Championship clubs to adopt wage restraints

Fate of Preston shows danger of chasing Premier League riches

The most dangerous division in football is the Championship. So seductive, and so seemingly close, is the lure of the Premier League’s riches that clubs are prone to over-reach themselves financially in an attempt to join it.

The latest Deloitte Report into football’s finances reveals that Championship clubs averaged a wage/revenue turnover of 88 per cent, at least 11 per cent higher than either the Premier League, League One, League Two, or the major foreign leagues: La Liga, Serie A, Bundesliga and Ligue 1. Uefa have set a 70 per cent limit in its forthcoming Financial fair Play regulations, the same figure Deloitte suggest is a warning level. In League Two a salary cap of 60 per cent, a safer limit, already operates.



Deloitte reveals that eight clubs in the top two flights in 2009/10 exceeded 100 per cent ratios. Manchester City, a special case thanks to petrodollars, were the only Premier League club. Among the Championship clubs were Preston North End. In 2001 and 2005 they lost in the promotion play-off final, in 2009 they lost in the semi-final. They did all this without spending heavily on transfers, their record buy remains David Healy, signed for £1.5m in 2000, but wages add up on average gates of around 13,000 and their wage/revenue ratios for the two years to 2010 were 132 per cent and 108 per cent respectively. Losses, after player trading, were £10.5m



At the end of 2009-10 Preston faced a winding up order from the taxman. It was survived only through a takeover by Trevor Hemmings, a locally-born septuagenarian businessman. Hemmings drastically slashed the £11.6m staffing and player wage bill, bringing in trouble-shooter Maurice Lindsay, better-known for his rugby league links, to cut it to £6.5m. "We had to change the culture. We had to move away from the belief that the club would just carry on and someone would eventually pick up the bill,” said Lindsay. There was a price to pay. Last month, after 11 years in the second tier, Preston were relegated.



It is not as if Preston were big spenders. Their wage bill was below the division’s £15m median. And they were dwarfed by the £47m Newcastle United laid out in winning the Championship in 2010 (incurring a £22m loss). Second-placed West Bromwich Albion, spent £23m.



Newcastle United are, admittedly, a special case, given their support and stadium, but just as significant is that they, and West Brom, were in receipt of £8m relegation parachute payments which enabled them to maintain the bulk of their Premier League players (the third relegated cub, Middlesbrough, paid £31m in wages, and came 11th). These payments will next season be increased to £48m over four years. Other Championship clubs receive £2.3 million a year, League One sides £325,000 and League Two clubs £250,000.



Often as not it is in attempting to bridge the gap which brings clubs to their knees. Next season, for example Blackpool will be picking up £13.7m more in TV-related payments hand-outs than play-off finalists Reading, who might otherwise be expected to be promotion favourites. Reading thus have a choice, push the boat out and keep the likes of Shane Long and Jobi McAnuff, or sell to maintain a balanced budget.



Previous evidence suggests chairman-owner John Madjeski will sell rather than put the club at risk, but not all owners are so prudent. Thus the Football League are considering introducing it’s own version of Financial Fair Play, to help those who won’t help themselves.



Greg Clarke, the League’s chairman, revealed yesterday Championship clubs were likely to follow Uefa’s lead, although there had been some resistance.



He said: “Championship clubs voted to look at financial fair play, and in principle decided that was the road they wanted to go down. It's a perfect storm in that a lot of things have come together to make this happen, including, of course, the level of debt in the game – £700m in the Football League, most of that in the Championship – and big losses being racked up by the clubs.”



“These things are never unanimous, and a couple of the clubs would rather not have constraints on how much money they can spend,” admitted Clarke. The proposals will be voted on at the League’s AGM in Cyprus today.

One of the factors leading to this development is the spectre of a 26 per cent drop in TV income when the Football League’s new deal comes into operation. "Football finances are difficult,” added Clarke, “the UK television deal is less than the last one, and there are no signs that the economy is going to recover quickly."



In addition League One is moving towards adopting the 60 per cent salary cap already in place in League Two. It may be a while, however, before this is extended further. Based on 2009-10 figures only Arsenal, Burnley, Derby County, Manchester United, Tottenham and Wolves, of the 44 clubs in the top two divisions, would not exceed this cap.



On the face of it the worst offenders were Blackpool with a wage/revenue ratio of 134 per cent. This figure – as revealed in the bar chart issued by Deloitte and carried elsewhere on this website - is frightening and clearly unsustainable had they not won promotion, and the £80m windfall that entailed. However, buried in the report, 39 pages in, it is noted that Blackpool, paid significant promotion bonuses. Deduct the bonuses, which have been reported to be around £5m, and Blackpool’s wage-revenue ratio is 81 per cent.



That is still higher than is desirable, but it paid off handsomely. Blackpool were more cautious in the top flight and were subsequently relegated but they return to the Championship in far better shape than they left it. Seeing the improvements in playing staff and infrastructure at Bloomfield Road other clubs will be tempted to copy. Most, however, will not win promotion. The FFP model may be flawed, but it is needed to protect football clubs from living their dreams, and suffering a nightmare.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
News
Lizards, such as Iguanas (pictured), have a unique pattern of tissue growth
science
Extras
indybest
News
Anna Nicole Smith died of an accidental overdose in 2007
people
Life and Style
food + drink
Arts and Entertainment
'The Great British Bake Off' showcases food at its most sumptuous
tvReview: Bread-making skills of the Bake Off hopefuls put to the test
Caption competition
Caption competition
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

Bleacher Report

Daily Quiz
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

Career Services

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home