June 9, 2011 12:04 am

Crunch time for football clubs as costs grow

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English football faces a “crunch time” battling to control unsustainable finances, with combined pre-tax losses in the top two divisions rising to well above £500m, according to Deloitte’s annual football finance review.

The 2009-10 season ended with Premier League pre-tax losses spiralling to £445m from £275m the previous season.

Although losses made by Championship teams eased slightly to £138m compared with 2008-09, the aggregate of £583m in the two divisions represents a near fourfold increase on the losses recorded five seasons previously.

Most of the losses in the Premier League are confined to four clubs – Liverpool, Manchester United, Chelsea and Manchester City – all with billionaire owners. But across the two leagues’ 44 clubs, only seven made pre-tax profits. Their combined net debt was just less than £3.5bn.

Clubs will next season come under new “financial fair play” regulations being introduced by Uefa, the European governing body, which require them to break even or, at worst, achieve a tolerable level of deficit.

But the pressure for on-field success is continuing to drive up player wages. In 2009-10, wages grew 5 per cent in the Premier League to more than £1.4bn, and by 6 per cent in the Championship to £357m.

Chart: Premier League finance

The first half of the 2010-11 season, the first of an improved three-year broadcast rights deal for the Premier League, saw clubs start to eat into the extra £6m a year they each receive from the new rights package.

In the latest season wages were rising at a rate of 10 per cent, Deloitte estimated.

The result is a worsening ratio of wages to revenue in the Premier League of 68 per cent, while the ratio in the Championship stands at 88 per cent.

Over four years, Championship wages have grown at double the rate of revenue growth, Deloitte said.

The 24 Championship clubs, which must make do with a 25 per cent reduction in broadcast income from 2012-13, are holding their annual meeting this week in Cyprus, with measures to control costs top of the agenda.

Dan Jones of Deloitte said: “This is a crunch time across English football.” Wages were “the biggest concern. That is the one area that really sticks out.”

This year’s review was a more sober assessment of football’s financial health than in previous years, he added, a reflection of football maturing as a sector. “If football has been going up a very steep slope, we are in a much slower growth phase,” he said.

Mr Jones predicted that this time next year, the number of clubs going into administration would stay roughly the same as last year, that the summer transfer window would be quiet and clubs would make a concerted effort to comply with Uefa regulations.

But he said he believed that pre-tax losses would improve only slightly. “The picture is not great,” said Mr Jones.

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