Million plus salaries cripling football clubs

Football shooting self in foot

As the football transfer window opens across Europe, clubs are working around the clock to attract top class players and renegotiate contracts to hold onto their brightest stars. This period, sometimes known as the ‘silly season’, is a time when tens millions of pounds can exchange hands in a matter of minutes.

But a leading financial adviser has warned clubs to act with caution and rein in player wages, which are spiraling out of control and creating unsustainable businesses.

Deloitte, which provides consulting services to several Premier League clubs, just released its latest report into the state of football finances. A key finding is that the Premier League’s wages-to-revenue ratio has risen to 70 per cent for the first time.

For most of the 2000s the ratio was 60 per cent and Deloitte warns that anything above the low 60s is dangerous for the long-term viability of a business. Deloitte, itself, has a wages-to-revenue ratio of 41 per cent.

The good news is that the increased operating costs are mostly being offset by increased club revenue. At a time of flat economic growth, football’s popularity has not waned, helping the sport remain a viable product.

Premier League club revenues increased by 12 per cent to £2.3bn, which is remarkable growth when you consider that in 1991/92 the collective revenue of England’s 92 professional clubs was £263m.

Revenue growth was driven by increases in broadcasting revenue (13 per cent) and growth in commercial revenues (18 per cent). The growth in broadcast revenue for clubs is due to the distribution of money generated from TV broadcasting rights. Overseas broadcasting rights more than doubled in the past year.

Despite all of the extra money coming into football clubs, it is exorbitant player salaries that are threatening their very future.

The Premier League’s wage bill soared by 14 per cent to 1.6bn, which is equivalent to 80 per cent of the increase in revenue.

Pay rises mostly come from the ‘Big Six’ clubs, although Manchester City (who spend £174m in annual wages) and Chelsea (£191m) are the major culprits helping to drive the inflation.

Manchester City, which spent more than £100m net on transfer fees, is already under the microscope of UEFA, European football’s governing body. 

From the just completed 2011/2012 season, UEFA will be monitoring club finances as part of financial fair play rules that require all clubs competing in Europe to break even. In 2015, clubs will be assessed and punished if they do not comply. At present, only eight Premier League clubs reported pre-tax profits with Manchester City reporting the largest operating loss of £82m.

In the past decade, player wages have inflated to unsustainable levels at a time when many football supporters face pay freezes or cuts. If clubs do not take responsibility for controlling player salaries, then football authorities should consider regulation to cap it.

As most companies have had to adapt to much harsher economic conditions in recent years, the football industry can no longer afford to turn a blind eye.

David Beckham lies on floor, expensively, Photograph, Getty Images

Arvind Hickman is the editor of the International Accounting Bulletin.

Photo: Getty
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The Prevent strategy needs a rethink, not a rebrand

A bad policy by any other name is still a bad policy.

Yesterday the Home Affairs Select Committee published its report on radicalization in the UK. While the focus of the coverage has been on its claim that social media companies like Facebook, Twitter and YouTube are “consciously failing” to combat the promotion of terrorism and extremism, it also reported on Prevent. The report rightly engages with criticism of Prevent, acknowledging how it has affected the Muslim community and calling for it to become more transparent:

“The concerns about Prevent amongst the communities most affected by it must be addressed. Otherwise it will continue to be viewed with suspicion by many, and by some as “toxic”… The government must be more transparent about what it is doing on the Prevent strategy, including by publicising its engagement activities, and providing updates on outcomes, through an easily accessible online portal.”

While this acknowledgement is good news, it is hard to see how real change will occur. As I have written previously, as Prevent has become more entrenched in British society, it has also become more secretive. For example, in August 2013, I lodged FOI requests to designated Prevent priority areas, asking for the most up-to-date Prevent funding information, including what projects received funding and details of any project engaging specifically with far-right extremism. I lodged almost identical requests between 2008 and 2009, all of which were successful. All but one of the 2013 requests were denied.

This denial is significant. Before the 2011 review, the Prevent strategy distributed money to help local authorities fight violent extremism and in doing so identified priority areas based solely on demographics. Any local authority with a Muslim population of at least five per cent was automatically given Prevent funding. The 2011 review pledged to end this. It further promised to expand Prevent to include far-right extremism and stop its use in community cohesion projects. Through these FOI requests I was trying to find out whether or not the 2011 pledges had been met. But with the blanket denial of information, I was left in the dark.

It is telling that the report’s concerns with Prevent are not new and have in fact been highlighted in several reports by the same Home Affairs Select Committee, as well as numerous reports by NGOs. But nothing has changed. In fact, the only change proposed by the report is to give Prevent a new name: Engage. But the problem was never the name. Prevent relies on the premise that terrorism and extremism are inherently connected with Islam, and until this is changed, it will continue to be at best counter-productive, and at worst, deeply discriminatory.

In his evidence to the committee, David Anderson, the independent ombudsman of terrorism legislation, has called for an independent review of the Prevent strategy. This would be a start. However, more is required. What is needed is a radical new approach to counter-terrorism and counter-extremism, one that targets all forms of extremism and that does not stigmatise or stereotype those affected.

Such an approach has been pioneered in the Danish town of Aarhus. Faced with increased numbers of youngsters leaving Aarhus for Syria, police officers made it clear that those who had travelled to Syria were welcome to come home, where they would receive help with going back to school, finding a place to live and whatever else was necessary for them to find their way back to Danish society.  Known as the ‘Aarhus model’, this approach focuses on inclusion, mentorship and non-criminalisation. It is the opposite of Prevent, which has from its very start framed British Muslims as a particularly deviant suspect community.

We need to change the narrative of counter-terrorism in the UK, but a narrative is not changed by a new title. Just as a rose by any other name would smell as sweet, a bad policy by any other name is still a bad policy. While the Home Affairs Select Committee concern about Prevent is welcomed, real action is needed. This will involve actually engaging with the Muslim community, listening to their concerns and not dismissing them as misunderstandings. It will require serious investigation of the damages caused by new Prevent statutory duty, something which the report does acknowledge as a concern.  Finally, real action on Prevent in particular, but extremism in general, will require developing a wide-ranging counter-extremism strategy that directly engages with far-right extremism. This has been notably absent from today’s report, even though far-right extremism is on the rise. After all, far-right extremists make up half of all counter-radicalization referrals in Yorkshire, and 30 per cent of the caseload in the east Midlands.

It will also require changing the way we think about those who are radicalized. The Aarhus model proves that such a change is possible. Radicalization is indeed a real problem, one imagines it will be even more so considering the country’s flagship counter-radicalization strategy remains problematic and ineffective. In the end, Prevent may be renamed a thousand times, but unless real effort is put in actually changing the strategy, it will remain toxic. 

Dr Maria Norris works at London School of Economics and Political Science. She tweets as @MariaWNorris.