THE PREMIER League is generating more money than ever but double-digit wage inflation explains why several clubs have experienced falling operating profits and recorded pre-tax losses. This is the central theme of Deloitte's annual review of football finance, which was published yesterday and offers an intriguing insight into the game's finances during the 2006-07 season.
Although strong growth in commercial and match-day income saw collective Premier League revenues exceed €1.9 billion for the first time, much of this increase has ended up in the pockets of players and their agents. Dan Jones, a partner in the sports business group at Deloitte, said: "The improvement in cost control which would demonstrate a normal business culture of maximising profitability does not appear to be happening at Premier League clubs. A shared will and action, individually, by all the clubs to limit wages growth would deliver increased profitability for all, but the pursuit of on-pitch success and the intense competitive desire to gain an edge means clubs continue to invest heavily in their playing squads and bid the market up, to the detriment of all clubs' finances."
In 2006-07 the amount Premier League clubs spent on salaries increased by 13 per cent, marginally ahead of a median 11 per cent rise in revenue. Clubs paid an average of €61 million in wages, with Chelsea having the biggest bill at almost €168 million and Watford the smallest at €22 million. In the Championship aggregate operating losses worsened as average wage increases of 14 per cent outstripped median revenue growth of 3 per cent.
The average Premier League figure stood at 63 per cent but Tottenham could be proud of their housekeeping because their wages/turnover ratio was the lowest at 42 per cent. Manchester United's was a disciplined 44 per cent and Liverpool's 58 per cent.
Only eight then Premier League clubs showed operating profits, namely Manchester United, Arsenal, Liverpool, Tottenham, Newcastle, Reading, Sheffield United and Watford.
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