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Last Updated: Wednesday, 30 July, 2003, 14:45 GMT 15:45 UK
Football 'facing up to financial reality'
Michael Owen
Michael Owen's wages are the exception rather than the rule
English football clubs are finally showing signs of dealing with their financial problems, according to a survey of football finance.

The annual study by consultants Deloitte & Touche found that while the ratio of players' wages to income remains high, the balance of power in wage negotiations is swinging back towards the clubs.

It also said the 2001/02 season was a "watershed" for the transfer market, and we are unlikely to see again the level of transfer spending witnessed over the past five years.

"The past year has been a difficult one for football finances. Our report clearly shows grounds for optimism, but not complacency," said Dan Jones, director of Deloitte & Touche Sport.

How football clubs' finances have changed over the past decade

"What is needed now is strong management and leadership to control costs and improve the bottom line.

"We hope we have seen a peak in player wages and the bottom of the trough in club losses.

"In reality, we expect wages to nudge up at the top level, but hope that the wages/turnover ratios will fall at all levels of English football."

The end of player power?

Deloitte & Touche found that in the Premiership the ratio of wages to turnover rose to 62% in the 2001/02 season, up from 60% the previous year.

Premiership clubs' total turnover 1.132bn
Premiership clubs' total pre-tax loss 137m
Average Premiership club turnover 56.6m
Premiership clubs' total wages and salaries grew by 26% to 706m
The average Premiership club has income more than four times that of a Division One counterpart
Promotion to the Premier League is worth about 34m
Source: Deloitte & Touche (2001/02 season)
The ratio in the Football League fell to 73% - the lowest level since 1996/97 - although this was helped by money from the short-lived ITV Digital contract.

But the study noted that the threat of lower income from TV rights has forced clubs to be more ruthless in their dealings with players.

While the David Beckhams and Michael Owens of this world are unlikely to feel the pinch, many other players could see future contracts undergo major changes.

"With notable exceptions, in financial terms, players - who... were seen as assets to be protected on long lucrative contracts to ensure resale value - are now viewed as liabilities," the report said.

The income gap between clubs in the Premier League and the rest is likely to grow to 600% meaning that only the select few can plan ahead with any certainty
Nigel Adderley, BBC Sport

"As clubs see a lack of buyers in the transfer market (and) a deluge of possible replacements coming out of contract on free transfers... they need to make rapid adjustments to their squads and business models."

"The future for the majority of players is one of short-term contracts linked to the division in which they are playing, an inbuilt adjustment of salary on promotion or relegation (and) more sophisticated performance-related pay."

Transfer market 'has peaked'

Total spending on player transfers by English clubs hit 407m in 2001/02, down slightly on the previous season's record of 423m.

But for the 2002/03 season the total is expected to be only 150m, with only 20-25m being spent in the January transfer window.

Bayern Munich versus Manchester United
The English Premiership compares very favourably on just about all (financial) indicators when you look at Europe
Paul Rawnsley, Deloitte & Touche Sport

Deloitte & Touche said the totals of a couple of years ago are unlikely to be seen again in the near future, despite the best efforts of Chelsea's new owner, the Russian tycoon Roman Abramovich.

"The player transfer market has peaked in terms of overall value, but not in terms of values for the true stars," said Mr Jones.

And there's a warning for clubs in the lower divisions.

"The 'old' survival strategy of day to day operating losses, with occasional player sales or benefactor investments to resolve a crisis is no longer tenable or responsible.

"What transfer spending there is increasingly does not trickle down to lower league clubs."

Euro leaders

While many English clubs are facing up to the harsh truths of economic reality, the Premiership is well ahead of the top leagues on the continent.

Manchester United 33.9m
Newcastle United 14.8m
Liverpool 14.5m
Tottenham Hotspur 9.2m
Chelsea 8.1m
Source: Deloitte & Touche Sport, operating profit for season 2001/02
"The English Premiership compares very favourably on just about all (financial) indicators when you look at Europe," said Deloitte's Paul Rawnsley.

The firm estimates the aggregate income of all clubs in the top divisions in Europe to be 7.1bn euros in 2001/02, with the English Premiership having the largest individual share at 25%.

And while both the English and German leagues saw turnover rising by about 20%, in Italy revenue fell by 2% while in France they were static.

The rise means that the English Premiership now has a revenue gap of 600m euros compared with the next largest, Italy.

Struggling through

Deloitte & Touche's survey found turnover among Premiership clubs rose by more than 20% to 1.132bn in the 2001/02 season, and is forecast to have exceeded 1.25bn last season.

Meanwhile clubs in the Nationwide League saw turnover rise to 467m in 2001/02, although this was boosted by the ITV Digital contract. For 2002/03 turnover is expected to have fallen to about 390m.

Despite the problems faced by the smaller clubs in the lower leagues, Deloitte's Paul Rawnsley said he thought they had now got through the worst of it.

"Last season was a transitional year, we saw more than a dozen clubs going through some form of insolvency proceedings - but all are still going.

"The doom-mongers were saying 18 months ago that about 40 clubs could go out of existence - but none have so far, although a few have been teetering on the brink."

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