European football will take its first step towards salary capping next week as a consensus grows among the top clubs that wages must be reduced in the face of an uncertain economic future, particularly an anticipated decline in television revenue.
The G14 group of leading clubs met in Barcelona two weeks ago and agreed in principle to a salary cap because most of their annual turnover disappears on players' wages they can no longer afford. Manchester United, a G14 member, last week agreed a new contract with Roy Keane that will pay him £100,000-a-week sterling for the next four years.
UEFA's executive committee is next week expected to agree to a licensing system which would require all clubs taking part in its competitions to meet certain criteria regarding stadiums, youth development policies and issues relating to good governance. Clubs that do not meet the criteria will not be granted a licence and will be ineligible for the Champions League or UEFA Cup.
The system will come into force in 2004, but for Europe's leading clubs, headed by Milan, Lazio and Barcelona, it could be extended to incorporate salary capping.
Lazio president Sergio Cragnotti yesterday said he would propose a salary cap for the club this month.
"The objective is to contain the costs of salaries," he said. "I believe that there will be some news because I believe that the world of football must be restructured. We are now in a situation where revenues are being dried up by costs."
The clubs have not worked out what form salary capping would take, but there is a growing feeling that a unified system is required so that all European leagues are equally restricted. The only way this could be achieved is by administering it through the club licensing system.
Over 80 per cent of most top clubs' turnover is spent on wages. At some that figure is higher, and it is conceivable that many clubs will go bankrupt if this continues.
UEFA's spokesman, Mike Lee, said: "It is clear that a growing number of clubs in Europe are facing major financial challenges and are interested in some sort of system to contain the overall level of salaries. While we are sympathetic to the idea, there needs to be a great deal of commitment from the clubs themselves if there is to be any move in this direction.
"Many clubs that have been taking part in our working party on the club licensing system feel that it gives us a framework to help address some of the issues over salary capping. You could never have salary capping without establishing some basic rules of financing that are adhered to by all the clubs in Europe."
Italian clubs in particular, who started the trend of extremely high wages almost a decade ago after they had agreed lucrative television contracts, are leading the drive towards salary capping.
Serie A's 18 clubs finished last season with a combined operating loss of around £700 million. Lazio recently admitted they are two months behind in paying players' salaries, and claimed the delay was because television companies have been late in paying them.
Fiorentina, one of the highest payers in Italy, is near bankruptcy with debts of around £100 million.
Bundesliga clubs are finding themselves in difficulties following the financial problems of the marketing company Kirch, which owns the television rights to German league football. In Spain, the expected windfall from pay-per-view deals has not come about.
Simon Banks, a football finance analyst who has investigated the issue of salary capping, said: "The only way it can work is through UEFA's licensing system. Clubs will always try to outbid each other and pay higher salaries to get the best players. Salary capping has to be one of the conditions of the licence and has to be monitored by UEFA.
"The irony is that in the past it has always been the smaller clubs asking for salary capping. This time it is the bigger clubs, and if they want, they will get it."
Salary Capping: How it might be achieved
Fixed percentage of club turnover set aside for players' wages - This might be somewhere between 50 and 70 per cent of annual turnover, but football officials are quick to point out that they are nowhere near reaching a final figure. Under such a system, all clubs within Europe would have to adhere to the accepted figure, otherwise they would not be granted a club licence and thus not allowed to compete in UEFA competitions.
Flat-rate squad salary cap - This has been successfully introduced in other sports such as rugby, ice hockey and in many US sports. The governing bodies of these sports set a figure for how much can be spent on salaries each year and all clubs have to stick to it.
Limit on squad sizes - Possibly set at 25 players per squad, this system is considered to be the hardest to implement as it would be almost impossible to find consensus on squad numbers among competing clubs.
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/YVIRIOZQ35EWRPZXR27KGMO6YU.png)