Premier League Clubs' Final Chance to Spend Big This Summer
With so many players in the shop window at Euro 2012, Premier League clubs will be battling to sign some of the stars of the tournament this summer.
But with financial restrictions imposed upon them both by debt and Europe’s governing body, could this be the last transfer window in which we see major spending?
There is barely any facet of the world game, no matter how minute or seemingly insignificant, which cannot provoke the most passionate of debate. But one statement that almost everyone can agree on is that the rate at which debt and spending, particularly in the Premier League, has risen over the years is unsustainable.
While revenue from broadcast rights and sponsorship continues to increase, that rise is more than cancelled out by spiraling wages and transfer fees.
Using data from Deloitte’s annual review of football finance for 2010/11, The Sun reported last month that "while total revenue from things such as TV rights, sponsorship and tickets climbed by £241 million, spending on wages and transfers went up by a combined £411 million."
The latest broadcasting rights deal for the Premier League will see Sky and BT pay a combined total of £3.018 billion for the latest three-year deal to start in 2013. That is a huge amount of money in anyone’s book, but once that is divided up between 20 clubs according to their respective successes for each of the three seasons from 2013/14, suddenly the windfalls for each recipient look nowhere near as big.
UEFA brought in its financial fair play regulations in part to prevent clubs with rich benefactors or access to vast wealth by other means from having too great an advantage, but also to try and avoid a whole raft of clubs across Europe going bust in the future as they try in vain to compete with their big-spending rivals.
Club accounts for the 2011/12 season will be the first to come under full evaluation with regards to FFP, meaning clubs will have to reappraise the way they approach.
Premier League champions Manchester City, for example, will in theory not be able to replicate the huge spending which, over the past four years, has taken them to the top of the English game.
Since Sheikh Mansour took over in 2008, almost £1 billion of his own money has gone into City.
Whereas, before, big-money acquisitions such as Robinho and Craig Bellamy were allowed to leave for little or nothing if deemed surplus to requirements, now they will have to try and extract decent fees from potential buyers in order to help balance the books.
Aware that they had one last opportunity to invest heavily in their squads, some of the big clubs went on a spending spree last season. Between them, the two Manchester clubs, Liverpool, Chelsea and Arsenal spent £300 million, around 60 percent of the Premier League’s total spending for that year.
According to Deloitte's January 2012 report, just £25.4 million of that was spent in January, a far cry from the record £225 million spent in the previous winter window.
This graphic created by Premiershiptips.com lays out spending in the English top flight for the past six years.
The owners of City and Chelsea may have the personal resources to fund one final splurge this summer if they can find a way of balancing the books, but Liverpool, United and Arsenal may well have already played their pre-FFP joker.
The rest of the teams in the division who are able to slash out on several key signings may well take the opportunity to do so this summer, while there is still time to even things up over the first rolling three-year period on which UEFA assess clubs’ accounts.
Where there are financial requirements and restrictions, however, there are always people employed to find ways around them. Just as rich corporations and individuals find ever more ingenious ways of dodging tax, so too are football clubs working hard on new sources of revenue and loopholes in the FFP rules.
City caused much uproar last summer when they announced a deal worth £400 million over 10 years to have their stadium sponsored by Etihad Airways. The airline is owned by the Abu Dhabi government, making the link with a football club owned by a member of the emirate’s royal family a highly questionable one.
Reaching out to extend global appeal is now par for the course for any established Premier League club, with preseason tours to emerging markets such as China, South-East Asia and USA now par for the course.
Sunderland announced this week that they had struck a pioneering new deal with non-profit organisation Invest in Africa, which they hope will help them tap into that continent’s market. Eurosport reports the club's vice-chairman David Miliband saying saying on the deal:
"The biggest thing for us is that it is a long-term commercial partner and sponsor. There is obviously the shirts aspect to it, but I think it's deeper than that, it's about a whole range of contracts which include money coming into the club, as we have to be financially sustainable and the sponsorship is a vital part of that.
"But I never forget, we are a £75million or so turnover club, and Manchester United are, what - £450million, £475million? We are trying to compete in the same league. We can beat Manchester City and they have got a pretty big turnover.
"We want to make sure that we have got a long-term financial stability that allows us to make the right decisions on players and on the pitch, as well as in the backroom."
All these alternative means of driving revenue points to Premier League clubs accepting that they can no longer base their aspirations on irresponsible financial management.
A decade ago, Yorkshire giants Leeds United were just beginning to face the brutal fallout of their extravagance on the transfer market, while in 2010, Portsmouth became the first English top-flight side to go into administration as a result of their wage bill far outstripping their turnover.
It seems that, through those devastating examples of what can happen and UEFA’s regulations, Premier League clubs have been forced to curb their excessive spending. After this summer, at least.
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