The clubs promoted to the English Premier League are spending eye-popping amounts in the transfer market — is the strategy sustainable?

Background for analysis

Last season, Sunderland set a new marker for transfer spending among clubs promoted into the English Premier League, with a net outlay of €156.3M, good for sixth largest net spend across all 20 clubs in the league. The strategy was seemingly validated, as they not only survived but finished high enough to qualify for a European Cup place.

What followed in this summer’s window was all three promoted clubs following the same course, with average spending of €185.6M and an average net spend of €170.7M. Ipswich Town, Coventry City and Hull City had the third, fifth and sixth largest net spends across the league, respectively.

The natural inclination among many observers and in the media is to wonder how this massive spending can be both compliant in the era of Squad Cost Regulations and sustainable for the ownership of these clubs. These are levels of spending associated with the upper echelons of the Premier League, committed knowing full well the fate of many clubs leads back to relegation, and certainly not fulfilling Cup dreams like Sunderland did.

From the desk of the CFO, promotion to the top tier is a modeling dream when it comes to the structure offered by England’s football pyramid. Every season in the Premier League means participation in the richest broadcast revenue pool in domestic football. And should relegation come, the first two years alone of the most generous parachute payments stipulated in the world provide an artificial revenue cushion of over €100M on top of the natural levels offered in the Championship.

Using the Football Financial Model for insights into the P&L of a composite club resembling these three promoted clubs, combined with trusted data on transfer fees and club valuations, it is possible to provide a sound analysis of the full implications of this strategy. That analysis will give a verdict on whether this splashy spending is an unsustainable flash-in-the-pan or has sound enough basis to assume it is the start of a trend we should see continue.

Here are some principles that the analysis will reflect:

• Year 1 outlays that sparked the evaluation are one-time cycle peaks triggered by scaling the squad up from a promoted Tier 2 spend to a typical bottom-half Premier League wage level. If a given club survives for additional seasons in Tier 1, the outlay might still be net negative, but to a far lesser magnitude than the Year 1 peak. As anecdotal confirmation, Sunderland had a net spend of only €44.0M in their second Premier League season.
• In almost all recent examples of Premier League clubs being relegated, their transition back to Championship cost structure involved a clear net transfer profit. This season’s promoted clubs would be assumed to do the same net selling upon relegation, and have more assets on hand to enhance the proceeds, without significantly risking squad competitiveness.
• Spending to establish a squad at bottom-half wages would statistically improve a club’s chances of avoiding relegation over a relegation-wage club, but it is increasingly unclear whether the Premier League has any relegation-wage clubs, with 10-12 clubs at the bottom supporting similar wage bills. No discussion of odds will be presented.
• The Premier League and the Championship each run their own assessment of squad cost compliance. Combining the one-up, two-down period into a single three-year evaluation is an analytical choice made here, on the basis that the ownership group commits to the strategy as one decision, and is not a description of how either competition applies its own test.
• For simplicity in presentation and concept, amortization of transfer fees is not considered in the tables, with the impact of the monetary value of any transfers conservatively incurred in full at the time of the transaction.

The analysis below will put a composite sample club to the test, reflective of the activity and nature of this Premier League season’s three big-spending promoted clubs. It will seek to offer insights as to the impact on the operating P&L, the feasibility of maintaining regulatory compliance, the depth of the possible cash burn and the upside move in the club’s valuation that would justify the investment risk.

What does the Football Financial Model establish for the club’s operating net during the three years of the worst-case scenario?

Once promotion is secured, the worst-case scenario is a single season spent in the top flight, and then right back down for two seasons without promotion in the Championship.

While the decisions regarding transfer spend and desired squad wage level can vary widely, the club’s normal operating results are highly predictable, and are exactly what the Football Financial Model is built to project with precision.

A tight prediction of matchday and commercial revenues from the published financials of clubs with a similar stadium size and commitment to fielding a squad with bottom-half wages is presented in the prior reference exhibit detailing the composite sample club.

Broadcast revenues drive the league’s wealth and are stipulated by contract — meaning we can predict what a relegation season in the Premier League would pay. Even more importantly, because of the stipulated parachute payments to clubs relegated from the Premier League, we know the artificial revenue boost the club would receive in non-promotion seasons back down in the Championship.

The chart of key P&L statistics from the three-year journey first shows the club’s setup and finishing parameters each season. It then offers an isolated view of three figures that tell the bulk of the story: the broadcast revenues which dictate overall income, the squad wages which dictate overall expenses and the operating net that shows what the bottom line of operations yields before transfer spending is considered.

Even in a worst-case scenario of dropping right down and staying there, the next three years essentially produce break-even results to the operating P&L, before the impact of transfer activities. Any additional seasons in the top flight would produce a similar result and only delay the known two-year parachute drop process accordingly.

From the standpoint of ongoing cost structure, a club spending up to field a bottom-half squad instead of a relegation-wage club is not irresponsible from a sustainability perspective.

This means the story shifts entirely to net transfers over the three-year period, in terms of both its cash impact, and also its implications for compliance with SCR standards.

In its promoted year, the club spends big in the transfer market to level up — but if the club goes down right away and stays down, how much will it have to recoup to stay in SCR compliance after Year 3?

The actual spending data from the summer 2026 window shows the three promoted clubs spent an average of €185.6M on purchases against €14.9M returned in player sales, for a net outlay of €170.7M.

With the Premier League and Championship unifying the general core basis of the SCR standards around defined squad costs not exceeding 85% of defined revenues, the whole three-year period in the one-up, two-down scenario can be combined into the single evaluation the ownership group has to get right.

For simplicity in exploring the calculation of the promoted club’s defined squad costs, we will take this €170.7M as the pure purchase outlay, with no sales against it during the Year 1 Premier League season. That is one main component.

What we know from the P&L in The Model are the other two components of squad costs — the total first-team squad wages and the head coach’s wages, over the full three-year journey, with one season as a bottom-half Tier 1 spender and two seasons as a champion-level Tier 2 spender.

This all yields total squad costs of €389.2M over the three-year worst-case scenario. As long as that amount does not exceed 85% of club revenues, the club is at no regulatory risk from having taken on this aggressive promotion-spending strategy.

The Model again tells us the first of the two main components here — the Non-Trading Revenues. These total €418.6M for the period, which taken at an 85% factor counts as €355.8M toward the threshold.

The second component of SCR revenues is player sales, which is exactly the big question we came here to solve for, and the only remaining unknown in the equation.

The €33.4M gap between calculated squad costs and discounted non-trading revenues means that after reversing out the 85% factor, only €39.3M of player sales would be necessary following relegation to remain in compliance.

Sales of €39.3M are modest given the precedent of the selling behavior of relegated clubs, and relative to the increased assets the club has just acquired in Year 1.

Looking back again to the actual behavior of the three promoted clubs — of the 25 players purchased for €10M or more, 16 were 23 years old or younger. These assets, along with those already at the club, present significant resale value.

It would be conservative to presume that, if necessary, the club could sell players in excess of this floor requirement, and recoup up to 60% of the Year 1 outlay of €170.7M, meaning just over €100M at the high end of the range.

Anywhere in this approximately €40M–€100M player selling range satisfies compliance, and establishes a minimum net transfer outlay of €70M–€130M to pursue the strategy. The obvious question left in assessing the investment commitment of ownership is what reward this guaranteed net cash outlay is seeking to unlock.

All cases that start with this level of spending commit to significant losses over the test period, so is it justified by what is possible for the club’s enterprise valuation?

In short, there is no certain answer with any path, but valuations observed for club transactions in England, set against the cash impact of the analysis above, show that the level of financial risk is tolerable with regard to net equity implications, and is one that most of the new breed of ambitious club ownership seen in England will gladly take on.

The choice to not invest in the transfer market and maintain relegation-level wages is not a viable long-term way to keep the club at the Premier League level. That short-term operating cash-grab with a defined low ceiling on club valuation might have been more appealing to an older generation of owner, or a distressed group, but is not a path that would seem to appeal to any Championship club with an ambitious owner who just won promotion to the biggest league on earth.

Rounding for simplicity and observed from recent M&A activity in the English market, a club with some investment that makes a fleeting top-flight appearance might be worth €150M, up from €100M with the same quick stay but a lack of spending.

Clubs that manage to invest and string two seasons together in the Premier League seem to command closer to a €200M valuation, and those that put a run of three seasons together would be considered mainstays, for which there seems to be an observed floor closer to a €300M valuation.

It is fair to observe that the paths representing extra investment around promotion will not out-yield taking the cash upside of not investing, netting the resulting enterprise valuations against the respective short-term cash effects of the three-year scenarios. But it is also fair to observe that the short-term net risk tops out at a €50M detriment in the investment-path cases, and all of those cases leave ownership with higher valuations.

Realistically, while the analysis sticks largely to the worst-case path or results, that €50M net hit to the equity proxy is also likely to be mitigated in one form or another with an investment in player assets. That additional income would be most likely to arise from increased value received from player sales, then from rewards from better league or domestic cup finishes, and then via European Cup qualification.

Conclusion: the promoted club spending trend is likely to continue

All in all, taking real-world data around transfers and club valuations, and cross-referencing it to the rich operating financial detail the Football Financial Model can project, a justification emerges for the recent trend of clubs promoted to the Premier League spending big in the transfer market ahead of their first season in the top tier.

Given the minimal risk to operating results, and complete control over the purchase and sale of players to modulate the level of financial and regulatory exposure, the guarantees stipulated by England’s parachute system create a robust planning framework around which to take a calculated risk for the upside of hundreds of millions in enterprise value, and the thrill of fielding a more competitive side in the biggest, most exciting domestic league in the world.