Huge wage bills at Birmingham City

The authoritative Swiss Ramble takes a close look at the recently published accounts of Birmingham City. They have consistently lost money, only reporting a profit once in the last six seasons – and that was just £1m in 2014/15. Since then, the losses have been growing: £5m in 2015/16; £16m in 2016/17; and £37m in 2017/18. Total losses since 2008/09 are £83m.

The loss before tax more than doubled from £16.4m to a barely credible £37.4m, primarily due to massive investment in the squad: wages rose £16.1m (71%) from £22.5m to £38.6m. Of course, it is difficult for clubs in the Championship without parachute payments to compete with those who receive them. Eight clubs benefitted from them in 2017/18, three of them receiving £42m.

The only season that the club reported a significant profit in recent years was £16m in 2011/12, which was very largely due to £22m of once-off player sales (Johnson, Dann, Gardner, Beausejour, Jerome & Ridgewell). In the six years since, club only had £18m profits from this activity.

Although it is true that almost all clubs in the Championship lose money, as they strive for promotion to the top flight, the club's £37m loss is really striking. Only two clubs reported higher losses in 2016/17, Newcastle United £47m & Brighton £39m – and both paid promotion bonuses of around £10m.

Despite the 17/18 growth, revenue has dropped by more than two-thirds (£42m) to £19m in the seven years since relegation from the Premier League, very largely TV money. In the four years between 2012 and 2015, Birmingham benefited from £48m parachute payments, but these stopped in 2016.

The wage bill shot up an incredible 71% (£16.1m) from £22.5m to £38.6m in 2017/18, as the 'Redknapp effect' bit hard, though was inflated by severance payments for departing managers. In just two seasons, wages have increased by £23m (150%) with playing staff up from 64 to 107.

As a consequence, the Birmingham City £39m wage bill was one of the highest in the Championship, thanks to numerous signings and loan players. It was actually higher than Hull City’s £31m and only £3m below Norwich City £42m, even though both clubs benefited from hefty parachute payments.

To illustrate just how big the 2017/18 wage bill of £39m really is, it is actually the highest amount ever paid in the Championship by a club not in receipt of a parachute payment. Furthermore, many of the others in this list were inflated due to chunky promotion bonuses.

As a result of the wages growth, the wages to turnover ratio surged from 128% to an astonishing 202%, three times as much as 67% in 14/15. Although more than half the Championship clubs have ratios over 100%, Birmingham City are in a league of their own (the next highest is Blackburn Rovers 147%). The 2017/18 wages to turnover ratio of 202% is not quite the highest (worst) in Championship history, but it is only surpassed by Bournemouth’s 237% in 2014/15 – and that was adversely impacted by an estimated £7m promotion bonus, while Birmingham finished a lowly 19th.

Commercial income rose 6% (£0.4m) to £6.5m. This feels low, but only 10 clubs in the Championship earn more (highest Leeds United £16m). 888sport and Adidas are the principal shirt sponsors, but owners Trillion Trophy will pay 'significant' stadium naming rights from 2018/19.

Despite their many issues, the club have seen their attendance rise four years in a row from the 15,457 low point in 2013/14, which reflects very well on their supporters. In fact, the 21,042 attendance last season was the highest since they were last in the Premier League in 2010/11.