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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