Relegation Clauses – Do clubs have a contingency plan in place?

Andy Boyde

Andy Boyde

It is that time of the season again when the Premiership trap door is looming for a number of clubs who find themselves in the bottom half of the table. QPR and Reading’s fate has already been sealed with both teams now gearing themselves for life in the Championship next season. Sunderland FC and Newcastle FC are two teams at the start of the season that few would have predicted to be in a battle for survival. From the individual club’s point of view it would seem that one team has pondered the “What If’s” and one team has not.

Where the Tyne-Wear derby teams really vary is that Sunderland learnt from the heartache of relegation in 2003 where 70 members of staff lost their jobs. Standard protocol for the ‘Black Cats’ is that the players have clauses inserted into their contracts that if they were to fall into the Championship, players would see their salaries fall by as much as 40 per cent. Conversely, the ‘Toon Army’ have seemingly forgotten their relegation from the Premier League in 2009. They did not insert relegation clauses into all of the five French imports who arrived at St. James’ Park in the 2013 January transfer window. Mathieu Debuchy, Yoan Gouffran, Mapou Yanga-Mbiwa, Massadio Haïdara and Moussa Sissoko cost the club a whopping £31m in transfer and agents’ fees .

The new television rights deal for showing Premier League matches kicks in next season with the Premiership teams set to receive £60m – a £14m increase in income. This will only expand the financial gap between the Premier League and the Championship. With broadcast revenue accounting for around 40% of the club’s total income and each place dropped in the Premier league previously costing the club £750,000 per place, the new TV rights package has bumped this figure up to £1.5m.

The problem for any team coming up from the Championship is that they have to pay over the odds to attract players with Premiership experience. The plight of QPR demonstrates that the club’s bargaining position is not a strong one as they had to leave out relegation clauses to ensure players would sign. The financial sucker punch is that players on long term contracts and inflated wages make them difficult to move on. Players such as Julio Cesar, Junior Hoilett and Esteban Granero all have three years left on their respective deals and may prove difficult to find packages as attractive elsewhere.

Perhaps the worst example of a player wishing to see out a long term well paid contract is that of Winstone Bogarde; the former Dutch international only appeared eleven times during his four-year contract with Chelsea, reportedly earning £40,000 a week during this period. The Blues even won a domestic trophy during this period triggering a bonus payment in agreement with his contract, despite Bogarde not featuring at all that season. Bogarde himself sums up the motivations of a footballer with a small window of opportunity to secure long term lucrative contracts:

“This world is about money, so when you are offered those millions you take them. Few people will ever earn so many. I am one of the few fortunate’s who do. I may be one of the worst buys in the history of the Premiership but I don’t care.”

Andy Boyde

Sports Law Department
0 113 207 0000

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