The annual publication of the Deloitte review of football finance is always a major event for those interested in the business side of football. They have cornered the market for authoritative overviews of developments. We shall be featuring stories from this review over the next few days.
One point that immediately caught my eye was that for a second successive year the Premier League clubs’ total wages increase has outstripped revenue growth, rising by £64m (5 per cent) to over £1.4 billion in 2009/10.
The annual publication of the Deloitte review of football finance is always a major event for those interested in the business side of football. They have cornered the market for authoritative overviews of developments. We shall be featuring stories from this review over the next few days.
One point that immediately caught my eye was that for a second successive year the Premier League clubs’ total wages increase has outstripped revenue growth, rising by £64m (5 per cent) to over £1.4 billion in 2009/10.
As a result, the league’s wages/revenue ratio reached an all time high of 68 per cent. The normal advice is that it should not exceed 50 per cent. Deloitte’s Dan Jones told the Financial Times that wages ‘were the biggest concern. This is the one area that really sticks out.’
Chelsea spent the most on wages (£174m) with Manchester City (£133m) replacing Manchester United (£132m) as the next highest spender. In the first two seasons after they were acquired by the new owners in September 2008, Manchester City’s total wages have increased by £79m in aggregate.
The only two Premier League clubs who did not report an increase in the amount they paid in wages in 2009/10 were West Ham United (down £13m) and Wigan Athletic (down £3m). There continued to be a strong correlation in the Premier League between league finishing position and a club’s ranking in terms of wages expenditure implying that, other things being equal, spending more on wages translates to success on the pitch.
Mid-table clubs such as Sunderland, Aston Villa, Stoke City and Bolton Wanderers are spending more on wages than they can recover in additional income. ‘That group are interesting.’ Dan Jones told The Times. ‘Although it’s about being higher up the table, if ultimately they achieve their goals the financial price could be that they can’t compete in Europe as they don’t pass [Financial Fair Play] criteria.’
Dan Jones told the Pink ‘Un that this year’s review was a much more sober assessment of football’s financial health than in previous years, a reflection of football maturing as a sector. My interepretation is that in economics a mature sector will have slow growth prospects and may be dominated by long-established businesses, as is the case in football. What is different about football, of course, is that it attracts individuals willing to make an investment whose returns are in prestige rather than money. Mature industrial sectors tend to attract asset strippers who carry out often brutal rationalisations. That is not likely to happy in football.
Mr Jones concluded, ‘If football has been going up a very steep slope, we are now in a much slower growth phrase.’