Thursday, June 01, 2006

English Premier clubs still ahead of European rivals

Deloitte & Touche’s latest Annual Review of Football Finance reports that English Premier League clubs’ total wages have dropped for the first time in the league’s history. The report also confirms that, the Premiership clubs remain by far the biggest earners in world football, with the top 20 clubs generating over £1.3 billion in revenue. "Over the past decade, we have seen Premiership wages rise by an average of 20% each year. The 3% reduction in the total wage costs for Premiership clubs, based on the latest available figures for the 2004/05 season, provides a stark contrast. Our latest analysis further supports the improving balance between revenue and costs, not just in England, but also across Europe. The need to ‘save clubs from themselves’ with a salary cap now seems far less important than it did five years ago,” Dan Jones, Partner in the Sports Business Group at Deloitte, commented.

The 15th annual report also highlights the prowess of the Premiership compared to its global rivals. While the German Bundesliga and Italian Serie A clubs had the biggest leaps in financial fortunes, with revenues up 17% and 16% respectively, English Premiership clubs remain well ahead. Premiership clubs benefit from a more even spread of revenue across different sources and different clubs, and greater profitability than European rivals.

The Big Five European leagues generated 54% of the total £7.8 billion European football market. These are the top tier leagues in England (£1.3 billion), Italy (£0.9 billion), Germany (£0.8 billion), Spain (£0.7 billion) and France (£0.5 billion);

Clubs in Germany (17%) and Italy (16%) had the highest rates of revenue growth for the 2004/05 season, compared to 1% in the English Premiership In addition to the English Premiership, clubs in Italy (down 2%) and France (down 3%) also managed a reduction in total wages costs in 2004/05. Across the ‘big five’ leagues, the ratio of wages to revenue continues the improving trend of recent years

English clubs are the most profitable in Europe, followed by Germany. For 2004/05, a record 14 clubs reported pre-tax profits. Revenue generated by the English Championship clubs of £306m reaffirms it as Europe’s sixth biggest league, after the Big Five, and an impressive £134m ahead of the next biggest second tier league in Europe (Italian Serie B)

“We expect English clubs to continue to lead the world financially," said Paul Rawnsley, Director in the Sports Business Group. "The new TV deals are set to boost Premiership clubs’ revenues to over £1.7 billion from 2007/08. Whilst the majority of the increase is likely to be spent on players, there will also be further investment across the clubs’ businesses to secure this broad based future success.”

Other key findings of the Deloitte Annual Review of Football Finance 2006 include:

• While other European leagues cannot rival the ‘big five’ in terms of absolute revenues, the majority continue to achieve year on year revenue growth. Comparatively, these leagues rely less on broadcasting income and more on commercial and matchday income streams. However, for many leagues, a significant percentage of revenue is generated by a handful of clubs. This pattern is then replicated in wages and salaries costs, and ultimately in on-field performance.

• The lower rates of revenue growth continue as England’s top 92 clubs generated total revenue of £1.8 billion in 2004/05, up just 2% from 2003/04. The average Premiership club generated revenue of £67m in 2004/05 (£66m in 2003/04), compared to £13m (£12m in 2003/04) for a Championship club. As a result of improved cost control, Premiership clubs’ operating profits increased to a new record of £162m in 2004/05 and only Chelsea and Fulham reported operating losses. The new broadcast deals provide the opportunity for increased profits from 2007/08 if clubs are able to continue to control wage inflation.

Manchester United reported the highest operating profits in English football (£33m), down from the record £52m the club reported in 2003/04. Liverpool’s success in winning the UEFA Champions League helped boost their operating profits to £25m and reduced the gap between Manchester United and the second placed club. Overall the Premiership clubs reported pre-tax losses of £78m (improved from £128m in 2003/04). There were 14 clubs reporting pre-tax profits, up from ten clubs in 2003/04 and five clubs in 2002/03. If Chelsea’s results are excluded, the Premiership clubs are profitable at a pre-tax level for the first time since 1998/99.

• The Championship play off final continues to represent the biggest financial prize in world football, worth at least £40m to 2006 winners Watford. This figure is likely to grow to over £50m for the 2007 final. Championship clubs’ revenues continued the solid improvement of recent years and surpassed the £300m mark for the first time in 2004/05, up 7% to £306m.

• Net transfer fees, although down by a quarter, were still nearly £200m. Overseas clubs, particularly those in Spain and France, continue to benefit greatly from spending by English clubs. • In total, over the past two years, almost £0.5 billion has left the English game in transfer payments to non-English clubs and agents. This European investment – allied with homegrown English talent – helped Liverpool win the Champions League in 2004/05 and two English clubs reach European finals in 2005/06.

• Investment in stadia and facilities by the top 92 clubs since the start of the Premiership is now almost £2 billion. Over the same period, estimated total revenue into the top 92 clubs has been c.£13.3 billion. This means that around 15 pence of every pound coming into football has been spent on facilities development.

• Attendance levels remain strong, after tremendous growth throughout the 1990s. Average attendances have risen from 21,159 during the first year of the Premiership to 33,887 in 2005/06, a growth of 60%. Premiership stadia remain over 90% full on average across the 380 games for the ninth successive year. Although the Football League experienced a slight dip in aggregate attendances in 2005/06, the trend line over recent years is upwards. With total attendance at over 16m, the Football League continues to be one of the best supported football competitions in Europe.

• In Europe, Bundesliga average attendances in 2005/06 were over 40,000 per game – comfortably the highest in world football. Meanwhile, attendances in Italy continue their significant decline. Serie A average attendances are estimated to have fallen by 15% to 21,700 in 2005/06. There is a significant strategic challenge in Italian football to modernise its stadia and mobilise its fan base.

The 2006 edition of the the Deloitte Annual Review of Football Finance 2006 is available at £400 per copy or at the student discount rate of £40 per copy.

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