Report: Clubs face worrying wage war

Wage increases in the Premier League and Championship continue to outstrip growth in revenues, according to the latest annual report into football finance.

The Deloitte report shows salaries in the top flight rose by £64m (5%) to over £1.4bn in 2009-10, with the league’s wages-to-revenue ratio reaching an all-time high of 68%.

Chelsea remain the highest payers with an annual bill of £174m but Manchester City (£133m) are catching up fast – they have overtaken Manchester United (£132m) and increased their spending on salaries by an astonishing £79m over the two previous seasons.

The situation in the Championship is even more worrying with more than one-third of clubs paying out more in wages than they received in revenue.

Championship clubs are expected to back proposals at today’s Football League AGM to introduce a UEFA-style financial fair play system, where teams can only spend what they earn.

Alan Switzer, director in the sports business group at Deloitte, said: “Whilst revenues have held up well, a wages to revenue ratio of 88% is a cause for concern and will need to be addressed by Championship clubs.

“Football League clubs have been put on notice about the need to rein in their spending due to the forthcoming 25% reduction in the value of live TV rights, effective from 2012-13.

“The Football League has calculated that over 80% of player contracts will have expired before the new TV deals start, which gives clubs time to reduce their cost base. However, financial history does not bode well.”

The Premier League’s overall revenue increased by 2% in 2009-10 and broke through the £2bn barrier for the first time.

Commercial revenues also rose overall in the top flight by 6% to £459m but Deloitte say although a handful of clubs achieved significant increases - notably Manchester City – the majority experienced modest declines.

Other figures show record pre-tax losses in the Premier League clubs of £445m overall, with gross transfer down by more than 20% from the record £713m in 2008-09 to £559m last season.

On a more positive note, net debt in Premier League clubs fell by 20% from £3.3bn to £2.6bn. This is mainly due to debt to equity conversions, especially at Manchester City, and Arsenal selling off property in their Highbury Square development.

The figures for the 2010-11 season should see debt further reduced due to the Liverpool and Blackburn takeovers.