The ailing balance sheets of Villa and Blues could be in for more punishment unless they turn around relegation form, a former chairman of Leeds United has warned.
Birmingham’s two major football clubs are in the bottom five of their divisions – and former Leeds chairman Gerald Krasner told the Post they would have to slice £60 million off their joint wage bills if the worst happens.
Latest accounts show West Midlands football clubs made a combined loss of £87.5 million last year – with only West Bromwich Albion making a profit of any note.
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Mr Krasner, of Begbies Traynor, which was administrator at AFC Bournemouth in 2008 and Port Vale in 2012, said unless the clubs’ owners were prepared to invest tens of millions of pounds their wage bills will have to be slashed to avoid colossal losses.
Aston Villa paid almost £72 million in wages last year but Mr Krasner said that would have to be closer to £20 million in light of falling income.
He said: “If you get relegated from the Premier League, you get parachute payments in the first few years, but unless they got rid of a lot of wages Aston Villa would be dependent on the owners to meet a lot of costs – but Aston Villa aren’t definitely relegated.
“The parachute payments start off at something like £30 million a year, but that is not enough to cover the fall in income.”
He added: “Aston Villa would have to knock something like £50 million off their wage bill. You can take a risk keeping a good team to get back up, but only if the owner is willing to put their hand in their pocket.”
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While the fall in income from the Championship to League One is less severe, Mr Krasner said Blues would also have to cut the wage bill amid falling income.
He said: “I would say there was probably a £10 million difference in wages between League One and the Championship on average.
“The problem is then you have to break up the team, and that can make it hard to get back up quickly.”
Aston Villa posted a loss of £51.8 million last year, while Blues lost £4 million, with both clubs investing a vast amount of income on wages.
At Villa, £71.9 million is spent on wages from a total turnover of £83.7 million, which represents 86 per cent. At Blues, that figure was 95 per cent last season, with £22.9 million out of £24.2 million going on the wage bill. Villa, who are three points clear of the relegation zone, face Hull City on Saturday in a key match to secure their Premier League future.
The potential for falling revenue was exhibited by Wolverhampton Wanderers, which saw sales almost half from £60.7 million to £32.1 million when the club was relegated to the second flight.
Similarly, Birmingham City has seen revenue plummet in recent years, after slipping out of the top flight in 2011. The club turned over £24.2 million in 2013, down from £39.1 million the year before.
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Jerry Blackett, chief executive of Greater Birmingham Chambers of Commerce, said: “The relegation of our key football clubs would mean a great loss of kudos for the city and for local businesses. It is the football on match days that keeps local pubs and shops afloat.
“More than that, matches generate a lot of money for the local economy, particularly a Premier League club such as Villa, who can attract crowds of 40,000-plus. The Premier League is paid money by television, divided up among the various clubs.
“If Villa or Albion were relegated, that money would dry up and the local economy would suffer.
“It would be disastrous for local businesses and, as a flag-waving exercise, if Birmingham had no Premier League football team.”