Premier League wages hit new high

Posted in 'Personal Finance' by Ian Carpenter

27 June 2012

A report carried out by Deloitte has revealed that the proportion of income spent by Premier League clubs on wages has hit a new high.

A staggering 70% of football club income was spent on salaries during the 2010/11 season, with Manchester United – winners of the league that year – spending a comparatively modest 46% of revenue. Across the city, Manchester City spent an incredible 114% of its revenue on wages. Chelsea remained the biggest spender, with a wage bill totalling £191m, a rise of 10% on the previous season. Total wages across the whole league rose by £201m to a massive £1.6bn.

The governing body of European football, Uefa, has identified escalating player wages as the main cause of financial difficulties in the football world. It has looked into the idea of introducing a salary cap, but found that such a limit would not comply with European law.

In order to address the issue, Uefa will now enforce a limit on the losses that clubs can make. Clubs will be limited to losing no more than €45m in the 2011/12 financial year, and these figures will be scrutinised closely before the start of the 2014/15 season.

Sanctions will be dependent on the seriousness of the financial situation, but penalties will range from a reprimand, to a fine, deduction of points in Uefa competitions and ultimately a ban from the main competitions, the Champions and Europa leagues.

While the football regulators are beginning to take the issue of excessive salaries seriously, footballers continue to earn ridiculously high wages. Yet more and more footballers are going bankrupt as a result of lavish lifestyles and poor investment choices. Earlier this year, former England international Lee Hendrie declared himself bankrupt after racking up debts of more than £200,000 with HMRC, after earning tens of thousands of pounds every week during the peak of his career.

Only last year, Tottenham Hotspur goalkeeper Brad Friedal, went bankrupt after his non-profit US football academy built up debts of nearly £5m.

Even the highest paid players can struggle to get credit. Prospective lenders will take your salary and other information into account when assessing your application, but it could all count for nothing if your credit file isn’t kept up to scratch.

Ian Carpenter is the Operations Manager of checkmyfile, has a degree in Business Studies and is a Graduate Member of the Institute of Credit Management