Frances Ball 25 Apr 2019 11:25am

High wages dent Premier League profits

That’s due in part to the Premier League’s record five teams in the UEFA Champions League last year, according to Deloitte’s Sports Business Group analysis of annual revenue for 2017/18

All reached the round of 16 or further, and as such there was a substantial increase in UEFA distributions to Premier League clubs. Deloitte reported this increase at approximately £71m.

Operating profits across the league, however, fell 16%. The drop was largely due to high wage bills, with a combined pay expenditure of £2.9bn.

Dan Jones, partner at Deloitte and head of its Sports Business Group, commented, “We have seen clubs’ wage expenditure increase at a faster rate than revenue growth in 2017/18. This is the same pattern as observed in the second year of the previous Premier League broadcast cycles, as clubs continue to invest in playing talent.”

The wages/revenue ratio, this year at 59%, is the lowest outside the first year of a broadcast rights cycle since 1998/99.

As a result of high wage expense, overall operating profit is at £0.9bn, compared to the previous season’s £1bn. As Deloitte pointed out, that most-recent figure is still the second-highest in Premier League history.

Commercial revenue also grew, as did match day revenue. More than half of the latter was a result of Tottenham Hotspur’s move to Wembley Stadium, and their new kit deal with Nike.

Spurs, Arsenal, and Liverpool, together contributed over 75% of the total pre-tax profit. There was also, however, an increase in the number of clubs that reported a pre-tax loss.

Tim Bridge, director of the Sports Business Group, said, “The increased wage expenditure was expected given the busy transfer market in the 2017/18 season, with two record transfer windows driving estimated Premier League gross spend of £1.9bn.”

He added, “With the emphasis now on clubs to generate revenue growth from sources other than central broadcast distributions, it may be that we see the levels of pre-tax profit diminish over the next few years.”