Premier League clubs rein in wage inflation to blow the final whistle on the prune-juice era

Frank Dalleres
Follow Frank
Alan Sugar
Lord Sugar coined the phrase in his days as chairman of Tottenham (Source: Getty)

It is one of the most infamous expressions in English football, emblematic of the cash-soaked Premier League era.

But “the prune-juice effect” – coined by then-Tottenham chairman Lord Sugar in exasperation at Premier League clubs’ collective tendency to plough any extra revenue into raising player salaries – could be in danger of disappearing from the lexicon.

The country’s top teams have in recent years dramatically cut the proportion of revenue increases that goes straight onto their wage bill, according to a new report from Deloitte.

Its Annual Review of Football Finance notes that for the last three seasons for which accounts are available, Premier League clubs have diverted just 44 per cent of income growth into remuneration. For the five seasons before that, the figure was 99 per cent.

A new era of profitability among the biggest sides, greater restraint – some of it regulatory-enforced, some of it voluntary – and a decline in the need to gazump comparatively poor European rivals is behind the trend, says Dan Jones, head of Deloitte’s Sports Business Group.

Read more: The full Premier League prize money breakdown has been revealed

“I think we are in a different place now,” he told City A.M. “It’s easy to lose sight of that when you’ve still got a 12 per cent wage increase [in 2015-16]. It’s pretty difficult to think of that as being relative restraint, but that balance is better now than it has been.”

Premier League clubs generated record revenues of £3.6bn in 2015-16 and, though pre-tax profits turned into a £110m loss due to a number of exceptional items, the outlook remains bright.

Chelsea v Sunderland - Premier League
England's top-division clubs are enjoying a new age of profitability (Source: Getty)

Operating profits for 2013-14 to 2015-16 were £1.6bn – more than the combined total for the preceding 16 campaigns – and they are set to rise, owing to new television contracts that took effect in 2016-17 worth more than £8bn over three years.

When accounts for 2016-17 are published later this year, Jones believes that, for the first time, all 20 Premier League clubs could report a profit.

Wage-revenue ratio, a key metric of financial stability, could also dip below 60 per cent for only the second time in a decade.

“The wage bill will have gone up but relative to revenues it won’t have done,” he added.

Premier League clubs’ bountiful resources are set to fuel a record-breaking transfer spend during this window, having steadily increased for the past six years to £1.17bn last summer.

Jones said: “We’re pretty confident that we will see a record again this summer but equally comfortable that it is sustainable and not going to jeopardise any Premier League club’s finances.”

Read more: Higher fees forcing Premier League clubs to fork out more than ever before

Related articles