll be having camera crews and journalists coming from all over the world.

It is a challenge but the Premier League’s actually very organised in regards to this. They tend to give clubs that have been promoted an advance in their first instalment of the broadcast money, so that will allow them to have the cash to incur these upgrades.