My comparative analysis of the club's wage spending continues with this comparison with Arsenal between 1990 and 2009. Is it really true that Liverpool have always had significantly lower wage bills than Arsenal? Is Arsenal's frugal 'wage structure' a myth or a reality?
I recently compared Liverpool and Arsenal's gross/net transfer spending between 1990 and 2010, an analysis that showed that Liverpool had spent MORE money on transfers than Arsenal in the last 20 years. Of course, some fans refused to accept the figures, arguing that the *real* reason Arsenal had been more successful than LFC was massive wage bills, and the ability to offer players higher wages.
Is this true though?
NOTES
* I've only included wage bills from 1990 to 2009. The 2010 accounts are not available yet, which means there is no accurate data available for that financial year.
* The figures used are wage costs only. Social security costs (YES, that phrase IS used in the accounts), and Pension costs are not included as they do not constitute wage/salary payments made directly to employees. This is the mistake the media makes when they report wage costs: they include a combined figure of Wages + Social Security + Pension costs.
My calculation:
Wages and Salaries
minus Social Security Costs
minus Pension costs
= Spending on wages and salaries ONLY
* For Liverpool, I have used the accounts for the CLUB not the Holding Company. The figures for Kop Football Holdings Limited (KFHL) differ slightly from the figures presented in the accounts for Liverpool Football Club and Athletics Grounds Ltd (LFCAGL - i.e. the Club).
* Until 2006-7, there were no holding companies associated with LFC, so it seems wrong to skew the figures for the last 3 years. Ultimately, every financial detail with regards to Liverpool FC itself is found in the accounts for LFCAGL, which is what I've used here.
* It should be remembered that the wages and salary figure includes ALL staff connected with the club. This means means coaches, medical staff, and even the guys that cut the grass at Anfield. However, the bulk of the figure will obviously be player salaries. This article is not titled 'Player Salary Comparison'; it is titled 'Wage Bill Comparison'. Player salaries are part of the wage bill.
* There is no other figure available for wages so these figure must be used. It should also be noted that Deloitte uses the same figures (albeit *including* social security + pension costs) in its 'Annual Review of Football Finance. If the figures are valid enough for the experts in the field then they're surely valid enough for me to use.
* SOURCES: Official club accounts for Liverpool FC and Arsenal FC: 1990-2009. Liverpool FC = Liverpool Football Club and Athletics Grounds Ltd (Company No: 0003568). Arsenal = Arsenal Football Club PLC (Company No: 109244). I can't be bothered to post 38 separate snippets from each set of accounts (!), so if someone wants verification of any given year then leave a request in the comments and I will post the relevant snippet.
LIVERPOOL vs. ARSENAL: Wage Bill Comparison 1990-2009
KEY POINTS
* Clearly, it is not fair or accurate to suggest that Arsenal outperformed Liverpool as a result of increased wage spending. As the figures here show, the difference between LFC and AFC overall is miniscule: 2.7m extra spent by Arsenal over a 19 year period, which roughly equates to an extra 140k spent per year.
* Liverpool have higher wage spending than Arsenal for 12 of the last 19 years; Arsenal were higher for 7 of the last 19.
* Between 1990 and 2010, Liverpool spent more money on transfers than Arsenal, with transfer activity in the 1990s being particularly wasteful in comparison to Arsenal.
* Once again, these figures show that Liverpool's financial management in the 1990s was arguably negligent. More money was spent on wages and transfers for the period than both Arsenal and Man United but what does the club have to show for it? Next to nothing.
If one thing is clear it's this: transfer spending and return on player investment (in the form players bought actually having a consistent, measurable, positive impact on the club) has to improve exponentially under NESV.
Jaimie Kanwar
I recently compared Liverpool and Arsenal's gross/net transfer spending between 1990 and 2010, an analysis that showed that Liverpool had spent MORE money on transfers than Arsenal in the last 20 years. Of course, some fans refused to accept the figures, arguing that the *real* reason Arsenal had been more successful than LFC was massive wage bills, and the ability to offer players higher wages.
Is this true though?
NOTES
* I've only included wage bills from 1990 to 2009. The 2010 accounts are not available yet, which means there is no accurate data available for that financial year.
* The figures used are wage costs only. Social security costs (YES, that phrase IS used in the accounts), and Pension costs are not included as they do not constitute wage/salary payments made directly to employees. This is the mistake the media makes when they report wage costs: they include a combined figure of Wages + Social Security + Pension costs.
My calculation:
Wages and Salaries
minus Social Security Costs
minus Pension costs
= Spending on wages and salaries ONLY
* For Liverpool, I have used the accounts for the CLUB not the Holding Company. The figures for Kop Football Holdings Limited (KFHL) differ slightly from the figures presented in the accounts for Liverpool Football Club and Athletics Grounds Ltd (LFCAGL - i.e. the Club).
* Until 2006-7, there were no holding companies associated with LFC, so it seems wrong to skew the figures for the last 3 years. Ultimately, every financial detail with regards to Liverpool FC itself is found in the accounts for LFCAGL, which is what I've used here.
* It should be remembered that the wages and salary figure includes ALL staff connected with the club. This means means coaches, medical staff, and even the guys that cut the grass at Anfield. However, the bulk of the figure will obviously be player salaries. This article is not titled 'Player Salary Comparison'; it is titled 'Wage Bill Comparison'. Player salaries are part of the wage bill.
* There is no other figure available for wages so these figure must be used. It should also be noted that Deloitte uses the same figures (albeit *including* social security + pension costs) in its 'Annual Review of Football Finance. If the figures are valid enough for the experts in the field then they're surely valid enough for me to use.
* SOURCES: Official club accounts for Liverpool FC and Arsenal FC: 1990-2009. Liverpool FC = Liverpool Football Club and Athletics Grounds Ltd (Company No: 0003568). Arsenal = Arsenal Football Club PLC (Company No: 109244). I can't be bothered to post 38 separate snippets from each set of accounts (!), so if someone wants verification of any given year then leave a request in the comments and I will post the relevant snippet.
LIVERPOOL vs. ARSENAL: Wage Bill Comparison 1990-2009
KEY POINTS
* Clearly, it is not fair or accurate to suggest that Arsenal outperformed Liverpool as a result of increased wage spending. As the figures here show, the difference between LFC and AFC overall is miniscule: 2.7m extra spent by Arsenal over a 19 year period, which roughly equates to an extra 140k spent per year.
* Liverpool have higher wage spending than Arsenal for 12 of the last 19 years; Arsenal were higher for 7 of the last 19.
* Between 1990 and 2010, Liverpool spent more money on transfers than Arsenal, with transfer activity in the 1990s being particularly wasteful in comparison to Arsenal.
* Once again, these figures show that Liverpool's financial management in the 1990s was arguably negligent. More money was spent on wages and transfers for the period than both Arsenal and Man United but what does the club have to show for it? Next to nothing.
If one thing is clear it's this: transfer spending and return on player investment (in the form players bought actually having a consistent, measurable, positive impact on the club) has to improve exponentially under NESV.
Jaimie Kanwar
yes you have won the european cup 5 time's,why don't you compare you results with united,and leave arsenal alone.
ReplyDeletenot only has our finances been poor but so has our decisions in every every area of running a football club...for 20 years! This must be the great Liverpool way I hear so much about
ReplyDeleteDoes this take account of the other, often rather ingenious methods that Arsenal use to remunerate their players? Pensions should certainly be included, as this is a significant tax avoidance measure, but also what about payments to limited companies, including off shore companies, for image rights?
ReplyDeleteI wonder whether either set of figures provides a true picture
Why cant ppl realised LFC have been mismanaged for a very long time up top. Its plainly obvious and I dont need to fine comb the financials for LFC for the statement to be true or not.
ReplyDeleteNice work Jaimie though in proving what alot of people know already. Hopefully the blind can too :D
Hi GAGA - I'm not trying to prove that LFC has been financially mismanaged per se - these figures don't exist anywhere, so I'm just putting them out there. In future, when people want to make a point about wage spend, they will have something to back up their argument.
ReplyDeleteProud - whatever vehicle wages are paid into, they *first* have to be paid by the club. Once they've been paid out, that's when the money goes into a limited company/offshore account etc. It doesn't matter what financual vehicle is used, it doesn't change the amount of money actually being paid out by the club, which is what needs to be accounted for.
ReplyDeleteI already have compared results with United. This is not an attack on Arsenal; just a comparison.
ReplyDeleteAnother quality post
ReplyDeletewhat about comparing your net/net spending on transfers against Arsenal's ,it would be embarrassing.
ReplyDeleteI've already done that. The link is in the article.
ReplyDeleteArsenal fan here. So both clubs basically spent the same. That tells me that the major contributing factor to the difference in success levels between the two clubs, among other things, must be the manager. I don't think that Liverpool has been mismanaged financially as they are arguably the biggest club in England, at least at the time the Premiership started, so you would expect them to be spending accordingly. That the managers at the time did not make the most of those resources is the problem. But i dont think that equates to mismanagement. Anyways, just my opnion. Good luck for the rest of the season.
ReplyDeleteThis is incisive analysis, but hardly a secret (Liverpool's wages vs Arsenal's, that is). It may be strecthed even further; note that Arsenal has intensified its academy activities since the 2000s and this also has an impact on wage bills as the club keeps quite a large number of players (over 76, at the last count), who all get paid. So, effectively, the increase in the wage bill is easily explained. Arsene's famed frugality isn't a myth but real.
ReplyDeleteIt would be interesting to know what they mean by social security costs (is that NI contributions or what?) and pension costs (does that mean employers' contributions) and whether these are paid at a flat rate for every player, in case these are a variable that should be taken into account. Apart from that it would be interesting to compare success rates in winning trophies with the changes in comparative levels of wages/salaries. As always you have provided some interesting analysis.
ReplyDeleteInteresting comparison.
ReplyDeleteAlthough I think you're being a little unfair to compare against the majortiy of Wenger's time in charge.
He may not be as succesfful in terms of trophies as a few top managers but working on a relatively restricted budget he is by far the best coach in the world at developing talent. Even before the names he made at Arsenal, he'd already pulled through George Weah & Lilian Thuram among others.
Thanks for the interesting research. Plain for all to see you can't hide under the "wages excuse". You know what would also be a good ratio to show? If you include a column depicting "wages as a percentage of turnover" for the period under analysis for both clubs. That would also be a telling and relevant indicator of how well a big expenditure item like wages "is managed" by both clubs.
ReplyDeleteI think it is fairly obviously that Liverpool has been mismanaged, as the biggest (or at least the most successful) club in the country they should be in a better position now, even after almost two decades of Manchester United dominance they still have a bigger haul of silverware, though that may change over the next few years. Arsenal as a club has always been well managed, the people that run it are a mixture of old school English toffs, who act almost as custodians of the tradition and then you have the noveau riche,extremely shrewd Jewish businessmen. This has made for a good mix. When you add a manager who is also an economist this tells you everything you need to know. One point I will make is that many Arsenal fans are of the view that our current crop of players are being paid far too much and that they are pampered and being rewarded for failure. This maybe a little harsh and probably exists at every premiership club that isn't winning a trophy every year but is worth thinking about.
ReplyDeleteP.s excuse my poor typing and grammer ;) I typed all that in a rush
ReplyDeleteGreat stuff as usual.
ReplyDeleteKop tuality. Or something like that.
Re wages as a % of turnover: That's on my list, and I'll be posting those figures very soon. I toyed with the idea of including turnover figures in the wage spend comparison but it was just too many figures (!)
ReplyDeleteI'm really struggling to believe this for some reason. You've pretty much thrown my whole belief system out the window. We've spent the about the same or more on transfers and salaries than both manu and arsenal over the last 20 years! Jaimie are you sure you're not missing something? Is it possible there is a bonus scheme or some way of player renumeration not included in the wage figure? I must say I'm finding this quite embarrasing
ReplyDeletewhy is it you believe that deloitte include pension and social security costs, and that they don't use the slightly altered system you've employed?
ReplyDeleteDo we really need this stats? What is the relevant of this information...?
ReplyDeleteWhat is the relevance of your comment? if you don't like stats, don't come to this site. and don't waste thread space by posting pointless comments.
ReplyDeleteWhy is the point of analysing anything? It's important to have accurate information out there, isn't it? In fact, I can't be bothered to explain the obvious.
Staff costs are recorded in two places in the accounts. You have a 'staff costs' section which has the total figure (Wages + Pensions + Social Security), and then you have a specific breakdown of the three. Deloitte probably uses the 'staff costs' figure, and does so because for them, there's no reason not to.
ReplyDeleteJust because they do that doesn't mean it's the right approach. The three aspects of staff costs are specifically separated in the accounts; if there's no reason for that, why do it?
Money paid directly to players is in the wages + salaries section. It is just common sense not to include pensions and social security. Do employees receive NI contributions? NO. Do employees have pension benefits paid to them? NO. So why include them in a salary review? That just gives padded, inaccurate figures.
The method I use is far more accurate when it comes to establishing the actual spend on player salaries.
I've emailed Deloitte with this very question anyway; when I get a response I'll post it.
yeah !!! whats the point ... exactly ????
ReplyDeleteInteresting comparison. Arsenal fan by the way.
ReplyDeletewhat this article and a previous one on transfer spending show to me is that wasteful spending by Liverpool in the 90s that didn't deliver a return led to a situation whereby Liverpool didn't have the funds to compete in the 00s. As the overspend in the 90s didn't deliver trophies, the spending couldn't be maintained.
A vicious circle then ensues whereby spending is less because debts are higher because of lack of success and previous overspending. Funnily enough, a manager like Roy Hodgson who can get performances out of low-cost teams is probably exactly what Liverpool need, especially if he can get them back into the top four by the end of next season.
LMAO... I love stats as I am a statistician. They must be a purpose for providing this information. For every project, there must be an abjective/Goal, then you collect your data and analyse the data and produce your finding, You have simply told us your findings, but what is your objective? Are you saying more wages translate to trophies? is there a correlation with wages and how high you finish in the league (I think everyone knows that anyway). What is your objective? Mind you, you can not tell me which site to visit or not too, When you start paying for my broadband maybe you can, Frankly the stat provided is not no use.
ReplyDeleteNext time consider Arsene was there for longer and might have tied players to longer deals (lower salary) Liverpool managers kept changing and new manager might have to sign a new player and pay market rate at the time of signing. have you accounted for continuity of the clubs? Now i see why "data analyst" do not earn much... 8-) . could there also be a london factor? You spend more in london than Liverpool? Car insurance? buying a property? etc... ? I dont know the factors that influence salaries from a footballers point of view. Simply providing numbers makes NO SENSE unless your objective are clearly stated. Soon you ll give us injury time stats... Are you that bored? Get a girl friend mate...
ReplyDeleteYou can't disregard social security and pensions costs. What you're talking about here are player costs. It doesn't matter whether those costs are paid to HMRC or Standard Life they are costs to the club directly related to the player.
ReplyDeleteYou can't disregard social security and pensions costs. What you're talking about here are player costs. It doesn't matter whether those costs are paid to HMRC or Standard Life they are costs to the club directly related to the player.
ReplyDeleteBrilliant article. One thing that you have missed though is that the Arsenal wages from about 2000 or so include large bonus' to the legal team, plus directors related to the building of the stadium - probably equates to 1-2 million per year.
ReplyDeleteGood analysis. It would be interesting to do a comparison on squad size, academy and senior players. That way we could see who is investing for the future, and, teams that prefer to buy finished products.
ReplyDeleteAre you sure these figures are accurate? Arsenal's accounts for y/e 2008-2009 show wages & salaries (ecluding social security costs and pensions) as £90.69m for 2009 and £88.26m for 2008.
ReplyDeleteAre you sure these figures are accurate? Arsenal's accounts for y/e 2008-2009 show wages & salaries (ecluding social security costs and pensions) as £90.69m for 2009 and £88.26m for 2008.
ReplyDeleteClichy is a prime case of Moneyball. Signed for £250,000, he is approaching 250 games for Arsenal and worth anything from £5 million to £15 million (while some discuss players' values in fixed terms, it is worth remembering that they fluctuate and, more to the point, a footballer is only worth what someone is prepared to pay for him). Liverpool's left back, in comparison, is Paul Konchesky, four years his senior, costing £4 million and arguably an inferior player.
ReplyDeleteArsenal's, in short, is a far more cost-effective model. Where Liverpool spent £5 million on Christian Poulsen, Wenger has the more powerful, accomplished, Alex Song, seven years his junior, and priced at only £1 million when he arrived.
Am I sure the figures are accurate? I'm not sure - I am certain. You make it sound like you've checked the accounts but you obviously haven't. Where did you get those figures from? Whatever source you used is inaccurate. The figures I've used are 100% correct, and come directly from Arsenal's accounts. I've posted two images below showing the relevant section from the 2008 and 2009 accounts; as you can see, the figures are correct.
ReplyDeleteArsenal - 2008 Wages + Salaries
ReplyDeleteArsenal - 2009 Wages + Salaries
ReplyDeleteReally interesting article, would definitely like to see turnover stats as well. There was a good article today by Keith Edelman who referred to Liverpool and matchday revenue.
ReplyDeleteLiverpool - £42m
Man U - £100m
Arsenal - £94m
Chelsea - £75m
That suggests your wage bill is not sustainable, you've been paying out wages and transfers fee's similar to the other top teams but without having the income base to support it. The Anfield capacity is a big problem plus you don't have the affluent locals that Arsenal and Chelsea enjoy, the only other option is to add more seats like Man U and make up the shortfall that way.
You really need to get a life mate. Not only is this a waste of time, it's meaningless. If you don't know how many staff (playing or otherwise) are involved then the figures bare no comparison. The easiest example of this is the fact, substantiated in your table, that Arsenal's spending on wages has risen considerably in the last few years....er because we have a much bigger stadium which requires more staff. And what about stuff like catering or merchandising? Who contracts out/franchises and who doesn't???? Unless you have figures for players wages don't bother trying to draw conclusions, it's not possible.
ReplyDeletethe news tadium should sort this stat out for Liverpool.
ReplyDeleteNot sure it really makes a massive difference for comparitive purposes though. NI Rates and Pension contributions are likely to be very similar for both clubs.
ReplyDeleteLIVERPOOL VS MAN UTD, AVERAGE SIZE OF THE TURDS DEPOSITED DURING EVENING GAMES IN THE TOILETS OF SPION KOP AND STRETFORD END, 1975 - 1990 ...... NEVER BEFORE PUBLISHED !!!!!!
ReplyDeleteindeed, many thanks for the reply, il be interested to hear what deloitte have to say on the matter.
ReplyDeleteGood read also!
WHY DONT U COMPARED THE NET INCOME BEFORE AND AFTER RAFA REGIME IF U REALLY WANNA TO BE FAIR ENAF
ReplyDeleteslightly confused here,according to <span>Deloitte LFC wage bill on 2009, including pension and social security, was 107m while the example shown on this page for 2009 calculates to 100459
ReplyDelete</span>