Warning over Premier League wages
- 8 June 2010
- From the section Business
Soaring wages are threatening the stability of Premier League clubs, a report into football finances has said.
Premier League clubs spent 67% of their revenues, or £1.3bn, on player wages during season 2008/09, Deloitte said.
Chelsea again topped the wages bill, at £167m, while Manchester City's wage bill soared from £54m to £83m.
"For every £100 that comes into Premier League football clubs, £67 goes out on the wage bill - that's too high," said Deloitte's Dan Jones.
In addition Premier League operating profits fell by more than half to £79m, their lowest level since 1999/2000, with Germany's Bundesliga overtaking it to become the world's most profitable league.
Sports minister Hugh Robertson said the wage rise was "very worrying" but that the government should not intervene, instead looking to put pressure on football governing bodies to improve financial practice.
"The concern is that the operating profits have halved and the wages bill has increased and we will be pushing football's regulatory authorities very hard to take some action," he told BBC Radio 5 live.
"This report points to a very worrying problem and we are very keen to see action in four areas: financial transparency, the relation of debt to turnover, the fit and proper person test and more independent governance on the board.
"It is absolutely right that we should give football the first opportunity to sort this out."
Mr Jones, the editor of Deloitte's Annual Review of Football Finance, said the wages ratio was above the 58% to 63% of the past decade.
The result is that profit margins are very thin or non-existent, and with the tightening of credit as well, that is really making that problem come into sharp focus now, and those debt levels start to pinch," he said.
The wage bills of Premier League clubs have recorded double-digit percentage growth for three years running. In 2008/09 they were up by £132m, or 11%, to £1.3bn.
Total wages have grown by 55%, or £474m, in that three-year period.
"The growth in wages is difficult to slow down, given existing three or four-year [player] contracts, but must nonetheless be reined back to address clubs' declining profitability," Mr Jones added.
And he said that the wages ratio in the Football League was 86% as a whole and 90% in the Championship.
"That is too high, that needs to be brought back under control," said Mr Jones.
And the challenging economic environment meant that revenue growth at Premier League clubs was restricted to 3% - leaving it just short of the the £2bn level, at £1.981m.
Only 10 of the 20 top league clubs made an operating profit in 2008/09, one less than a year before.
And Premier League club's net debt at the end of the 2008/09 season had increased to £3.3bn from £3.2bn the year before.
However, just under half of that was "soft loans" from club owners.
Almost two-thirds, or more than £1.9bn, of the total net debt related to Arsenal, Chelsea, Liverpool and Manchester United.