Liverpool's recent European Cup triumph means English football clubs can lay claim to the title of both on- and off-field champions of Europe, according to a new report.

Deloitte's annual review of football finance shows that, with revenues of almost €2bn (£1.35bn) in 2003-04, the English Premiership widened the gap between itself and Italy's Serie A, the second highest-earning European league, to €823m.

Moreover, with Serie A clubs recording combined operating losses of more than €1bn over the past three seasons, the Premiership is pulling ahead in the wages it can afford to pay.

Whereas English and Italian top-division salaries ran almost together until 2001-02, a substantial gap has opened up in the past two seasons, with Serie A wages dropping to €845m in 2003-04, compared with €1.21bn in the Premiership.

With English clubs also enjoying a structural advantage due to lower tax rates than France and Italy, this suggests that the flow of top foreign talent to England is likely to continue, making the end-product more attractive. This is no small consideration at a time when average Premiership attendances have been edging down.

"The Premiership continues to go from strength to strength with solid top-line growth," said Dan Jones, a partner in Deloitte's sports business group. "This gives the Premiership a competitive advantage compared to its European rivals, most notably when it comes to attracting and retaining top-quality players."

Detailed figures for the Premiership have been coloured by the acquisition of Chelsea in 2003 by Roman Abramovich, the Russian oligarch. Deloitte terms this "one of the most significant changes of ownership in the history of sport", although the recent takeover at Manchester United by Malcolm Glazer, the US entrepreneur, may turn out to be at least as significant.

Revenues at the Premiership champions surged by £50m to £144m in 2003-04, wages and salaries doubled to a "football world record" of £115m and pre-tax losses reached a record £88m. "In excess of £300m of new money has been injected into the club - a record in the world of football".

The impact of the west London club's new benefactor was most apparent in the wages and transfers. While Chelsea's salaries were doubling, the wage bill for the other 19 clubs fell from £706m to £696m - a stark turnaround from the explosive growth of recent years. Deloitte said: "If a 1 per cent reduction could ever be described as highly significant - then this is it."

Gross transfer expenditure rebounded to £414m in 2003-04, after declining steeply to £203m the previous season. The report attributed this largely, but not entirely to "the Chelsea phenomenon", with the club's 2003-04 transfer spending put at £175m.

The upsurge in transfer spending meant that total player costs of the top 92 English clubs - including wages and net transfers - exceeded £1bn for the first time, representing 59 per cent of total turnover. Deloitte said it was "open to question" whether this would be repeated in the near future.

Premiership clubs reported operating profits of a record £149m, with only four registering operating losses. At the pre-tax level, however, they were still in loss, although the deficit was pruned from £153m in 2002-03 to £128m. Ten clubs returned a pre-tax profit, up from five the previous year. The overall gearing ratio remained high at 189 per cent.