Inside Football: Why the Premiership destroys dreams

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In the years since the 1992 Premier League breakaway, which have stretched the gap between the top flight and the Football League into a yawning financial chasm, relegated clubs have developed a variety of ways to deal with the plunge. Norwich City, West Bromwich Albion, Southampton and Crystal Palace, from whom three will be down by the end of this afternoon, can all agree that relegation will cost them a drop of around £20m in income.

In the years since the 1992 Premier League breakaway, which have stretched the gap between the top flight and the Football League into a yawning financial chasm, relegated clubs have developed a variety of ways to deal with the plunge. Norwich City, West Bromwich Albion, Southampton and Crystal Palace, from whom three will be down by the end of this afternoon, can all agree that relegation will cost them a drop of around £20m in income.

The first response, fallen into by many clubs in the Premiership's early and middle years, might be called "The Sheffield Wednesday method". This involves making no plans at all for the drop, signing expensive long-term players' contracts, which do not break or reduce if the club is relegated, making brave noises about "establishing the club as a top six side", then, when the club goes down, either going bust or limping along for years saddled with an unpayable debt.

Dave Richards, Wednesday's chairman when the club granted four-year contracts to Gerald Sibon, Gilles de Bilde, Andy Hinchcliffe and Wim Jonk, did not stick around to sort out the mess when the club went down in 2000 with debts it still struggles to service. He left in February shortly before the drop, to become the first paid chairman of the Premier League, on a package, in the first year of his part-time position, of £176,000.

Other clubs which went down without obvious contingency plans included Nottingham Forest, Queen's Park Rangers, Wimbledon, Leicester, and Derby, and their fates have been, respectively: years of financial trouble culminating in this season's relegation to League One; administration and ongoing severe debts; administration and relocation to Milton Keynes; administration; receivership with ongoing debts as large as those that the club were relegated with.

A more extreme form of the "Sheffield Wednesday", or "Richards" method, which took root in a couple of clubs after they survived a single season in the Premier League, is "Six Weeks of Madness", or "The Richmond Plan." This involves throwing out the years of prudence, and gambling vast sums of money, paying £40,000 a week wages, on "establishing ourselves in the Premier League". Bradford City's chairman, Geoffrey Richmond, did that in 2000, then when the club was relegated at the end of the following season, still with Benito Carbone's £2m a year contract to honour and everything hocked to finance houses, Bradford collapsed into administration with debts of £36m.

Ipswich, after finishing fifth in the Premiership in 2001, were not too dissimilar, signing Finidi George and others for a push on Premier League consolidation, and instead tumbling into relegation followed by David Sheepshanks, the club's chairman, memorably declaring that Ipswich were going into "temporary" administration, with debts of £45m.

Other reactions, practised by the likes of Sunderland and West Ham United, have been simply to ship out as many Premiership quality players as possible, in the battle to stay solvent. West Ham's chairman, Terry Brown, waved an approving letter from an insolvency practitioner, Lee Manning, who said the club's response to relegation in 2003 had been "exemplary", but this is not tremendously popular with fans, who found the club had sold the spine of an England team; Frank Lampard, Rio Ferdinand, Joe Cole, Glen Johnson, then David James and Michael Carrick, and all it had in return was a nice letter from an accountant.

It is startling that clubs simply accept the gap, and so few press for it to be narrowed, for money to be shared more sensibly from the Premier League. Most do say now they have a Plan B or, as Andrew Cowen, Southampton's financial director, puts it, "risk mitigation."

Norwich, who start today favourites to stay up because their fate - if they can win at Fulham - is in their own hands, perhaps practise the purest form of this contingency planning: "ambition with prudence".

The owners, Delia Smith and her husband Michael Wynne Jones, have been determined not to "go native", and have been appalled at the selfishness of the Premiership's clubs, including ones, like themselves, who could easily find themselves soon back down in the Football League. Norwich believe 25 per cent of the Premier League's television money should be redistributed down through the Football League, to make relegation less of a catastrophe and give promoted clubs a fairer chance of staying up. They say that whatever happens today, they will continue to make that case.

The way they have dealt with the gap this season looks like straightforward common sense. The income gap of £20m is between what the 20 clubs receive from the Premier League's £1.1bn, three-year TV deal, and the mere £24m which all the 72 Football League clubs divvy up for a whole season. Norwich can expect to receive £18-£20m in TV money this year; they would be paid only £600,000 in The Championship. The chief executive, Neil Doncaster, told me he does not expect the club to suffer seriously in other areas: if they play reasonably well, Carrow Road will be full, and sponsorship deals are long term and not affected.

Cowen, of Southampton, told me there were additional costs, that Southampton might expect gates to suffer a little, and also the club's sponsorship deals do drop on relegation. "The figure of a £20m deficit is about right," he said.

At Norwich, they didn't plan to go straight back down, but to be solvent if they did. That meant the manager, Nigel Worthington, was given money to strengthen the squad, notably £3m for Dean Ashton, but only enough to keep the books balanced if relegation were to happen. Every single player, Worthington himself and even the club's executives including Neil Doncaster, are on "divisional pay", meaning their wages will drop if the club is relegated. Norwich will, understandably, not disclose specific details, but the figures are said to vary between 20 and 50 per cent for the players' contracts, providing for a 35 per cent drop overall.

Relegated clubs receive "parachute" payments, half the Premier League's basic TV award, around £6m, for two seasons, and Doncaster told me that, and the club's other continuing income, means Worthington will not have to sell players, and the squad can be kept intact.

Divisional pay seems the obvious answer to minding the gap, but for years it has been difficult to negotiate top players into accepting it. Significantly, the Premier League is a step up for almost the whole Norwich squad, and so it would have been easier to negotiate. Cowen told me that is changing, that there is a new realism and that divisional pay has become "more part of the landscape." With some players' contracts coming to an end, and divisional pay incorporated into enough contracts, Southampton, too, he said, expect to remain solvent if they finally lose the Premiership status they have maintained since 1992.

At West Brom, too, they planned not to overspend, and be solvent if they go down, and club sources said there is enough "flex" in the players' contracts to take the relegation hit, as they did two seasons ago.

Crystal Palace have effectively spent no money, and so will not go down in a worse position than they are in anyway, but Palace have relied on loans from the owner, Simon Jordan, and also face the headache that their lease on Selhurst Park runs out in just five years, so they do have problems ahead.

Whichever three of the four goes down, then, they appear to have implemented enough of the "Norwich method" not to crash spectacularly within a few months. However exciting the battle has been, however, the sight of the three promoted clubs mostly occupying the three bottom places, points to a financial gap becoming impossible to bridge with simply a well-run club and eager players.

Money determines success. In the 13 years of the First Division before the formation of the Premier League, just six promoted clubs went straight down. Already, in the Premiership's first 13 years, 10 have gone straight down, and at least two more will join them today: the phenomenon is increasing as the financial gap widens. If Southampton survive, it will be the first time ever, in the 31 years since three-up three-down was introduced, that the three promoted clubs have gone straight down. "It's far from satisfactory," said Neil Doncaster of Norwich. "It's uncompetitive and is removing the football dream from many fans."

While the gap remains, however, "ambition with prudence" is the important phrase for clubs which want to stay in business or bounce back. Words of comfort, not the stuff of dreams.