Football clubs’ costs spiral upwards

By Ben Fenton, Media Correspondent

Published: May 29 2008 00:26 | Last updated: May 29 2008 00:26

A good accountant could be as useful as a good manager to aspiring Premier League football teams as the cost of maintaining even mediocrity in the top division spirals upwards, new figures show.

Crowds are flooding back to the stands and revenues in the English four divisions topped £2bn for the first time, but life at the top continues to be a struggle for all but an elite handful of clubs, according to the annual Deloitte review of football finance for the 2006-07 season.

----------------------
Wages erode Premier League cash
John Terry misses a penalty in the Champions League final

Premier League clubs are spending a greater proportion of their cash on wages than ever before, a report into football finances has found.

The revenues of top-flight English sides topped £1.5bn for the first time in the 2006/7 season, Deloitte said.

But the ratio of footballers' wages to turnover hit its highest level since the league began in 1992.

Pursuing on-pitch success meant clubs spent on players to the detriment of their finances, the report said.

Only eight of the 20 Premier League clubs recorded an operating profit in 2006/7 - half the number which did so a year earlier.

However, strong English representation in the Champions League - with three semi-finalists in successive years - suggested that quality in the Premier League was continuing to improve, it added.

TOP PREMIER LEAGUE WAGE BILLS 2006/7

* Chelsea - £132.8m (£114m)
* Manchester Utd - £92.3m (£85.4m)
* Arsenal - £89.7m (£82.9m)
* Liverpool - £77.6m (£68.9m)
* Newcastle Utd - £62.4m (£52.2m)

(2005/6 wages in brackets)
Source: Deloitte

In detail: Premier League wages

'Sustainable level'

Wages paid by top-flight English sides grew by 13% from the previous season to £969m

One club, Reading, saw its wage bill more than double, while Portsmouth and West Ham United spent 49% and 41% more respectively on paying their players. Chelsea had the highest wage bill, totalling £132.8m

Spending was partly driven by the arrival of a new three-year broadcasting deal - worth £1.7bn - which began in August last year.

Click here to see the wages of the Big Five leagues

This will propel Premier League revenues for the 2007/8 season to about £1.9bn, the report estimated.

"A number of clubs essentially spent some of the money on new players and wages in advance," said one of the report's authors, Deloitte's Alan Switzer.

Graph of how teams make their money

"They knew the broadcast revenue was coming so it was acceptable to do so, but what would be more worrying would be if clubs' wage bills increased even more significantly in coming years."

The wages-to-turnover ratio hit 63%, up from 62% in 2005/6 and 48% in 1996/7, though Mr Switzer said this was "still at a sustainable level".

"Wages will have gone beyond £1bn for the season which has just ended. It will be interesting to see what happens next, and how high they will go."

'Trophy assets'

Much of the investment has been at clubs which have seen new owners at the helm, said Dan Jones, a partner in Deloitte's sports business group.

FANCY THAT: 2006/7 SEASON FACTS

* Arsenal's matchday revenue grew 105% to £91m in its first season at the Emirates Stadium
* Premier League gross spending on transfers was £492m
* The top four spenders in the Championship (Sunderland, Birmingham City, West Bromwich Albion and Derby County) occupied the top four league spots

Source: Deloitte

However, the failure of clubs to produce a strong bottom line suggested that club owners might not have a "real desire" to make significant profits.

"The improvement in cost control which would demonstrate a normal business culture of maximising profitability does not appear to be happening at Premier league clubs," he said.

"It seems that, as in prior decades, we are seeing football clubs treated as 'trophy assets', except with clubs now owned by billionaires from a range of nationalities rather than local businessmen made good, reflecting the global appeal of the game."

PREMIER LEAGUE CLUBS WITH LOWEST STADIUM UTILISATION

* Bolton Wanderers - 75%
* Middlesbrough - 76.3%
* Blackburn Rovers - 76.8%
* Wigan Athletic - 76.9%
* Sunderland - 89%

Figure relates to average % of stadium filled for home games
Source: Deloitte

The "key strategy" to making money for the club was in selling it on by building up a brand value, he added, "rather than a more tangible ongoing measure such as profitability".

Elsewhere in Europe, the top flight of the French, Italian and Spanish leagues saw about the same proportion of turnover being spent on wages as in the Premier league.

However in Germany, only 45% of income went on salaries.

The Bundesliga had the highest operating profit margin in Europe, the report said, at 18%.

PREMIER LEAGUE TEAMS WITH MOST DEBT 2006/7

* Chelsea - (£620m)
* Manchester Utd (£605m)
* Arsenal - (£268m)
* Fulham - (£182m)
* West Ham Utd (£142m)

Figures are total debt at end of 2006/7 season
Source: Deloitte

This was helped by Germany having Europe's highest average attendances - with fans drawn by the continent's lowest ticket prices.

However the report noted that "the price of Bundesliga's clubs' very good financial performance seems to be a struggle to reach the latter stages of European club competition in recent years".