The Deloitte Money League is now out for 2018, and the interesting piece in it is they report Newcastle United continued to operate as a Premier League club when we were in the Championship.
The wage bill was massive, and another loan from owner Mike Ashley assisted Newcastle in surviving, and it all worked because we were promoted at the first attempt.
But notice the longer a team stays in the Championship, the less money they get, and they invariably have to cut their running costs significantly to keep in line with the Financial Fair Play rules.
Aston Villa are facing that problem at the moment and next season will be their third season down below.
Rafa Benitez – two successful seasons as Newcastle manager
They may even have to go into bankruptcy – but we hope not – that would be tragic.
It’s been well documented that to keep Rafa at the club Newcastle officials agreed to keep players who wanted to stay.
That included some high wage earners like Jonjo Shelvey, and we ended up losing over £90M before taxes for the 2016-2017 financial year.
Here’s some of the Deloitte report as reported in the Chronicle:
“Despite being relegated from the Premier League to the Championship for the 2016/17 season, Newcastle’s core wage bill actually increased (by 8%), even when excluding promotion bonuses and amounts written off as onerous contracts,”
“The decline in revenue recorded by the club meant that the wages/revenue ratio reached 131%, while the club recorded the largest operating loss in the league (£55M).”
“Newcastle was effectively run as a Premier League club taking what the club described as a “financial gamble” to secure an immediate return.”
“The result was positive as the club achieved promotion and subsequently consolidated their position in the Premier League by finishing 10th in the 2017/18 season.”
“It remains to be seen whether Newcastle’s success emboldens other clubs relegated from the Premier League to follow this strategy in the future.”
It all worked out for Newcastle, but it’s also a recipe to go into bankruptcy if things don’t work out – which means the team is not promoted in the very first season down below.
In that first year, there will be huge losses, and they simply cannot be maintained, and costs would have to be reined in significantly.
And in that second season, three relatively rich clubs coming down from the Premier League will be new competitors for promotion.
It was a huge risk taken by Newcastle – make no mistake about that – but due to the brilliance of manager Rafa Benitez and the courage and determination of our players, it was a huge success.
And it continued this season when we finished in 10th place and got a massive £123M from the Premier League.
And Mike Ashley is still hesitating on agreeing to Rafa’s demands before he will sign a new long-term deal at the club?