By Paul Jones
Cardiff City and Swansea City should both limit their spending on wages to 70 per cent of their revenue if they want to survive, say financial services firm Deloitte.
A salary cap at will be crucial to the viability of Championship clubs affected by the coronavirus pandemic, claim the football finance specialists.
Both Cardiff and Swansea are preparing for the resumption of matches next weekend after three months without any match day revenue.
The re-start comes as the Deloitte Annual Review of Football Finance 2020 found each of the three divisions of the English Football League achieved record revenues in 2018-19, topping a combined £1b for the first time.
Despite that, second-tier sides had a wages-to-turnover ratio of 107 per cent and lost a combined £300m in 2018-19.
Deloitte says the problem is therefore not how money is distributed within the English game, but that there needs to be tighter controls on how it is spent, especially at Championship level.
Dan Jones, the head of Deloitte’s sports business group said: “League One and League Two were doing a lot of the right things already – yes you had isolated incidents like Bury but you could isolate those and say they were down to bad management – systemically they were in a better place than they had been 10 years previously.
Revenue polarisation between and within European football leagues continued to grow, and the trend is likely to be exacerbated by the COVID-19 pandemic. Find out why in the full report at https://t.co/RiYRyp33mc #FootballFinance pic.twitter.com/Vx13AL2V9C
— Deloitte UK (@DeloitteUK) June 12, 2020
“What has happened with the pandemic is that if you take the ability to play football matches in front of crowds away from League One and League Two clubs they haven’t got the broadcasting money to fall back on, that is going to be very painful and it’s going to be very hard for those clubs to manage that situation. You can’t anticipate and plan for that situation.
“For the Championship, though, that was a situation where you look at our 18-19 numbers, you’ve got 107 per cent of revenue going out on wages, you can see the problem looming – £300m of losses across the Championship clubs, you can see what the problem is.
“A salary cap is a very blunt instrument, but if you were to say you can only spend 70 per cent of revenue on salary, and apply that in 18-19, you take £300m out of the wage bill and you pretty much wipe out the losses to the Championship at a stroke by that single measure.”
Deloitte, which has been involved in providing financial information to EFL clubs involved in discussions with players over wage deferrals and cuts, believes football can learn lessons from other sports, such as rugby union and Formula One.
“You wind the clock back 18 months, two years, everyone was saying how can we make it work (in Premiership rugby) and you then have the Saracens case and you see that actually these things have worked, they can have teeth, they can be enforced,” Jones added.
“Formula One is the same, it’s just introduced a new cost cap. It’s a sport where that’s been talked about forever as something that the sport needs and it’s always been ‘oh, it’s too difficult, it’s too complex, you can’t do it’.
“I just think if Formula One can do it, if Premiership Rugby can do it, I don’t see why the Championship can’t do it. The need is more urgent and more long-standing in the Championship than it is even in those other sports.”