RISKY GAME: WAGES NEAR DANGER LEVEL
Top-flight clubs have never had it so good but are splashing more than ever on salaries, says Deloitte
THE SYMPTOMS have not been hard to spot. First Yaya Toure, an effective if unspectacular journeyman midfielder, charmed Manchester City into lining his pockets to the tune of £185,000 a week.
Then some expert brinkmanship from Wayne Rooney persuaded Manchester United to bulldoze the club’s pay structure and hand the England striker a record-breaking £200,000 a week – before bonuses.
Now football’s most widely recognised finance experts have provided further evidence – in comprehensive detail – of the dangerous game being played by England’s top teams.
According to research published today by Deloitte’s Sports Business Group, Premier League sides spent a record 68 per cent of their £2bn income on wages during the 2009-10 season, the most recent for which all figures are available.
That is up from 62 per cent just two seasons previously and compared to just 44 per cent in the early 1990s. To borrow an expression from United manager Sir Alex Ferguson, it’s squeaky bum time.
“We’ve always talked about 70 per cent as being a warning level,” Deloitte’s Dan Jones, who edited the Annual Review of Football Finance, told City PM
“Obviously you have to look at each individual club but for the Premier League overall to be edging towards that 70 per cent mark is a concern.”
It is hardly as if revenue has been drying up, despite a recession. English top-flight teams are collectively raking in more than ever, far in excess of rival European leagues, and ever-more lucrative TV contracts mean that trend will continue. The problem is that the amount spent on wages in soaring even faster.
Perhaps surprisingly, however, the salary spending is being driven not by chequebook-happy City, uber-powerful United or oligarch-owned Chelsea, but by ambitious mid-table clubs who made average losses of £4m and are “caught in a cycle of excessive wage inflation as they compete with each other”, says Deloitte’s report.
There is a logic to their strategy: a strong correlation exists between wage bill and league position. Are clubs merely being sensible? “It’s being sensible to a point,” says Jones. “It’s worth spending more to try to move up the table but if that’s endangering the financial health of your club then that’s taking it too far.”
European governing body Uefa hopes to curb dangerous spending with Financial Fair Play (FFP) rules, which broadly require clubs to break even and will apply from accounts filed next year onwards. Yet doubts remain over their widespread effectiveness as they offer little incentive to middling teams who do not qualify for Continental competition, or those from the Championship, who face even greater financial difficulties.
Fears have also been raised that clubs seeking to break even will hike ticket prices, hitting fans in the pocket, but Jones sees it differently.
“Revenue success has been tremendous. It’s going to be about trying to get hold of costs, not trying to drive more revenues,” he says. “So it could make for some challenging conversations with players and agents – and probably not before time.”