English Premier League clubs have been warned to control their spending after a new review showed players' wages were outstripping revenue growth.
Wages went up by £201-million in the 2010/11 season to almost £1.6-billion – a 14% rise – while overall revenues at clubs rose by 12% to £2.27-billion, according to analysts Deloitte.
With the top 20 clubs splashing out on big salaries in an increasingly desperate bid for success, wages now account for a record 70% of the revenue generated by Premier League clubs.
Alan Switzer, director in the sports business group at Deloitte, warned big-spending Premier League owners that wage control was now essential, especially with Uefa’s financial fair play (FFP) rules coming into force soon.
“If the wages to revenue ratio is 70% or higher it’s very difficult to make an operating profit,” he said.
“In our view it is too high as a league and the clubs need to be edging back to the low 60s. Every 1% that it drops should increase operating profits by £20-million to £25-million.”
The wage rises at some of the league’s bigger clubs have been offset by significant rises in commercial income at some sides, including Manchester United, Liverpool and Manchester City.
The figures are for the 2010/11 season and will be the last before Uefa start taking them into account for their FFP calculations, where clubs in European competition have to break even or risk fines and even suspension from competitions.
Switzer said league champions Manchester City and Champions League winners Chelsea, owned by Abu Dhabi-based Sheikh Mansour and Russian Roman Abramovich respectively, faced the greatest challenges in conforming to the FFP rules.
“Chelsea and Manchester City are the clubs which have recorded the biggest losses so they are the two which have the most to do, and to be fair to them they have been pretty public about needing to take action,” he added.
“A significant number of clubs around Europe have some distance to travel on the road towards compliance.”
The Deloitte report does not cover the most recent season but it does show the effect of Britain’s 50% tax band coming into play – the 92 league clubs paid nearly £1.2-billion in tax, up 20%. – AFP