• England the European champions in c. £7.5 billion game
• England’s top 92 clubs generated income of over £1.75 billion in 2003/04
• Player costs exceed £1 billion for the first time, in part due to Chelsea’s record spending
• Excluding Chelsea, total and player wages declined for first time in Premiership’s history
• Record Premiership clubs’ operating profits
• Football League clubs make great strides in controlling costs and reducing losses
• Clubs in England’s top four divisions contributed around £600m of tax to Government in
  2003/04

Liverpool’s victory in the 2004/05 UEFA Champions League means that England can now lay claim to being both on and off field (financial) champions of Europe.  Liverpool’s win will have already generated up to £30 million in revenue for the club with the promise of more to come.  Overall, Premiership clubs earned £1.3 billion of revenue in 2003/04. This confirms that the Premiership is the biggest football league in Europe by a record margin and represents 18% of the total £7.5 billion European football market.

The 2003/04 season marked Chelsea’s first full year under new ownership.  This has had a substantial influence on the English and European game. Deloitte estimates £300m has already been invested in the club and has been rewarded with Chelsea’s first Premiership title. Chelsea’s spending on player wages and transfers contributed to total expenditure on players of over £1 billion for the first season ever.  However, excluding Chelsea, we estimate that players’ wages actually fell in the Premiership – again a Premiership first. 

Dan Jones, Partner in the Sports Business Group at Deloitte comments: “The Premiership continues to go from strength to strength with solid top line growth. This gives the Premiership a competitive advantage compared to its European rivals, most notably when it comes to attracting and retaining top quality players.  Premiership and Football League clubs have also had success in reining back costs, particularly wages, and in doing so have improved the profitability of English professional football.”

Financial Champions of Europe
Premiership clubs grew revenue by 6% in 2003/04 to £1.3 billion, equating to average revenue of £66.3m per club – over 50% more than the £43.0m average in Italy’s Serie A, its nearest competitor.  Growth was driven by broadcast revenues (up 9%, or £50m) and matchday revenue (up 9% or £32m).

Premiership clubs also recorded significantly higher operating profitability than their European counterparts. The Premiership clubs returned record operating profits of £149m (or £7.5m per club).  Within the other ‘big five’ leagues only German clubs recorded operating profits and even these were substantially lower than in 2002/03. 

In 2004/05 we anticipate there may be a small fall in Premiership revenues due to the first year of the new broadcasting deals.   Dan Jones commented: “While the structure of the new three year domestic broadcast deals, which started in 2004/05, will result in lower domestic broadcast revenues, evidence suggests that many clubs have been successful in increasing matchday and commercial revenues to compensate. Again this demonstrates the ability of Premiership clubs to adjust to changing market conditions. At worst, we expect a modest fall in overall revenues in 2004/05 and steady growth thereafter.”

England continues to boast the best stadia in Europe.  2003/04 saw further substantial investment with the opening, for football, of the City of Manchester Stadium and progress with Arsenal’s 60,000 capacity Emirates Stadium, scheduled to open for the 2006/07 season. Deloitte forecast that total investment in stadia and facilities will exceed £2 billion by the end of summer 2006. 

Alan Switzer, a Senior Consultant in the Sports Business Group at Deloitte, commented: “Quality facilities have contributed to increased attendances and revenues. Total Premiership and Football League attendances of 29.3m in 2004/05 represented the highest aggregate attendances since 1969/70. Utilisation of stadia capacity is increasing, as are revenue yields per seat on matchday.  Clubs are also becoming more sophisticated in treating their facilities as 365 days a year assets. England is Europe’s clear market leader in the football stadium business.”

Competition at the top end – blue shift?
Manchester United were again top of the Premiership (and global number one – see Deloitte Football Money League 2005) in terms of revenue generation (with £172m revenue) but Chelsea,  assisted by progressing to the UEFA Champions League semi-final in 2003/04, narrowed the gap (with £144m revenue).

Dan Jones commented: “Chelsea’s successful 2004/05 Premiership campaign marked the end of the second full season of Roman Abramovich’s investment in the club, and has shattered the on-field duopoly of Arsenal and Manchester United. Liverpool have the opportunity to build on their UEFA Champions League success adding to the promise of a competitive 2005/06 season both on and off the field.”

Competition at the bottom end
Much is written about the difficulties of ‘bridging the gap’ between the Championship and Premiership for promoted clubs.  It is challenging, but certainly not impossible.  Portsmouth and West Bromwich Albion have both successfully survived in the Premiership and Bolton Wanderers, Birmingham City, Charlton Athletic and Fulham are now looking beyond survival and, in some cases, to Europe. The significant boost provided by Premiership broadcasting monies and the ability of clubs to convert promotion into higher commercial and matchday revenues provides a revenue boost of upwards of £21m to invest in players, infrastructure and ‘gearing up’ to life in the Premiership.  Alan Switzer, from the Sports Business Group at Deloitte noted: “The financial boost received by promoted clubs means management’s ability (on and off the field) to adapt and step up quickly, and of course a slice of luck are arguably as, if not more, important than any perceived financial ‘gap’ upon promotion.”

England’s top four divisions – wage restraint and reduced losses
The clubs in England’s top four divisions generated total income of over £1.75 billion in 2003/04.  Premiership clubs accounted for three-quarters of this total, or £1,326m, up 6% on 2002/03 (£1,246m). 

The slowdown in wages growth first exhibited in 2002/03 continues. Total wages increased by the lowest rate ever (7%) in the Premiership’s history and actually declined if Chelsea are excluded.  The Football League clubs did better still and reduced overall wages for the second year running.

In relation to player transfer costs, the substantial fall in 2002/03 was reversed with gross spending of over £400m largely driven by Chelsea.  The amount of transfer fees leaving the English game to overseas clubs or agents was a record at £263m.

Dan Jones commented: “Whilst English clubs’ spending on player wages and net transfer fees costs exceeded £1 billion for the first time in 2003/04, a significant element of that was driven by Chelsea.  We expect the 2005 summer transfer window to quieten down. Big transfer fees and wages will continue to be paid for star players, but for the majority of players the new sense of ‘realism’ will continue to limit transfers fees and we hope that more performance dependent wages will continue to be introduced for all players.”

Football League clubs’ increased revenue and reduced wages resulted in substantially smaller losses.  However, operating losses of £52m and pre-tax losses of £67m still need further attention.  Paul Rawnsley of the Sports Business Group at Deloitte commented: “The Football League clubs have undoubtedly turned the financial corner post ITV Digital and are getting to grips with their cost base. A reduction in total wages of 10% across the three divisions represents an impressive achievement, but further progress is required to reduce the current unsustainable level of losses. The Football League has been rightly applauded for the governance changes it has introduced including Sporting Sanctions for insolvency, limits on wage spending and enhanced transparency in player agent dealings.”

Whilst it is the pay packets of players that receive the most media coverage, Deloitte highlights that the success of English football does deliver considerable benefits, including a significant annual return for Government.  Jason Hargaden, Tax Director in the Sports Business Group at Deloitte, commented: “There is sometimes a perception that the game does not pay much tax. In fact, professional football contributed around £600m of tax to Government in 2003/04. By the end of the 2004/05 season we estimate the clubs in the top four divisions have paid Government £4.3 billion in tax over the last 13 years.  A tidy sum for the Exchequer.”

Deloitte Annual Review of Football Finance 2005 The 14th edition of the Deloitte Annual Review of Football Finance was published on 8 June 2005. To view the Highlights and Foreward of the report and to order click here:  Deloitte Annual Review of Football Finance 2005. Cost is £400

Ends

Notes to editors
For further information or to speak with a member of the Sports Business Group at Deloitte please call Katie Broome (Deloitte Press Office) on +44 (0)20 7303 6359 or +44 (0)7977 203 155, or e-mail: kbroome@deloitte.co.uk.

Exchange rate
The exchange rate at 30 June 2004 has been used to convert figures in Euros (£1 = €1.49055).  For a copy of this News Release denominated in Euros please email your request to opound@deloitte.co.uk

Basis of preparation
The News Release and Highlights are extracted from the relevant sections of the Deloitte Annual Review of Football Finance (June 2005).  The bases of the opinions and calculations are explained in the relevant sections/appendices of that publication.

The analysis of the financial results and position of English clubs, and comparisons between them, has been based on figures extracted from the latest available group or company financial statements.  The analysis of the financial results of various European leagues, and comparisons between them, has been based on figures extracted from the relevant company or group financial statements or from information provided to us by national associations/leagues.

In some cases Deloitte have made adjustments to the disclosed figures to enable, in Deloitte’s view, a more meaningful comparison of the financial results and position of the football business on a club by club basis.  Deloitte have not performed any verification work or audited any of the information contained in the statutory financial statements for the purpose of their analysis.

In relation to estimates and financial projections, actual results are likely to be different from those projected because events and circumstances frequently do not occur as expected, and those differences may be material.  Deloitte can give no assurance as to whether or how closely the actual results ultimately achieved will correspond to those projected and no reliance should be placed by any party on such projections.

The published financial statements of clubs rarely split wages and salaries costs between playing staff and non-playing staff.  Therefore, unless otherwise stated, references to wages and salaries relate to total wages and salaries for clubs, including non-playing staff.

The publication and this News Release are intended to provide general information on the finances of the clubs in English football and other European leagues and cannot be relied upon to cover specific situations.  No responsibility for loss occasioned to any person acting, or refraining from action, as a result of any material in this News Release will be accepted by Deloitte & Touche LLP, Deloitte Touche Tohmatsu, and all other member firms of Deloitte Touche Tohmatsu organisation and their affiliates and in all cases any successor or assignee.  Readers should not act upon any material in this News Release without taking relevant professional advice.

About the Sports Business Group at Deloitte
Over the last decade Deloitte has developed a unique focus on the business of sport. Our specialist Sports Business Group offers a multi-disciplined expert service with dedicated people and skills capable of adding significant value to the business of sport. Whether it is benchmarking or strategic business reviews, operational turnarounds, revenue enhancement strategies or stadium/venue development plans, business planning, market and demand analysis, acquisitions, due diligence, expert witness, audits or tax planning; we have worked with more clubs, leagues, governing bodies, stadia developers, event organisers, commercial partners, financiers and investors than any other adviser.

For further information on our services you can access our website at www.sportsconsulting.co.uk 

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press