England's leading football clubs have left their loss-making ways behind and entered a new era of profitability after mustering record-breaking pre-tax profits last season.
Premier League teams registered a combined pre-tax profit in 2013-14 for the first time in 15 years, with the £190m figure almost four times the previous record of £49m, set during the 1997-98 campaign. This is a marked departure from the £2.6bn losses accumulated over the previous decade, according to research published today by Deloitte.
Operating profit for the 20 top-flight sides, which excludes player trading, net interest charges and amortisation of player contracts, also hit a new high of £620m – more than the six preceding seasons combined.
The profit was the result of a 29 per cent rise in revenues across the division to £3.3bn, driven by booming broadcast contracts and commercial growth, allied to the impact of cost-control measures such as the financial fair play (FFP) rules initiated by European body Uefa.
Clubs’ return to profitability heralds the end of the so-called prune juice effect, which repeatedly saw uplifts in television rights income largely swallowed up by instant wage inflation. Player salary costs rose just six per cent in 2013-14, while the Premier League’s wages-to-turnover ratio – a key indicator of financial health among clubs – fell from a record high of 71 per cent in 2012-13 to 58 per cent, its lowest level since last century.
“It feels to me like a turning point rather than a blip,” Dan Jones, of Deloitte’s Sport Business Group, told City A.M. “Having spent 20 years tracking this stuff, this feels like a really big moment. We called three years ago that we thought financial fair play was as big a moment for the business of football as the Bosman ruling, and I think we’re seeing that start to bear fruit now.”
The Bosman ruling altered the transfer market irrevocably in 1995 when it abolished fees for out-of-contract players within the European Union.
Key to optimism over continued profitability is the enduring TV income bonanza, illustrated last month by the Premier League selling its domestic rights for the 2016-19 cycle to Sky and BT for £5.1bn – a 70 per cent increase on the current deal.
Unlike in previous seasons, teams are prevented from ploughing the windfall straight into pay rises for their stars by the Premier League’s cost-control measures and Uefa’s controversial FFP regulations, which broadly demand that clubs spend only what they earn.