New TV deal could drag Premier League clubs out of debt - if it's not all spent on wages
Report suggests extra money should be used wisely
Thursday 06 June 2013
Half the clubs in the Premier League are still making losses despite record overall revenues - but the huge new TV deal could drag most out of the red if chairmen resist blowing the money on player wages, according to a new report.
The Deloitte Annual Review of Football Finance 2013 says the extra TV cash plus new spending controls could have significant beneficial effects for top-flight and Championship clubs if it is managed properly.
From August, clubs in the Premier League will receive an extra £25million on average each year from the new TV contracts, and for most clubs that could wipe out their losses. Relegated clubs will also receive up to £60million in parachute payments.
The Deloitte report predicts player wage costs will rise considerably with the new TV money coming in - but says that clubs should keep that rise to respectable levels.
"Achieving a more sustainable balance between their costs and revenues and thereby generating more profits provides opportunities or, some might say, a culture shock for clubs," says the report.
"Increased profitability will allow greater longer-term investment in stadia and training infrastructure, youth development and community programmes."
Premier League clubs' revenue reached a record £2.36billion in 2011/12, but most of that increase went on wages - up 4% - to remain 70% of total turnover.
In the Championship, the picture is even more alarming with only five of the 24 clubs finishing in the black and overall 90% of all revenue going on wages.
Alan Switzer, director in the sports business group at Deloitte, said: "It's fair to say some Championship clubs are rolling the dice and gambling on getting into the Premier League.
"The financial regulations the Football League has brought in seek to address that, and if the losses are above the allowed limit then the club will have an embargo on transfers."
The top five clubs by revenue in 2011/12 were Manchester United (£320m), Chelsea (£261m), Arsenal (£235m), Manchester City (£231m), and Liverpool (£189m).
Manchester City also made the greatest annual loss, £97.9m, down significantly from the £197.5m of the previous 12 months.
In comparison with the rest of Europe, the Premier League clubs continue to have the highest revenue, £2.4billion compared to Germany's £1.5 billion and Spain's £1.4billion.
The Bundesliga remains the most profitable however, with operating profits of £154m, followed by the Premier League's £98m.
Debt levels at top-flight clubs remained much the same at £2.4billion, but 59% of this is in the form of non-interest bearing 'soft loans' mainly involving three clubs - Chelsea (£895m), Newcastle (£267m) and QPR (£93m).
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