Deloitte’s annual review of football finance claims that the market has undergone a reality check due to European clubs improving their business practices and radically cutting their spending on players.

According to Deloitte, European clubs and federations generated more than £7bn of income during the 2002-2003 season, with the English Premiership topping the profitability league table with an income of £1.2bn.

This increase was matched by a downturn in spending. During 2002-2003, Premiership clubs shelled out £187m in transfers – a 42 per cent decrease from the season before and well below the record of £364m in 2000-2001.

Dan Jones, a Deloitte partner, said that, following the fall of ITV Digital and the drying up of TV money, clubs had realised that the key challenge was to control costs.

“Total payments by English clubs in respect of players – in wages plus transfer costs – fell by 5 per cent to £852m in 2002-2003,” Jones said.

He added: “This is a relatively small percentage but, in reality, it is a monumental change. It is the first recorded year on year decrease in total player spending since we started producing the annual review 12 years ago.”

Despite the Premiership’s record operating profit of £124m, however, only five clubs managed pre-tax profits. These clubs were Manchester United with a profit of £39.3m; Arsenal (£4.5m); Newcastle United (£4.4m); Liverpool (£3.6m) and Birmingham (£3.3m).