Championship clubs are heading down a black hole
As owners blow 99% of revenue on wages...
Clubs are playing a dangerous game by overspending in a desperate attempt to reach the Premier league, the annual report on the game’s finances will reveal today.
As troubled Aston Villa continue their battle to stave off administration, the report shows that, in total, teams in the second tier gambled 99 per cent of their revenue on wages — way beyond the recommended figure of 70 per cent.
All but four clubs in the division were in the red during the period investigated for accountants Deloitte’s review of football finances. ‘Owners and managers have... taken the decision to stretch themselves financially to gain promotion,’ Deloitte said.
Villa’s parlous finances have raised concerns this week and yesterday they saw off the immediate threat of administration by finding £2million to pay an overdue tax bill owed to HMRC.
The report reveals 13 Championship clubs spent more on wages than they earned in 2016-17.
The finance experts said the temptation to over- stretch was heightened by what they are calling ‘the Newcastle effect’ — in which the Tyneside club earned promotion after they increased their wage bill by eight per cent despite being relegated from the top flight in May 2016.
Newcastle’s ratio of wages to revenue in the Championship was 131 per cent. The club recorded the biggest operating loss in the league — £55m. ‘Newcastle was effectively run as a Premier league club... to secure an immediate return,’ Deloitte said.
The club’s wages accounted for 16 per cent of the total wage bill of the Championship. They spent 82 per cent more than Villa — the second highest spender in 2016-17. Villa ran up losses of £ 19.2m and spent £ 61.4m on wages. That’s £40m more than Huddersfield Town, who were promoted that season.
Of Newcastle’s high-risk gambit, Deloitte said: ‘It remains to be seen whether Newcastle’s success emboldens other clubs relegated from the Premier league to follow this strategy.’
Wolves took the same huge gamble last season — laying out £ 12.8m to benfica for winger Helder Costa and £ 15.8m to Porto for Ruben Neves. but by the time they are pursued by the EFl for a breach of Financial Fair Play they will be massive Premier league earners.
Villa, who lost to Fulham in the Championship play-off final last month, need to make £40m in savings to avoid being fined for breaching FFP rules and have dire cash-flow problems.
In the Premier league, only swansea (77 per cent) spent more than the recommended 70 per cent of revenue on wages.
Tottenham (42 per cent) spent the lowest percentage of revenue on wages in 2016-17. Manchester united, Arsenal and leicester City spent less than 50 per cent of their revenue on wages. burnley spent exactly 50 per cent.
Arsenal’s commercial might is revealed by the new report. They have become the first club other than Manchester united to turn in a profit of more than £100m.
The overall proportion of revenue spent on wages in the Premier league is 55 per cent — the lowest since 1997-98. For the first time ever, no Premier league club reported an operating loss.