By Tony Attwood
We’ve often taken a little look at the finances at clubs such as Man IOU, Barca and the like on this site. Swiss Rambler does the same, often in more detail, and recently did a brilliant piece on Inter Milan, showing how they too are facing an absolute financial crisis, and how their spending patterns are about to change, particularly as a result of the financial doping regulations.
And if you are a regular here you’ll be used to the mantra that Arsenal just about the only EPL team that are in profit, and meeting all the future requirements of UEFA.
However this has led to questions being raised (particularly by the Anti-Arsenal Arsenal web sites) about why, if we are making this profit, can we not buy this player, that player and some other player.
Obviously there’s a matter of judgement concerning players and their current and future ability, and I’m not going into that in this article. But there’s also something else happening that I want to consider.
In a recent statement Arsène Wenger stated that this transfer window was the toughest ever, with very few deals being done. I wondered how true that was, and if it were true, what the implications were.
In starting this little piece of research I began with the notion that if we look at transfers overall, things instantly get swamped by Manchester City, just as in the past the Chelsea buying made it hard to read overall trends because of their high levels of spending. But various figures are now emerging that suggest something quite profound is happening in football – and it is going to have a huge impact on the whole of the game across the UK, and perhaps across Europe as well.
Figures from Deloitte, quoted in the Financial Times today, show that even with Man City’s buying and selling included, spending was down 22%. The amount of money leaving the Premier League and going into other leagues was however over double last year’s total – which means a growing net outflow of money even when times are getting tough.
Deloitte figures also suggest that each season the transfer spending has been something in the order of £450m, for the last three years. This year is was down to £350m. Without Man City that would be around £235m.
And “without Man City” is worth considering because it seems unlikely that this bizarre club is going to repeat its crazed activities (and I write this before I know what on earth they are doing with their “25″ list.) As it stands Manchester City is 40% of the transfer window and won’t qualify for Europe. If they want to qualify they are going to have to change their approach quite dramatically.
Speaking of the “25″, part of the idea of this revolution was to ensure that more was spent on locally raised talent. If we take the transfer window just closed, then it didn’t really work. Grant Thornton figures reported in the FT show that 16% of the spend in the transfer window went on what they call “domestic players” down from 36% last year. (Actually as an aside, I wonder about domestic players. Does it mean that they know how to do the ironing?)
But here’s the knock on. Traditionally smaller clubs have raised money by transferring players up the leagues. But the cash moving around in the lower football leagues in England seems to have dried up too.
According to the Guardian, in 2009 Championship clubs’ paid out £41m and brought in £102m. Preliminary figures for this year suggest that the Championship expenditure might be just a little over half of what it was a year ago, and the income down by two thirds.
Clubs in the Championship are fairly modest sized companies with turnovers around £10m a year, so this decline in income of sales from them to EPL or foreign clubs is very concerning.
There could be several causes – but taken with the figures from the EPL it would suggest that all told, when the EPL sneezes, the rest of football gets pneumonia.
And a rather nasty cold is what the EPL seems to have.
Of course the EPL is aided by the rise in the money it got from broadcasting last year – but then in Lord Sugar’s famous comment, all the clubs do with extra broadcast revenue is “piss it up against the wall in players’ wages”. (What an elegant turn of phrase the man has).
The Guardian recently came up with another reason for the downturn in transfer activity – the banks don’t like it any more.
I was recently at a meeting (and on this occasion I can’t reveal any details because this has to do with my company, not just football tittle tattle), with some gentlemen close to the game, who reported to me that a substantial number of transfers are paid through finance companies. So, the deal for a £20m player is done, which means paying £5m a year to the selling club. Instantly the fax goes off to the finance company giving the details and asking for the cash.
The implication of this comes with the cost of the money. With the banks not touching football with a barge pole (and of course that is a generalisation, but nonetheless a valid one since a lot of banks have looked at the problems RBS has with Liverpool and are thinking, “we don’t need that”) the finance companies are able to charge more or less what they like.
And what they like is not what the clubs like. Clubs are starting to say, “no thanks” to the higher rates of interest they are being asked for.
Banks are also getting very edgy over the attitude of HM Revenue & Customs who are challenging the football-creditors rule again in the courts later this year. If that rule is challenged then every club that goes down is going to result in a significant short-fall for every other club owed money. As a result clubs will default on the finance company loans, and the price of football loans will go through the roof.
In fact the only EPL clubs that will be able to buy anyone are Man City, Chelsea, Tottenham (all with foreign benefactors) and Arsenal.
If the Championship is in trouble, then so are the lower leagues. League One looks to have done ok, bringing in around £7m in transfer sales, while spending only £1.5m. But again this is a drop by around 40% at a time when their costs (including wages) are still rising.
The hope that the lower league clubs had that the “25″ rule would mean a greater demand for home grown players, has not been seen.
So what does it mean? It means that the transfer window was down on its knees. Because of Man City it looked reasonable, but in fact it wasn’t. When Man City rejoin reality and start planning for life in Europe, the transfer window will be seen to be edging along the floor. There will be no help from Italy and probably less from Spain (although there will still be a lot of noise from that direction).
And it explains why various managers, including Arsène Wenger found it hard going to get the player they wanted, because the selling club couldn’t buy, because the club they wanted to buy from couldn’t get the player they wanted, and on and on.
In effect we are heading out of transfers as the norm in football, into youth policy as the norm in football. Now, who is it that has a decent youth policy?
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