Top-flight clubs issued warning as wage bills hit all-time high

Premier League clubs are already spending next season's windfall from the new TV deal, but have been warned the profligacy must stop or else more sides face going into administration like Portsmouth. Figures revealed today show that players' wages among top-flight clubs have risen sharply, outstripping the teams' rise in revenue by some margin. The clubs' income in the season 2008/09 grew by £49m to a record £1.98bn, yet that increase was not enough to cover the £132m increase in wage costs for the same period.

Part of the blame for that has been put down to clubs giving in to wage demands from players and their agents who are only too aware that Premier League revenues are about to balloon again, when the new broadcasting rights deals, which have risen by 30 per cent to £3.6bn, come into effect next season.

The 20 Premier League clubs are so concerned about the prospect of fighting off the demands of players and their agents they have yet to announce just how much money has been raised by selling the league's TV rights overseas. One source said: "As sure as night follows day if there is an announcement concerning revenue growth, the next knock on the chairman's door will be from a player's agent."

The latest figures are released today by Deloitte's Sports Business Group for the season 2008/09, which show that the operating profits of Premier League clubs fell by almost half, from £185m in 2007/08, to £79m. The news comes the day after the BBC screened a Panorama documentary which claimed the Glazer family, the owners of Manchester United, have debts of more than £1.1bn.

According to the BBC's figures, the Glazers' debts include £700m tied to Manchester United, £388m on mortgages for their First Allied shopping centre business in the United States and £66m tied to their Tampa Bay Buccaneers NFL team. The Glazers say they are comfortable with the situation and that their assets total £2bn. The revelations have cast further doubt on whether the Glazers are the right people to own Manchester United, particularly as they are the target of the "green and gold" protest organised by disgruntled supporters.

United's financial concerns are mirrored across the Premier League, which has shown itself to be buoyant in the current recession but still needs to curb the games of financial Russian roulette played by its clubs. Only last week David Sullivan, the co-owner of West Ham United, which has debts of £100m, announced he was hoping to sign 32-year-old Thierry Henry on wages of £75,000 a week.

Deloitte's report shows that in 2008/09 total spending on players' wages rose by £132m (11 per cent) to more than £1.3bn, up to 67 per cent of all revenues. The previous season the proportion was 62 per cent of income. Analysts say the 67 per cent figure is the highest in Premier League history and warn the season just finished is likely to show an even greater proportion of income going straight out on wages.

In the last three years, spending on players' salaries in the Premier League has rocketed. Wages have soared by more than 55 per cent (£474m) in that period, and the most rapid rise in wages has come from teams outside the traditional "big four" clubs of Manchester United, Chelsea, Arsenal and Liverpool.

The Premier League's income is set to rocket again when the new TV deal starts. Alan Switzer, director in the Sports Business Group at Deloitte, urged clubs to spend that increased income wisely, and not to fritter it away on expensive new signings on even higher wages.

Switzer said: "The record wages-to-revenue ratio of 67 per cent in the Premier League is a concern, and we expect wages growth to outstrip revenue increases again in 2009/10. This will further reduce operating profitability, a decline that cannot continue indefinitely. However, clubs have the opportunity, via the revenue uplift from the new broadcast deals from 2010/11, to get wage levels down to a more sustainable share of revenue. It's not the first such opportunity. It remains to be seen whether they grasp it."

Clubs are already paying more in wages on the promise of their increased TV money. But many in the game believe the days of profligate spending are over, and clubs are generally looking to cut costs. They point to the example of Chelsea, who in the past have thrown money down the drain but who are now so determined to reduce their wage bill they risk letting a key asset such as Joe Cole walk away on a free transfer. Tellingly, Cole is a free agent but he has yet to receive an offer he cannot refuse from any club.

The imminent Uefa regulations concerning financial fair play as well as the Premier League's new rules to ensure a quota of "home grown" players are also expected to help encourage clubs to become more parsimonious.

A Premier League source said: "There is a will among Premier League clubs to keep spending down. The league's 'home grown' player quota should help to bring down wages. Clubs will be limited to a squad of 25 players, eight of whom must be 'home grown' which will mean a higher proportion of players coming from the club's own academy."