English Football

Breaks £1bln Barrier

In the tenth edition of the Deloitte & Touche Annual Review of Football Finance, English football's income for 1999/00 grew by £128 million (up 13%) to £1,078 million. This makes English football the richest league in the world and the first to break through the Billion Pound Barrier. According to Gerry Boon, Head of Deloitte & Touche Sport, the Sports Business Consultancy this record revenue comes before the full impact of the new TV deals kicks-in so yet more impressive growth is on the way. But, it is of critical importance that clubs use this extra money to repair their financial
position."

"While English professional football has generated massive income increases in the last decade, this has been more than matched by the Clubs ability to spend it." So, in 1999/00 overall operating costs rose by £188 million, £127 million of which represented the jump in Clubs total bills for wages and salaries (Note: these salaries are for ALL staff, not just players). England's 92 professional clubs made an overall operating loss - the financial result of the day to day running of the club before transfer fees and financing costs - of £59 million. Premier League Clubs operating profits were £53 million - the same level as 1995/96 despite incomes doubling in the period since then. Football League Clubs suffered record losses of £112 million.

"History has shown that for both leagues costs tend to run ahead of income whenever there's an anticipated upturn in revenues," says Gerry Boon. "This reinforces the critical importance of both the new TV deal revenues and, also for the Football League Clubs, the continued trickle-down of transfer income."

After transfer costs, profit on sale of players and finance costs, English Clubs overall pre-tax loss more than doubled to £145 million. The Premier League recorded a £34.5 million pre-tax loss (a significant deterioration against a £13.7 million profit in 1998/99) while the combined losses of the Football League Clubs worsened from £75.3 million to £110.1 million. "It is a salutary point" observed Gerry Boon "that even if the whole of the extra £85 million or so that Football League Clubs will receive from TV and Internet deals in the 2001/02 season (that started last Saturday), was to flow through to the bottom line i.e. with no wage increases at all the 72 clubs would still have to find another £30 million to balance the books. The Supporter/Investor or Benefactor has a role that is far from over.

Premier League Clubs generated 15% more income in 1999/2000, totalling £772 million, with the remaining 72 Football League clubs generating 9% more income at a total of £306 million. In that season, the Premier clubs shared almost £600 million more than their Division One counterparts. Average club income in 1999/2000 season for the Premier League was £38.6 million, Division One £7.7 million, Division Two £3.3 million and Division Three £1.7 million. Despite big rises in income across the board, the huge differential between the Premier League and The Football League is set to increase. Our estimates suggest that by 2002/03 twenty Premier League clubs will share around £1.5 billion a year about twice their 1999/2000 turnover and almost £1 billion more income than the seventy two Football League clubs. With the average
income differential between a Premier League and Division One club likely to grow to over £60 million, the average Premier League Club will be five and a half times the size of its Division One counterpart.

"The importance of promotion and relegation between divisions is more financially significant than ever. The biggest financial prize in English football is winning the Division One play-off final - a staggering £23 million for one match" says Gerry Boon. "We also see a new gap emerging, between Division Two and Division One, which will add to the already fierce competition for players across the whole league." "By 2002/03 we estimate the income differential between an average Division One & Two club will widen to £8 million (£4.4 million in 1999/2000). The emergence of these two Gaps explains why Division One clubs average losses more than doubled in 1999/00 to £3.2 million. Everyone wants to go up; no-one wants to go down."
"The Leagues have done their bit," concludes Boon "by securing the major part of this massive boost in income from some superbly-timed and executed new Broadcasting deals it's now up to the clubs to use it to secure a viable future. The numbers may differ but costs need to be managed effectively, at all levels of the Game. In 1999/2000 there were only 18 clubs in the whole English Game that were profitable."
The pressure for success is a constant driver for clubs to spend more as the link between effective expenditure and success is proven. Over the 1999/00 season, total wages costs increased to £747 million (69% of income) from £620 million the year before, 65% of income. The Premier League bill only increased by 20% compared to a growth rate of 28% in 1998/99. Over the same period Division One saw the biggest climb in the wages bill up 35%, while Division Two remained static, although, the makeup of the clubs in these divisions is the likely reason for these very different effects. In the 5 years since 1995/96, all the Divisions annual wages growth rates exceed the rates of income growth. 16 clubs across the Leagues have total club wage bills that exceed 100% of their turnover. The Football League's problem is at its worst in Division One, as over a third of clubs (compared to 20% in the previous season) pay wages that exceed 100% of income as clubs with Premiership ambitions tend to
spend beyond their means.

"To repeat the warnings we have made every year since the mid-1990s Wages are football's greatest challenge would appear to be banging the same drum," remarks Boon. "But those warnings are even more relevant now. A viable future means spending what you can afford. Managing your long-term wage bills is the key to financial strength. So we're quite happy to repeat ourselves. With many wages/turnover ratios approaching 100%, it is more important now than ever to use the new TV money wisely." In the 1999/00 season English football clubs spent £340 million on transfers, an increase of 7% on the previous year. While a more modest annual increase compared with previous years, this is still a record level. Spending with
non-English clubs was £182 million (53% of total expenditure) . This is the first time more money was spent abroad than in the English market, transfers within England were down to £158 million, the lowest level since 1996/97. 59% of Premier League transfer spending went outside England, and perhaps more surprisingly Football League clubs dramatically raised their external spending to £32 million (from £10 million the year before) as the tireless search for talent continued beyond domestic boundaries throughout all divisions. The trickle-down of net transfer income to The Football League from the Premier League wa