It will come as a surprise to very few, but now it is official; Premier League wages have reached an all time high.
That was the conclusion of Deloitte’s report into football finance, and it made or bleak reading with Financial Fair Play on the horizon.
As a whole, 70 percent (£1.6 billion) of the record £2.271 billion revenue generated by Premier League teams went on paying player wages with, unsurprisingly, Chelsea and Manchester City the worst offenders.
Operating with the vast majority of a club’s revenue going on wages simply isn’t possible in the long-term, says Alan Swizer, director of Deloitte’s sports business group.
“If the wages to revenue ratio is 70 per cent or higher it's very difficult to make an operating profit,” he explained.
“In our view it is too high as a league and the clubs need to be edging back to the low 60s.
“Every one per cent that it drops should increase operating profits by £20million to £25million."
Chelsea may have lifted the Champions League but they are the worst offenders in the Premier League, with wages for players accounting for £191 million in the 2010/11 season. Their revenue for the same season was £222.3 million, meaning their wage bill accounts for an astonishing 86 percent of the money flowing into the club. Their losses for the year reached £67.7 million, slightly down on the previous year.
Of course it is easy to accommodate such a heft wage bill with a Russian oligarch to foot the bill, but there appears no sign of cost cutting in sight with Eden Hazard already signed up this summer and Porto striker Hulk apparently close to agreeing a deal with the Blues.
Hazard, it has been reported, will earn £4.6 million a year net of tax, so around £9 million a year for his new employer. That averages out at £170,000 a week. Hulk will expect to be earning a similar figure.
Owner Roman Abramovich will be counting his lucky stars that Roberto di Matteo led the Blues to Champions League glory this season, the ‘hundreds of millions’ they will earn according to chief executive Ron Gourlay will certainly make life a little more comfortable. Estimates put the figure Chelsea will receive for winning the competition at just shy of £90 million – they received £50 million alone in TV and competition money.
While Chelsea will look to prop up their vast wages with Champions League glory, Manchester City can do no such thing, however with members of the Abu Dhabi Royal family backing them they won’t expect to go wanting anytime soon.
City’s wage bill jumped a remarkable £41 million to £174 million for the 2010/11 season as they went in pursuit of league glory, although they had to settle on FA Cup success in the end. Their total wage bill is equivalent to 114 percent of their total income.
Their first league title in 44 years earned them around £60 million according to estimates, but they’ll need a whole lot more than that to make up the difference before Financial Fair Play kicks in 2013.
Manchester United’s financial woes since the Glazer family took over the Old Trafford club have been well documented – reports suggest the Americans have paid out over £500 million in interest and fees since taking over – but they have their house in order in terms of the waged they pay.
Around 46 percent of their revenue goes on wages, well inside the target of 60 percent Deloitte believes is sustainable. Their revenue will be hit when their next set of accounts are revealed because of their early exit from the Champions League, but their place in the tournament next season should ensure that damage is limited.
Liverpool recorded a £49 million loss for the 2010/11 season the legacy left behind by the previous owners and their aborted attempts to build a futuristic stadium at Stanley Park.
They have the fourth highest wage bill in the league but could only muster eighth place overall this season and sixth last – no wonder the club’s American owners are desperate for Champions League football to balance the books.
Despite the loss Liverpool’s wage bill is up £14 million on the previous year, with the Reds paying the price not only for very big transfer fees but very high wages.
In terms of revenue, Tottenham are amongst the best performers in the Premier League, recording a 38 percent jump to £163.5 million in their takings for the 2010/11 season, while their wage bill is under the magical 60 percent mark at £91 million (55.6 percent of revenue) – putting them seventh highest in a season where they finished fifth, and then followed that up with fourth this season.
Spurs cruelly missed out on the Champions League this season while they finished outside the top four last time round, both of which will have a dramatic impact on their revenue when the next seasons figures are revealed; they will be desperate not to miss out again next term. If they can achieve that on a regular basis they will truly join the big boys.
By comparison their north London rivals Arsenal recorded greater revenue but also possess a greater wage bill, with the Gunners taking home £226.8 million and spending £124 million on wages.
In a wider context perhaps the clearest picture of the way in which the Premier League is shifting comes from the fact that the overall wage bill of the ‘big five’ (Chelsea, Manchester City, Manchester United, Liverpool and Arsenal) comes to a total of £777 million. The total wage bill for the entire league is £1.6 billion.
That means those five teams which account for quarter of all the teams in the Premier League actually pay almost half of the total wages.