Wage demands pose threat to Premier League

England’s Premier League has maintained its ranking as the leading European football moneyspinner by turnover but its profitability remains threatened by the wage demands of players and their agents.

Buoyant gate receipts and TV revenues helped England’s top flight to generate nearly £2bn ($2.9bn, €2.4bn) last year, compared with £1.3bn attracted by each of Germany’s Bundesliga, Italy’s Serie A and Spain’s La Liga, a report by business adviser Deloitte said.

But the report warned much of the increase in revenue is swallowed up by payments to players and agents in a dysfunctional business model where “clubs are continually driven to maximise wages rather than profitability”.

Wage inflation in the 2008-09 season was 11 per cent in the Premier League, with a £39m increase in club revenues, well below half of the £132m increase in total wage costs, which at £1.3bn accounted for 67 per cent of revenues.

Alan Switzer, director in the sports business group at Deloitte, said: “We expect wages growth to outstrip revenues increases again in 2009-10.”

Rival European leagues also suffered from the effects of wage inflation on operating profitability, with Dan Jones, partner at Deloitte, suggesting the World Cup would act to fuel demands of top club players. Serie A saw 73 per cent of revenues absorbed by wages, while France’s Ligue 1 on 69 per cent also outstripped the English game.

Operating profits in the Premier League more than halved last year from £185m to £79m as the Bundesliga outstripped the Premier League to be ranked the world’s most profitable with profits of €172m (£142m, $205m). Other big European leagues remained in overall loss.

Mr Jones suggested operating profit across the Premier League could be squeezed further as middle-ranked teams spent more to chase European qualification and avoid relegation.

The survey also found little correlation between pay and league position achieved outside the very top and bottom of England’s top division.

Total revenues across England’s top 92 clubs rose by £100m to more than £2.5bn, though debt levels also increased to £3.2bn.

“We accept that it’s right that revenue finds its way to talent, but we have tried to argue that there needs to be a healthy dose of restraint on the business side,” said Mr Jones.

“Clubs are things which can take a hundred years to develop, which can be put in jeopardy in the space of a few weeks of poor transfer dealings,” he argued.

Fans of clubs that relied on rich benefactors who were prepared to bear substantial losses also risked the danger of being left high and dry if owners ran into business difficulties, or “fell out of love” with the game.