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What can we do about wages

By Tony Attwood

So far the 20 Premier League clubs have not managed to agree on any form of salary capping although they have agreed to talk further next year. But there seems to be little chance of agreement.  Instead the notion of rich backers giving the clubs money and then turning that into shares (rather than loans) seems to be the order of the day.  It is what the mega rich like, and it protects the clubs a little against sudden withdrawals of the money.

But what it does not protect the clubs against is the sudden cessation of the input of money.  For if a club is spending 100% or more of its income on players salaries, and the money that is used to keep the club afloat dries up, they are still in desperate trouble.

A bit like King Edward VIII in the early part of the 20th century, who saw the poverty that existed around the Welsh mining valleys and “said something must be done” so the clubs like to say much the same, but have no idea how to get it together.

Or like everyone looking at the bankers, or the press in the UK (into which there has been a huge enquiry of late), there is agreement that the whole system in untenable, but there is no unity on what to do or how to do it.

The clubs know that they might have some sort of problem with Uefa eventually, but the clubs that make money (Manchester U and Arsenal) and the clubs that rely on very wealthy benefactors (Chelsea, Manchester C) have nothing in common.  The clubs that live of benefactors who, although mega rich are still nowhere near as rich as Manchester C or Chelsea (Fulham, A villa for example) have a different view while those that are up for sale, think the sale will be less likely to happen if salary caps come up (Everton for example).

Chelsea and Manchester C don’t mind that wages grow faster than TV revenue, because unless Uefa steps up its FFP campaign income is irrelevant until the backers get arrested or die.

But at least everyone can agree that the situation is out of control.   Back in 1995/6 the  Premier League clubs had a total turnover of around £350m and paid out £173m in salaries.  That level of 50% or so, is acceptable.  But by 2010/11 the turnover was £2bn – the sort of growth that is utterly unsustainable.

Worse some clubs were by then paying out salaries that were bigger than their total income: Villa, Manchester C, QPR and Swansea.

For many clubs this hike in salaries is a disaster.  When Aston V had salaries that were around 40% of turnover they managed to come fourth in the league and make a profit.   Now they pay out five times as much on salary, and the club is struggling, and in retreat from its earlier ideals for getting into the Champions League.

The problem is that there are no real alternatives to joining in the money rush.  Villa and some others are looking at upping their youth policy – but that still requires buying in top talent in the meantime, and the club is now unable to do that.

We know how Manchester U and Arsenal compete in this arena.  Manchester U have worldwide marketing, and Arsenal have the high income from the Emirates – particularly club level.    Tottenham are hanging on and have money available from the tax free Virgin Islands but others who, like Villa, rise up, find the cost of staying near the top is too much for them.  Newcastle is a case in point.

So we see disasters looming for Premiership clubs.  Leeds imploded, Portsmouth just became a gaping mess, Coventry declined and declined, and Birmingham’s big fixer is still on trial.  Such clubs can of course be better off lower down the league because the lower leagues have wage restraint built into their participation in the league.  But in the top league the players and their agents are making a fortune, and no one else is winning.

Some Arsenal fans complain endlessly about the price of tickets, but the price of tickets is the only way Arsenal can hold onto its top four position.  Without that we would be much further down the league.

But the wage restraint in the top league is just not happening and there are some who say they will take legal action if the clubs try to bring it in.   Whether there is a “live on what you earn” approach, or a limited rise in salaries each season as Sunderland suggested, or simply a “don’t make a loss” policy, there are objectors at every turn.

Worse many clubs in the Championship want to spend and spend again to get into the top league.  Once they get there they have to spend much more just to survive, so they like the scene even less.   Wigan reached the all time record as they aimed to move up to the top league, spending 223% of turnover on salaries.

The system, like the banking system before it, is utterly unsustainable.  In 2000 I wrote a little piece which said that Leeds were getting out of control and that other clubs would follow.  And so it has slowly started to happen.

What many people don’t seem to believe, or don’t want to believe, is that the collapse of clubs through this current insane financial system has only just begun.  There is worse to come for one very simple reason.   In the past banks were loathe to pull the plug on clubs, for fear of alienating local customers.   Such a deterrent has long since past.  When things go wrong and the owner stops putting money in, there is nowhere left to turn.

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14 comments to What can we do about wages

  • Mandy Dodd

    This is the start of a cycle, the more clubs get in trouble, the more clubs like us will be able to pick up players on the relative cheap, and that will include to some extent wages. Santi for £12.5m was just the start. As Wenger and Gazidis have constantly stated, clubs in Europe are in real trouble. (maybe Germany an exception). The mega rich can only take up so many players. I also see a coaching, tactics and player development revolution as clubs deal with less money, gather some interesting things happening with some of the Italian clubs like Fiorentina, let alone Dortmund.
    I cannot see UEFA or the EPL really enforcing these issues on the big boys, but sometimes, things that need to change take on their own momentum.
    Hope all on here enjoy the day

  • colario

    All this because Rupert Murdoch started satellite TV in the UK and to get the punters to buy the dish and decoder he paid millions for the right to show 1st Division Football.

    Then he sold the right to show what became Premier League around the world.

    With the end of restriction of employment, players became free to negotiate their wages and so came agents fees and high wages with which only the rich can survive.

    So came the mega rich with money to lose. Now across Europe the season winners are predictable and we are heading for a Europe League of one, two, three clubs from the big leagues. The rest having the rating of Sunday football as a spectacle.

    The true supporter of the local club being pushed aside into the cold.

    Thank you Rupert.

  • shotta

    Tony – In trying to keep this piece to a 1000 words or less you have over-simplified this a bit. Bankrupt or insolvent football clubs are not going to come crashing down all at once because they are part of the political economy. The powers that be and the politicians are fully aware that football is integral to the bread and entertainment that is necessary to keep the majority of punters pacified. If the clubs can’t regulate themselves, as is increasingly apparent, then the politicians will come marching in on a white steed to save football just like they saved the bankers. Mark my words.

  • nicky

    @Colario,
    A great summing up of the malaise spreading throughout our national game. Wouldn’t change a word of it.

  • bob

    “Some Arsenal fans complain endlessly about the price of tickets, but the price of tickets is the only way Arsenal can hold onto its top four position. Without that we would be much further down the league.”
    Mr. Attwood,
    You may have a reason, and it would be good to fathom your numbers, but: How do you say this straight-faced, in 2012, with no reference to the CL qualification, the new TV deal, the new Emirates deal, the real estate deal and (your outright acceptance or non-opposition to) the zero transfer net balance practice? And with no critique of the well-paid sub-par marketing division? You may have good reasons, but with statements like these and no stated numbers or open analysis, I can only wish you a merry xmas. How about some numbers, then, rather than the proverbial lump of coal in the stocking? Are you not keen on like-for-like replacements, filling the hole in the x-Song midfield, ushering in quality x-RvP firepower, spending a wee bit more on our high (mostly part-time) scorer? Or have you become wedded to the Arsenal has no money mantra because the petro-beasts have so much more money? Logic, sire.

  • bob

    Mandy Dodd,
    I consider your postings a true gift that keeps on giving.
    merry xmas to you too!

  • bob

    Shard,
    January is just around the corner. Eager to meet up on the transfer watch. In any case, all and only good tidings for the post-mayan calendar epoch.

  • Adam

    Shotta, What you say has already taken place research “The Governance of football”. The politicians are ready and waiting to interfere with another industry they had nothing to do with building.

    Mr Attwood a cheerful piece for christmas?

  • Adam

    I thought the lower leagues had their own version of FFP in which they could only over-spend by a very small amount? soon to be break-even. (more lower league clubs are refusing to pay agents fees, maybe they make their contracted players pay them out of their wages?)
    It is one of the reasons the premier league is starting to take action as they will slowly lose power over the clubs that are relegated and have to meet the FFPs of the lower leagues. All teams promoted to the prem will be well placed to meet FFPs and will want to stick to those rules to compete.
    I hope a change in attitude within the top flight is coming.

  • colario

    @ shotta. Nice to know that someone has thought to bring Father Christmas to this blog on Christmas Day. The only politician who is likely to come to the aid of football is Lady Godiva!

  • Mandy Dodd

    Thanks Bob

  • mannix

    i think there is a sense there but i doubt if they will agree coz some of this clubs is nothing without spending big. Man C for instant can’t stand without spending alot. Anyway until then we will still struggle for 4th pos.

  • T2T

    Well, there is one point you didn´t address at all; The salary cap is for the total wage bill. Arsenal have a very high one, 4th highest in the PL but we pay significantly less for our best players compared to the other clubs.
    Arsenal´s issue is NOT the highest earners but the amount we pay to the 2nd best and the squad players.
    When RvP can more than double his pay check – almost triple – by moving to ManU and their wage bill is not 2.5x bigger than ours – something is wrong.
    In our current squad, the automatic starters probably make less than they could at the other top English clubs while those who hardly get a game (e.g. Squillaci) probably makes way too much.
    My Christmas wish for Arsenal is more about who should be sold than who we should buy – even if it means we take a loss;Squillaci, Chamakh, Djourou, Denilson, Bendtner, Park. Because of their obvious quality when they get to play in their correct positions, I´d prefer to keep Rosicky and Arshavin. Arshavin is probably a very high earner (90k/wk is being reported) and we may be able to save around 5m/year if we sell him. That´s real money that can be used to e.g. pay TW14 an extra 10k/wk, etc.

  • Bennydevito

    Merry Christmas and season’s greetings fellow Untolders! Tony, Walter and occasionally Cameron – keep up the good. Whilst I don’t always agree I do like the sanity and eloquence in here.