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.

Jeremy Corbyn speaks to the media as he leaves a radio hustings on August 25, 2015 in Stevenage. Photograph: Getty Images.
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Corbyn's compromises show that he isn't so different from his rivals

The Labour leadership frontrunner is a politician after all. 

Jeremy Corbyn is lauded by his supporters for his honesty and conviction. His repudiation of the shabby compromises and realpolitik of Westminster. With no less fervour, he is denounced by his opponents as an unreconstructed ideologue, a man allergic to compromise. But as the Labour leadership contest reaches its denouement, the frontrunner is showing his pragmatic side. 

Having declared his support for British withdrawal from Nato ("I'd rather we weren't in it," he told the NS), Corbyn acknowledged at yesterday's Mirror hustings that there wasn't "an appetite as a whole for people to leave" and that he would instead call for the body to "restrict its role". The next Labour manifesto, should he oversee it, will not oppose membership (even the "longest suicide note in history" did not). Corbyn's compromise should not come as a surprise. Senior MPs told me that it would be all but impossible for him to find a shadow foreign secretary prepared to advocate withdrawal. On Tuesday, Andy Burnham, one of the few senior figures prepared to serve under the left-winger, had declared that he would resign rather than oppose membership. On this issue, Corbyn has shown that he is prepared to reach an accommodation with his colleagues and, more significantly, with the electorate - the act for which his rivals are condemned. 

Nor is this the first time that Corbyn has put pragmatism before principle. After refusing to rule out supporting EU withdrawal, he later clarified that "We cannot be content with the state of the EU as it stands. But that does not mean walking away, but staying to fight together for a better Europe." On the monarchy, the lifelong republican ruled that abolition could wait because "my priority is social justice" (another dreaded compromise with the electorate). If, as seems certain, Corbyn is elected leader, more trade-offs will surely follow. Once principles have been conceded a few times for reasons of electability or practicality it is harder to avoid doing so again. Corbyn, it turns out, is a politician after all. 

George Eaton is political editor of the New Statesman.