TODAY: An audience with Mark Pougatch – live
by Tony Attwood
Spending money on salaries is different from all other types of spending. If you spend half you income on alcohol and cigarettes you’ll probably be getting ready to shuffle off this mortal coil, but leaving that aside, there is nothing apart from your will power and habituation, to prevent you stopping that expenditure.
Same with the money spent on your car, pizzas, your partner or anything like that. If you really want to stop, you can stop.
But wages are different. Wages are paid as part of a contract, and if you stop paying them not only are you likely to lose your staff you’ll also more than likely be sued, and find it very difficult to recruit any other staff in the future.
Which is why, when a football club spends more than its entire income on salaries, they are considered basket cases. They can’t readily get rid of their that expenditure, nor can they readily increase their income. They are, in short, stuffed – unless they get promotion and stay promoted.
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So the ratio of turnover to wages in football clubs is indeed particularly interesting. Take it much above 70% and the club looks to be in trouble. Clubs still do it for future glory – as with getting promotion from the Championship to the Premier League; something that is done in order to grasp hold of the fantastic TV payouts that come with being in the PL. Unless a virus comes along of course.
Here is the basket case league, using figures published by the Athletic. They show the percentage of income spent on salaries…
- Sheffield United: 195% of income spent on salaries
- Aston Villa: 175% of income spent on salaries
- Norwich: 161% of income spent on salaries
Now we can see how clubs get promoted – not just by spending more than their entire income on wages but by spending between 1.6 times and almost double the amount they earn from all sources on salaries.
Of course this can’t continue – but by having gained promotion the clubs have increased their income dramatically and they will keep that to some degree even if relegated because of the parachute payments.
Once we get below the promoted clubs figures are slightly better, but still bizarre:
- Bournemouth: 85% of income spent on salaries
- Everton: 85% of income spent on salaries
- Leicester: 84% of income spent on salaries
With this group, they are spending the money to stay in the League or to rise to the magic land of European football, but have no way of increasing their income other than through the TV revenue that they share. The grounds are full, the merchandising is maximised, the sponsorship deals are done…
Except the British economy has just collapsed. Those wage bills will still be there but the income from TV vanished and is now a repayment demand, and fewer people are buying merchandise.
But while Bournemouth have no other route to take (given that their ground is tiny) and are banking on PL survival, Everton and Leicester are trying to get into a European place for extra income. Fail to get it, and things don’t look so clever.
After this things look a little different
- 10th. West Ham: 71% of income spent on salaries
- 11th. Chelsea: 64% of income spent on salaries
- 12th / 13th. Arsenal & Burnley: 63% of income spent on salaries
- 14th. Manchester City: 59% of income spent on salaries
- 15th. Liverpool: 58% of income spent on salaries
To give a measure of this, West Ham United have got a stadium which cost them peanuts compared to other clubs, and they were still getting huge crowds before the virus struck. Clearly they have been trying to buy their way into the success that the board of directors promised the supporters when they moved grounds, but it hasn’t quite worked. But those pesky salaries still have to be paid.
Tottenham are bottom of the table spending just 39% on salaries, a clever although necessary ploy given the £1bn spent on their stadium. One doesn’t admire Tottenham of course but let’s be fair – that figure for player salaries while staying in the upper reaches of the League is very good financial management – although I think it is achieved through the one off, of advance payments on stadium sponsorship.
Part of the problem for the basket case clubs that spend more on salaries than they actually earn is that earnings are so different from one club to the next.
The top six have earned their name not just because of where they end up in the league, (although perhaps not this season) but also because of turnover.
- 1. Manchester United: £602m
- 2. Manchester City: £535m
- 3. Liverpool: £533m
- 4. Tottenham: £461m
- 5. Chelsea: £467m
- 6. Arsenal: £367m
If we then skip to the bottom of the income table we find something rather interesting remembering these figures are for 2018/19
- 18. Aston Villa: £53m
- 19. Norwich: £34m
- 20. Sheffield United: £21m
Yep, those clubs spending far more than they earn, on players’ salaries are right there at the bottom of the income chart. Their problem is that they didn’t earn much in 2018/19 because they were in the Championship.
Now they will be earning far more this season, of course, because they are in the Premier League, but will it be enough to re-balance the books?
For an indication of that we need to look at the profit and loss of clubs for 2018/19.
Tottenham were the big winners in that season, they had kept their costs down (remembering that the costs of the new stadium don’t show up in these figures, for although the money has been spent, the accounts will show that as a cost spread over the next 20 or 30 years as the money borrowed has to be repaid).
In fact nine clubs made a profit before tax in 2018/19 – Tottenham, Liverpool, Newcastle, Man U, Wolverhampton, Manchester City, Watford, Burnley and Crystal Palace. The rest (including Arsenal) made a loss. Arsenal lost £23.5m, partially because of getting rid of Mr Wenger and his staff early, partly because
But the biggest losers were Norwich (£39m), Aston Villa (£69m), Chelsea (£102m) and Everton (£107m)
And here we can see the big worrying signs. If Norwich and Villa go down, they will have had some PL money to help them along – except that they have been spending all of it and more on salaries. And those players will keep a fair bit of their salaries even if they go down.
Everton are also playing a losing game: huge losses but still not making it into the big money league of Europe.
And all of this takes no account of what has just happened in terms of the virus: no stadium income, TV money being repaid…
The media seems to be taking the view that it’s wonderful, football is back, everything will carry on as before. But I suspect that is not quite the case. The chances of a Premier League club going bust are rising day by day.
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