The Premier League has been overtaken by the Bundesliga as the world's most profitable league, as experts from Deloitte's Sports Business Group warned that England's top division could not "continue indefinitely" unless it curbs its current rate of spending.
Deloitte's latest annual report lays bare the Premier League's excesses. Wages, transfer spending and debt levels were up for the year 2008?09 but concern focused on how wages had exceeded the clubs' collective revenues to account for a record ratio of 67%. Deloitte forecasts that the percentage would rise again in 2009?10 and advised clubs to use the income from the new and more lucrative broadcast deal, which kicks in next season, to bring the levels down.
"The record wages to revenue ratio of 67% in the Premier League in 2008-09 is a concern, and we expect wages growth to outstrip revenue increases again in 2009?10," said Alan Switzer of Deloitte. "This will further reduce operating profitability, a decline that cannot continue indefinitely. However, clubs have the opportunity, via the revenue uplift from the new broadcast deals from 2010?11, to get wage levels down to a more sustainable share of revenue. It's not the first such opportunity. It remains to be seen whether they grasp it."
Total wage costs were up £132m to £1.3bn; gross transfer spending rose from £664m in 2007?08 to a record £713m and debt increased from £3.2bn to £3.3bn, although 40% of this was in non?interest?bearing "soft loans".
The Premier League can continue to lay claim to being the world's richest as its clubs generated total revenues of £2bn, more than Germany, Spain and Italy (each £1.3bn) and France (£0.9bn). But Premier League operating profits fell from £185m to £79m, and have been overtaken by the Bundesliga, for the second time in three years, as the most profitable in football. Cost control, according to Deloitte, remained the key challenge for Premier League clubs.
"The challenge for clubs continues to be converting their impressive year on year revenue growth into sustainable levels of profits that allow for continued investment in infrastructure and talent," said Dan Jones of Deloitte. "This is particularly the case as credit is likely to remain less available to football clubs than it was two or three years ago."
English football's ability, in general, to defy the credit crunch was another feature of the financial year. Premier League clubs' revenues increased to £1.98bn and Deloitte forecasts that, driven by the new broadcast contract, they would rise to £2.2bn by the end of 2010?11. The revenue of the 92 clubs in England's top four divisions increased by £100m to more than £2.5bn in 2008?09.
The Championship is the third best attended league in Europe, although a wages?revenue ratio of 90% in the division was "a cause for serious concern and will need to be addressed".
"Despite the sharp economic contraction, Premier League clubs were able to increase revenues by 3% in 2008-09," said Jones. "While commercial income fell marginally (1%), both matchday and broadcasting revenues increased. For the 2009?10 season just ended, combined attendances for the Premier League and Football League exceeded 30m – a level not seen since well before the introduction of all-seated stadiums.
"When you factor in the recently negotiated Premier League overseas broadcast deals, which come into effect from 2010?11, football has shown remarkable recession resistance during these difficult economic times."
