Real Madrid have overtaken Manchester United to become the world's richest football club, according to a new report.

The Spanish club increased its earnings by 17 per cent to £186.2m ($328m) in the 2004-05 season.

Manchester United, who had topped the Deloitte Football Rich List for the last eight years, saw its revenues drop from £171.5m to £166.4m over the same period.

Real's success has been attributed to the clubs ability to generate revenue from commercial sources such as sponsorship, merchandising and licensing.

Players such as David Beckham, Zinedine Zidane and Ronaldo have all played a key role in boosting shirt sales, the report found.

Dan Jones, partner in the Sports Business Group at Deloitte, said: "Real have transformed their revenues, doubling them in only four years.

"Although president Florentino Perez's strategy of recruiting world class 'galactico' players has not necessarily delivered the anticipated on-pitch results recently, their presence has facilitated a transformation in the club's financial performance.

"Real have shown a tremendous level of revenue growth since the millennium. The challenge for the club is to now press on and maintain its position at the top of the Deloitte Football Money League, and to translate this into improved levels of success on the pitch."

Based on income from football business, the top 20 consists entirely of European clubs, with British clubs making up nearly half of it.

The list also includes five Italian clubs, three from Spain and two from Germany.

Dan Jones, partner in the Sports Business Group at Deloitte: "Real have transformed their revenues, doubling them in only four years."

Italy's AC Milan remained in third place, while Serie A rivals Juventus moved up one spot to fourth.

Premiership champions Chelsea, bankrolled by Russian oil billionaire Roman Abramovich, slipped one place to fifth.

Barcelona, Bayern Munich, Liverpool, Inter Milan and Arsenal complete the top ten.

Everton made it into the top twenty for the very first time after finishing fourth in the Premiership last season.

However, Aston Villa, Glasgow Rangers and Marseille were all relegated from the top twenty.

The UK clubs have a much more balanced spread of revenue than their European counterparts, the report found.

Spanish and Italian are more dependent on broadcasting largely due to their individual broadcast rights deals.

The combined income of the top twenty clubs reached £2bn for the first time in 2004-5.

When the list was first compiled in 1997 the total income of the top twenty clubs was about £820m.

Top 20 rich list:

1. Real Madrid £186.2m
2. Man Utd £166.4m
3. AC Milan £158m
4. Juventus £154.9m
5. Chelsea £149.1m
6. Barcelona £140.4m
7. Bayern Munich £128m
8. Liverpool £122.4m
9. Inter Milan £119.7m
10. Arsenal £115.7m
11. Roma £89m
12. Newcastle £87.1m
13. Spurs £70.6m
14. Schalke £65.8m
15. Lyon £62.7m
16. Celtic £62.6m
17. Man City £60.9m
18. Everton £60m
19. Valencia £57.2m
20. Lazio £56.1m

Source: Deloitte