Belfast Telegraph

Thursday 24 April 2014

Players the ultimate winners as Premier League salaries hit record heights

The premier League's annual revenues have smashed through the £2bn barrier for the first time, though the inexorable rise in players' wages mean clubs are paying out more than ever before — £1.4bn — to reward those in whom they are placing their faith on the field, Deloitte's annual review of football finance reveals today.

Using figures for the 2009-10 season — the most recent available — the report reveals that the increase in revenues, with television money now exceeding £1bn for the first time, have gone straight back out on wages with a record 68 per cent of Premier League revenues now heading into players' pockets.

The collective wage bill has increased by £64m in just 12 months, taking pre-tax losses of the Premier League clubs after debt servicing and player costs to a record £445m, which means that compliance with Uefa's new financial fair play (FFP) regime looks a huge task for some.

Yet it is the Championship which the Deloitte report implies should give most cause for concern, underlining why the Football League now intends to introduce its own FFP system.

The Premier League's wage inflation and collective debt of £3.5bn are at least offset by rising television money but in the second tier, where Deloitte sees a colossal 88 per cent of revenue going on players, a 25 per cent reduction in live television rights from the beginning of the 2012-13 season spells serious danger.

Only three Championship clubs reported a pre-tax profit for the year under review, while 14 in the division lost £5m or more in the desperate drive to reach the golden land of the Premier League and overall losses were a record £133m. Championship clubs are spending £4 for every £3 they generate in income.

“Financial history does not bode well,” said Alan Switzer, director in Deloitte's Sports Business Group, said of the second tier. The Football League's calculation that 80 per cent of player contracts expire before the new Championship TV deals start at least give clubs time to reduce their cost base.

With some second-tier clubs paying out much more in salaries than they earned, Blackpool spent 134 per cent of revenue in their promotion campaign — set against their frugality last season in the top tier.

Bristol City, Queens Park Rangers, Ipswich and Preston all paid out at least 108 per cent of revenue on wages.

In the Premier League, only Manchester City exceeded the 100 per cent mark in their breakneck pursuit of Champions League football.

Deloitte — who are accountants to the Premier League and some of its clubs — observe that the “trophy asset” model of club ownership “remains prevalent as competitive pressure to win outweighs any collective desire to limit wage costs.”

But the biggest factor influencing the future landscape is FFP, Deloitte believes. Dan Jones, partner of the Deloitte Sports Business Group.

The review observes that the drive towards FFP, which obliges clubs with income and expenses over €5m (£4.46m) to limit losses to €45m (£40m) for the seasons 2013/14 and 2014/15, and less in future seasons, “will correct the financial situation, starting from the top.”

Despite the wage inflation, Deloitte cautions against any forecast of football's financial demise.

“Top flight football has shown remarkable recession resistance,” Mr Jones said.

The Premier League sides' collective operating profits — before player trading — are £101m, while the Serie A clubs collectively lost £110m in the 2009/10 season and France's Ligue 1 £102m.

The Football League's own achievements in attracting fans and new financial revenues — which are often overlooked — are reflected in figures showing that the Championship is the third best attended league in Europe, ahead of the top divisions in Spain, Italy and France.

The TV rights deal for the Premier League (including overseas rights) is the key commercial component — increasing from £2.8bn to £3.6bn — and while the operating profits of the Premier League have increased by £4m to £83m, the Bundesliga — the only one of the elite European leagues which is more profitable — has been far less resilient, with its own profit figure falling by 20 per cent to £113m.

Wages, rather than transfer spend, have been the key barometer of whether a club is likely to succeed for several years now, though this year's Deloitte Review reveals a hardening of that trend.

Despite the collective disposal of £37m of money by Liverpool and Manchester United on Sunderland's Jordan Henderson and Blackburn Rovers defender Phil Jones in the past 24 hours, gross transfer spending has — significantly — fallen by more than 20 per cent from the record £713m in 2008/9 to £559m in 2009/10.

This might reflect the fact that credit is less likely to be available to clubs in the current financial climate than it was two or three years ago.

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