Premier League club wages climb to new highs

By Bill Wilson
Business reporter, BBC News

media captionFormer footballer and manager Peter Reid says: "It's bad business practice"

The proportion of income that Premier League clubs spend on wages hit a new high in the 2010-11 season, says a Deloitte report into football finance.

Clubs in England's top football league paid some 70% of their income on salaries for the first time.

Manchester United, who won the league that year, spent 46% of revenue on pay, but Manchester City spent 114%.

The Deloitte report says that control of wages "continues to be football's greatest commercial challenge".

Its 21st Annual Review of Football Finance also says that pay discipline is needed "in order to deliver robust and sustainable businesses".

Cutting debts

Total wages across the Premier League rose by £201m (14%), equivalent to more than 80% of the £241m increase in club revenues that season, to give a final salary bill of £1.6bn.

Chelsea once again had the highest wage bill, at £191m.

The overall wages increase was driven by the clubs that finished in the top six positions in 2010-11, as well as Aston Villa. Between them they accounted for £145m of the total increase in pay.

However, clubs in the top league did manage to reduce average net debt by £351m, or 13%, to £2.4bn by the summer of 2011.

This was the lowest level since 2006, and largely due to significant debt reductions by Manchester United and Liverpool.

Revenue success

The Deloitte report also shows the huge growth in revenues since the Premier League was created two decades ago.

Premier League clubs' combined revenue reached a record £2.27bn in 2010-11.

In the same season, the 92 Premier and Football League clubs' combined revenues were £2.9bn, with average Premier League club revenues having risen to £114m.

image captionManchester City paid out 114% of its income on wages

"There is little doubt that the league is a tremendous success in revenue terms," said Deloitte.

Average attendances were close to 35,000 in the Premier League in 2011-12, with more than 90% of seats sold.

However, the growth in revenues has been accompanied by rising costs, especially players' wages.

"The Premier League's key wages to revenue ration, which had stood at around 60% for most of the 2000s, has risen sharply in recent seasons to exceed 70% for the first time," said the report's author, Dan Jones.

"With broadcasting revenues likely to deliver limited growth in advance of the next Premier League deal commencing in 2013-14, the focus will be on the clubs themselves to grow revenue in areas directly under their control."

As a result of tougher economic conditions in the UK economy, Premier League clubs' match day revenues have now remained broadly constant for five seasons.

Deloitte adds that "the overall environment remains challenging" despite some recent big commercial deals by Manchester City and Liverpool.

Outside of the top flight, Deloitte says that for many years the second tier of English football, the Championship, has struggled financially.

This is due to a combination of clubs adjusting to the impact of relegation from the Premier League, and others attempting to to achieve promotion, often taking financial gambles to try and get to the top flight.

It means that the Championship has delivered six seasons of increasing losses.

The Football League and Championship clubs have agreed to financial fair play rules, which seek to achieve a better balance between revenue and costs.

"We hope introduction of the regulations is the catalyst for a long awaited improvement in financial balance," said Deloitte.

Big five

From 2013-14 season Premier League clubs looking to participate in Uefa competitions will need to adhere to its financial fair play rules.

Deloitte says a combination of fair play rules and straitened economic times, which are limiting revenue growth, may see a majority of top flight clubs reporting operating losses rather than profits.

And it says that with funding sources becoming more constrained it may "finally bring about a change in behaviour".

Meanwhile, on the wider European picture, of the "big five" leagues - England, Germany, Italy, Spain and France - all but Ligue 1 in France saw growth.

Total collective revenues for the five leagues rose by 2% to 8.6bn euros.

Outside the big five, in Scotland the big two, Celtic and Rangers, accounted for 67% of Scottish Premier League clubs' total revenues.

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