Premier League clubs defy economic downturn

England’s top-flight clubs will buck the economic downturn by continuing to increase revenues next season but rising levels of debt could signal trouble ahead, according to the annual review of football finances from accountancy group Deloitte.

Dan Jones, one of the authors of the report, said the Premier League’s global popularity would keep revenues rising but predicted that revenue growth would slow.

“The new economic realities may lead to flat matchday revenues,” Jones said. “While attendances continue to hold up well, many clubs have frozen or reduced ticket prices.

“However, the stepped increases in the current domestic broadcast deal and the new UEFA Champions League TV deal make it likely overall revenues will edge up.”

The accountancy group’s report – based on figures from the 2007/08 season – reveals that total debt among the 20 Premier League clubs hit 3.1 billion pounds in 2007/8 while wage costs surged 23 percent to reach 1.2 billion pounds.

Deloitte’s Alan Switzer warned that clubs could not afford to be complacent about the long-term sustainability of their debt levels given the possibility of failure on the pitch, an issue highlighted by Newcastle’s recent relegation.

“The more debt you have, the more vulnerable you can be if you suffer a revenue knock-off such as failing to qualify for the Champions League or in the worst scenario relegation,” Switzer said.

“Having a higher debt is not helpful in those situations and you have to make sure you have some flexibility, and that places an onus on having flexibility around player wages.”

Although wage costs have increased, increased television money ensured that the average wages-to-turnover ratio for Premier League clubs declined slightly (from 63 percent to 62 percent).

Manchester United and Arsenal both paid out less than 50 percent of their income in wages but Chelsea’s ratio was 81 percent.

The wages-to-revenue ratio is more of a concern in the second-tier Championship, where the average was 87 percent, with Hull City – who won promotion to the top flight in 2008 – on 124 percent.

Switzer added: “Lower revenue growth in forthcoming seasons means clubs will have to focus on improving cost control – both wages and other operating costs – if profits are to be maintained.”

Deloitte’s report also highlights the success of the Championship, which enjoyed the third highest average attendances of any league in Europe behind the Premier League and Germany’s Bundesliga.

Switzer said: “That can be overlooked sometimes and the Championship is a very competitive league.”

Deloitte’s report found that the top-flight clubs are more profitable than their rivals overseas, having been briefly eclipsed on that score by Germany’s elite.

It also identifies Italy’s Serie A as the fastest-growing league in financial terms, with total revenues increasing by 34 percent.

The Premier League said Deloitte’s report was an indication of the rude health of English football.

Spokesman Dan Johnson said: “Clearly debt has risen, but it is a more complex issue that many commentators assume. Clubs use different models of debt – investment, benefactor and acquisition – but ultimately it is for individual clubs to decide what levels they carry and whether it is sustainable.”