PtG Article 09.06.2010

New reports show increased club debts in Brazil and England

On the eve of the World Cup, the financial bankruptcy of club football has been exposed by new research that shows the top clubs in Brazil and England owe a staggering total of €5.2 billion.

A report from accountants Crowe Horvath shows that debts at Brazil’s 26 leading clubs total €1.2 billion, while the latest edition of the annual Deloitte report on football finance published yesterday showed that net debt at the 20 English Premier League clubs has now reached £3.3 billion (€4 billion).

Clubs in Brazil, South America’s most popular and seemingly richest league, are suffering from a surge in expenditure as clubs try to compete with European sides on wages. Sponsorship income is rising but this failing to offset higher wages and debts are spiralling with Fluminense owing a total of €147.6 million according to Crowe Horvath’s research, which has yet to be translated into English.

Overall debts are up 11% to €1.2 billion despite a rise in income from sponsorship and advertising that is expected to continue into 2010, when Crowe Horwath forecasts that sponsorship would reach €144 million - up from €115 million in 2009 – and revenue from marketing and advertising would hit €230 million.

Slow growth and ballooning wages in EPL

The English Premier League is suffering from slowing growth and ballooning wages according to Deloitte with revenue up just 3% in the 2008/09 season to just under £2 billion but wages surging 11% to £1.3 billion. In the last three seasons, total wages in the Premier League have grown by 55% or £474 million.

"For every £100 that comes into Premier League football clubs, £67 goes out on the wage bill - that's too high," said Dan Jones, author of the Deloitte report. "The growth in wages is difficult to slow down, given existing three or four-year [player] contracts, but must nonetheless be reined back to address clubs' declining profitability."

Only half of the 20 Premier League clubs made a profit and total operating profits more than halved in 2008/09 against the previous year to just £79 million – their lowest level since 1999/2000.

Biggest spenders: Chelsea and Man U

Net debt edged up from 3% from £3.2 billion to £3.3 billion with more than £1.9 billion of the total net debt related to Arsenal, Chelsea, Liverpool and Manchester United.

Chelsea had the highest wage bill at £167 million, although signs are emerging that the club are trying to cap large payments as high earners England international Joe Cole and German captain Michael Ballack are being released this summer.

Manchester United were the second biggest spenders at £123 million, which was only up just 1.7% but the wage bill leapt 19% to £107 million at third-placed Liverpool, while Arsenal’s spending on wages was £104 million – up 3%.

The DebtsBrazilClubs   Debts (€m)

Fluminense-RJ  147.6

Vasco da Gama-RJ  146.8

Botafogo-RJ   142.3

Flamengo-RJ  138.2

Atletico-MG   128.2

Santos  81.2

Internaconal-RS  66.2

Gremio-RS   61.6

Palmeiras-SP  52.5

Portuguesa-SP  52.4

Guarani-SP   52.2

Cruzeiro-MG   43.8

Corinthians-SP  44.8

Vitória-BA   38.8

Ponte Preta-SP  37.3

São Paulo-SP  29.7

Bahia-BA   24.5

Goias-GO   22.2

Nautical   22.1

HMT-PR  22.0

Parana-PR   13.0

Sport-PE   12.9

Figueirense-SC  5.6

Youth-RS   5.6

Atletico-PR   0.6

São Caetano-SP  0.6

Source: Crowe Horvath RSC

English Premier League

Club   Net debt (£m)

Manchester United 716.6

Chelsea  511.6

Arsenal  297.0

Liverpool  261.7

Manchester City 194.4

Fulham  164.0

West Ham  114.9

Ston Villa  72.3

Portsmouth  70.5

Bolton Wanderers 58.4

Wigan   54.0

Sunderland  48.8

Tottenham Hotspur 45.9

Everton  37.9

Blackburn Rovers 20.3

Hull City  17.1

Wolverhampton 13.0

Birmingham City 12.0

Burnley  11.9

Stoke City  2.3

Source: The Independent