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Championship clubs spend £4 for every £3 generated

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Championship clubs are spending £4 for every £3 they generate in revenue according to figures released today. Although Championship revenues increased by 9% to exceed £400m for the first time “urgent corrective action” is required according to Deloitte’s Annual Review of Football Finance.

Championship clubs’ operating results worsened for the sixth consecutive year, to a record loss of £133m. 14 Championship clubs lost £5m or more at an operating level as opposed to 12 clubs in 2008/09 – in comparison only three clubs reported pre-tax profits. The Football League’s new domestic TV deal, coming in at £195m, is a 26% drop on the previous one while added pressures on matchday and commercial revenues risk weakening clubs’ positions further, says Deloitte.

Around one third of clubs in the Championship paid out more in wages than they earned in revenue. Deloitte says the correlation between wage costs and league finishing position remains weaker in the Championship than the Premier League although evidence indicates automatic promotion almost always requires a top six ranked wage bill. Championship clubs’ wages grew by 6% to £357m although their wages/revenue ratio dropped to 88% from a record high of 90% the previous season due to revenue growth.

The Football League suffered a 6% decrease in attendances in 2010/11. Deloitte said this was due to a change in the mix of clubs in the Championship and reflective of the “challenges faced by lower league clubs arising from the economic climate”. The aggregate net debt of the 24 Championship clubs has increased to £875m at the end of the 2009/10 season (£459m at summer 2009). Excluding Newcastle United, the figure falls to £587m in summer 2010 – but is still up £128m year on year.

Alan Switzer, Director in the Sports Business Group at Deloitte, said: “The Football League’s achievement in attracting fans and growing revenues is often overlooked. The Championship is the third best attended League in Europe, ahead of the top divisions in Spain, Italy and France. Whilst revenues have held up well, a wages/revenue ratio of 88% is a cause for concern and will need to be addressed by Championship clubs.

“The Football League has calculated that over 80% of player contracts will have expired before the new TV deals start, which gives clubs time to reduce their cost base. However, financial history does not bode well. The League will be keen to encourage its members towards consensual solutions to assist with financial responsibility and stability for the well-being of the competition and its member clubs.”

Deloitte’s figures come one day after Championship clubs revealed they were set to introduce their own version of UEFA’s financial fair play rules to ensure teams only spend what they earn. The system will be discussed at the Football League’s Annual General Meeting, held in Cyprus, today.

Football League Chairman Greg Clarke said: “The Championship clubs voted to look at financial fair play and in principle decided that was the road they wanted to go down. I think it’s essential, and the energy to solve this is coming from the clubs themselves.

“It’s a perfect storm in that a lot of things have come together to make this happen, including, of course, the level of debt in the game, £700m in the Football League, most of that in the Championship, and big losses being racked up by the clubs. I would hope this could lead to a return to the days when local communities could own the clubs rather than rely on offshore benefactors.”

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