Football clubs are learning to adjust to the new, harsh economic reality surrounding the game by reducing costs and players' wages as they attempt to avoid the financial problems that have threatened their existence.

The annual Deloitte & Touche review of football finances released yesterday claims that despite a projected decrease in revenue from broadcasting deals and other financial problems there is still cause for optimism and that clubs are learning to cope with their new situation.

The report claims that introducing new measures such as salary caps, performance-related contracts for players and negotiating more loan deals will all help football clubs to balance their finances.

The report, which covers the 2001-02 season notes that in the first division wages only increased by 3 per cent, followed by 8 per cent in the second division and 18 per cent in the third division.

In the Premier League, eight clubs reduced their wages-to-turnover ratio while only two clubs paid over 100 per cent of turnover as wages compared to 16 in season 2000-01. And it claims that following the collapse of ITV Digital last year, which severely hit the Football League, its 72 clubs are learning to cope.

A survey, according to the review, also shows that Celtic and Rangers would have the potential to challenge for the title if they were allowed into the Premiership.

The review reinforced the Premiership's image as one of the richest competitions in the globe.

But it is a gravy train for which the Old Firm have so far been refused a ticket.

And the consequences of that refusal could not have been more starkly underlined by the fact that Rangers posted a British record operating loss of £19 million for that period.

Celtic were less badly hit financially, recording operating profits of £5.4million and a £3million pre-tax loss.

The report also claims that despite warnings of financial doom, there is more money in the English game than ever before and that the Premier League is the richest in Europe. The report notes that footballers also had to adjust to the new reality by being prepared to accept short-term contracts linked to performance.