TaxPersonal TaxPay spiral ‘will damage clubs’

Pay spiral 'will damage clubs'

Spiralling wages are holding back Premiership football clubs’ profitability, and despite sound financial management by many club accountants, player costs threaten to widen the yawning gap between the sport’s rich and poor, Deloitte & Touche said last week.

The firm’s survey of the Premiership, published last week, revealed the clubs made a collective pre-tax profit during 1997/1998 for the first time in three years. Overall turnover grew by 23% to £569.2m. After transfer spending and interest, the clubs finished the year £17.7m in the black.

Overshadowing both these rises was the increase in wage bills, which leaped by 36% – ‘a trend which is clearly unsustainable in the longer term’, according to Deloittes.

Deloittes tax partner Richard Baldwin said good financial management helped, but competitive inflation was keeping wages dangerously high and hurting smaller clubs. ‘Listed clubs have shareholders to satisfy and dividends to pay,’ he said. ‘What has trickled down is wage inflation and that’s what is causing concern among second and third division clubs.’

Baldwin welcomed the introduction of the FRS 10 standard – which means clubs can write off transfer fees over the life of a contract – because it would make comparing clubs easier.

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