Football is losing its City fan club

A STARK fact should make the football world sit up and start worrying. Shares in Manchester United, the richest club in the world, are now worth £340m. Two years ago they were worth £1bn.

And look at Tottenham Hotspur: their shares have fallen almost a quarter this year. At £35m, that puts the north London club only just ahead of the transfer value of United's Argentine midfielder Juan Sebastian Veron.

With their shares struggling, it is hardly surprising that quoted football clubs find it all but impossible to raise money by issuing new equity. Which raises an important question - why are football clubs listed at all?

Andrew Burnett, an analyst at investment bank Merrill Lynch, said: 'There are very few clubs that would be attractive to equity investors - we think that only Manchester United and Juventus have got the brand image to market themselves globally. Really, you have to question whether all but the biggest football clubs should be quoted.'

The City is also growing increasingly nervous about the unsustainable level of players' wages. Manchester United captain Roy Keane has just signed a pay deal worth £90,000 a week. England captain and fellow United star David Beckham is expected to sign a four- year contract this month thought to be worth almost £100,000 a week.

But that is nothing compared with the financial own goals being scored at the less glamorous clubs such as Fulham, Brentford and Wimbledon that pay more in wages than their total annual turnover. And on Friday, cash-strapped Second Division side Bury won a stay of execution in the High Court in Manchester.

Peter Richardson, corporate director of financial markets at Barclays, said: 'The clubs cannot sustain these ever-increasing wage demands. If you combine the high cost of players with falling TV revenues, it suggests that future revenue streams are far less certain.'

Research by accountant Deloitte & Touche found that 47% of Premier League clubs - among them Liverpool, Derby County, Everton and Leicester City - paid more than three-quarters of their turnover in salaries. Richardson said: 'One of the things we look at if we are lending to football clubs is the ratio of turnover to wages.'

But football clubs need the City to play ball over raising new funds. That is particularly true of Arsenal, which has to find about £200 million to pay for a new, bigger stadium in north London.

The club has to buy the land before it can begin building, but 55% of its turnover goes on players' wages.

Rothschild, the Gunners' financial adviser, is believed to be preparing a timetable for the club's appeal to investors. Barclays, HSBC and Merrill Lynch have been touted as potential backers of the project.

Arsenal could go down the same route as Premiership rivals Everton and use a bond issue to fund the new stadium. Everton recently raised £30 million by selling bonds. Interest payments will be guaranteed by future ticket sales.

Newcastle United, Leeds United, Ipswich Town, Leicester City and Southampton have all completed similar deals.

City bankers believe this is one of the few remaining ways for football clubs to raise money.

One corporate financier said: 'Until the clubs reduce their wage bills, the City will remain uneasy.'