Graphic: Football's bubble refuses to burst

Crisis? What crisis? While the rest of the world is cutting costs, Premier League clubs have spent a record £1.2 billion on players' wages while running up record debts of £3.1 billion, according to the latest research into the state of football finances.

The report by the Sports Business Group at Deloitte reveals that Manchester United's debt stands at £649 million and Liverpool's at £299 million, both sums stemming from loans taken out by the clubs' owners to finance takeovers. Arsenal's £318 million includes £250 million in long-term bonds taken out to finance their new stadium.

Meanwhile, Premier League revenues are estimated to have hit £2 billion in the 2008-09 season as the top flight of English football resisted the effects of the worldwide downturn. According to the latest Annual Review of Football Finance, revenues among England's top clubs continue to outstrip those in rival leagues and are expected to climb even higher in 2009-10, although at a slower pace.

The estimates are based on figures for the 2007-08 season, when a new television rights deal boosted the Premier League clubs' income to £1,932 million. Deloitte believes that it surpassed the £2 billion mark for the first time in the campaign just ended.

The main beneficiaries have been players and their agents, with wage costs increasing by 23 per cent in the 2007-08 season to £1.2 billion - the largest annual increase in Premier League history. Graphs produced by Deloitte show a noticeable correlation between growth in revenue and wages, and that the Premier League is pulling ahead of its main European rivals in both areas.

Clubs still had enough left over to splash out a record £675 million on transfer fees in the summer 2008 and January 2009 transfer windows. And, despite the outlay, they were mostly able to improve the balance of wages to revenue, with the result that operating profits rose to £185 million.

However, individual clubs may have to work harder to ensure that such a healthy situation persists, if and when financial realities begin to catch up with them. Newcastle United, who have just been relegated, face a radical readjustment to a wage bill that, at more than £74.5 million, was £15 million above the Premier League average in 2007-08. Portsmouth's recent financial difficulties are explained by a rise of 48 per cent in wage costs to £54.68million in the season in which they won the FA Cup, unsustainable on average gates of 20,000.

“Lower revenue growth in forthcoming seasons means clubs will have to focus on improving cost control - both wages and other operating costs - if profits are to be maintained,” Alan Switzer, a director in the Sports Business Group, said.

For now, the Premier League is pre-eminent among European leagues, earning a bigger share of a European football market that grew from £10.5 billion to £11.6 billion in 2007-08. Top-division revenues were £1.1billion each in Germany, Italy and Spain and £800 million in France. The Premier League also restored its position as the world's most profitable after the Bundesliga had edged ahead in 2006-07.

Whether this growth can be sustained is debatable, with clubs realising that many of their supporters are unable or unwilling to pay increased admission charges. “The new economic realities may lead to flat match-day revenues,” Dan Jones, partner in the Sports Business Group, said. “While attendances continue to hold up well, many clubs have frozen or reduced ticket prices.”

There was also potentially good news for clubs outside the elite, with total revenues for the 72 Football League clubs exceeding £500 million for the first time. That figure will rise next season thanks to an improved broadcasting deal, but clubs who have pushed the boat out in the hopes of reaching the Premier League may need every extra penny of their share, with the Coca-Cola Championship posting record losses of £102 million.

Despite the revenue increases, net debt in the Premier League also increased to £3.1 billion in 2007-08, up from £2.7 billion the previous season. “Two thirds of this debt is in respect of just four clubs - Arsenal, Chelsea, Liverpool and Manchester United - and around £1.2 billion is non-interest bearing ‘soft loans,'” Paul Rawnsley, director in the Sports Business Group, said. “On the positive side of the balance sheet, these four clubs also had £1billion of assets in respect of investment in stadia and other facilities.”