Europe's top clubs agree to salary cap

In a move which might induce panic in Ferrari dealers across the continent, the power brokers of Europe's leading clubs yesterday agreed to a voluntary salary cap.

From the 2005-06 season onwards the 18 clubs of G14, who include Manchester United, Liverpool and Arsenal, have pledged to limit their spending to 70 per cent of turnover. All staff, including players and directors, will be included. Verification will be carried out by each club's statutory auditors.

The move, agreed at a meeting in G14's Brussels office, is a response to the unsustainable combination of escalating wages and collapsing television rights.

The most extreme problems are in Portugal, where wages have reached 90 per cent of turnover, and Italy, where the crisis claimed Fiorentina during the summer. In the 12 months to last June every Serie A club made a loss with Parma spending 110 per cent of turnover on wages.

In the Premiership the wages-to-turnover ratio had climbed to 60 per cent by June 2001 (Deloitte & Touche Annual Report of Football Finances June 2002) but the real problems were lower down. Even before the collapse of the ITV Digital deal First Division clubs were spending 101 per cent of turnover on wages with the lower divisions 87 per cent. Of individual clubs Fulham (195 per cent) were the biggest culprits followed by Wimbledon (188), Wigan (181) and York (180). The leading offenders in the Premiership were West Ham (83) with Manchester United (52) returning the best-balanced figures. United's figure is now believed to be more than 52 per cent but, like Arsenal and Liverpool, they should be safely under the 70 per cent maximum.

Salary caps have been in existence since 1984 in the United States, with basketball leading the way closely followed by the National Football League. Both rugby codes in England also have a cap.

Peter Kenyon, the chief executive of Manchester United and a vice-chairman of G14, said: "In the last few years the costs associated with putting together a football team have risen dramatically. The reality is if you look at football across Europe there are too many clubs who are technically bust and that is not healthy for the success of the sport."

However, while the theory may be sound in practice a salary cap is difficult to enforce. What if a sponsor picks up some or all of a players' wages – a practice which dates back to a brewery subsidising Kevin Keegan's arrival at Newcastle in the 1980s? How are payments for image rights – one of the ways Real Madrid funded the Zinedine Zidane transfer – assessed?

And, given this is self-regulated, how will Ajax and PSV Eindhoven react if Feyenoord, who are not in G14, go on a spending spree in the Netherlands? Will Juventus and the Milan clubs have the self-discipline not to respond if Roma go on a splurge? Similarly, in England, Germany and Spain, Chelsea, Schalke 04 and Deportivo La Coruña are not bound by this agreement.

In Australian rugby league, the Canterbury Bulldogs were found guilty of breaching the salary cap and had 38 points deducted, dropping them from top of the NRL to the bottom. There will be no such punishments for a renegade G14 member.

Then there are the legal challenges. The European Commission is likely to take a close look at the proposal and several agents can be expected to challenge it.

G14 CLUBS: Arsenal, Manchester United, Liverpool (all Eng), Real Madrid, Barcelona, Valencia (all Sp), Juventus, Milan, Internazionale (all It), Bayer Leverkusen, Bayern Munich, Borussia Dortmund (all Ger), Marseille, Paris St-Germain, Lyon (all Fr), Ajax, PSV Eindhoven (both Neth), Porto (Por).