By Tony Attwood
I have regularly argued that football journalists and bloggers base all their ideas on the notion that the only way forward for clubs is to buy new players.
As I have shown, the media likes making this a big story because it costs nothing in terms of research, and when over 95% of the rumours are shown to be false, they either ignore the fact or blame a club like Arsenal for being too slow, for dithering, for not being willing to think big etc.
As a result the big story – the really, really big story, is never told. And that story is simple: the transfer market is collapsing.
This table reflecting transfer spending shows how much the market has shrunk.
| Summer of… | England | France | Spain | Germany | Italy | Total |
| 2021 | £1.37bn | £540.7m | £416.7m | £635.7m | £689.2m | £2.65bn |
| 2020 | £1.47bn | £665.5m | £728.9m | £542.5m | 778.6m | £3.00bn |
| 2019 | £1.83bn | £1.14bn | £1.70bn | £923.3m | £1.38bn | £5.25bn |
| 2018 | £1.46bn | £1.07bn | £1.22bn | £715.2m | £1.15bn | £4.03bn |
In percentages this means that this summer compared with the summer of 2019 the market shrank by 50%.
Now this has all sorts of implications which the media absolutely will not explore because it doesn’t fit into their agenda.
First, and most obviously, the value of players is shrinking. Of course there will be exceptions, and of course players’ values change with age, form and injury. But overall in the last two years transfer spend has gone down by half.
England has escaped the worst of the downturn but even here the transfer spend has gone down by a third. In Spain the spend has dropped by three quarters.
Now clearly the rich clubs have vast incomes from various sources, and so can afford to lose money on players for years on end. And to all intents and purposes, PSG, Chelsea and Manchester City are not going to be harmed unless the entire market collapses, because a) their sources of money are so vast and b) neither the Premier League or French League seem willing or able to reign them in.
We might at one time have said the same about Barcelona, but as we have seen, their finances are now shot to pieces.
But what about Real Madrid? They are helped because in 2019/2020, they earned approximately £295m from sponsorship and merchandising, over double what they were earning at the start of the decade.
Which actually seems fairly sound, and maybe they should be put in the safe list with PSG, Chelsea and Man City. But the rest…
We know that Barcelona has already collapsed financially…. and that means that any club that has sold a player to Barce in the past four years is going to be wondering if the next instalment will be paid.
And now that scenario is being replicated across Europe, because most players are paid for over four years. Which means that this year clubs are going to be paying money for players who are now not worth a fraction of what they have to pay. The amount owed stays the same, the amount the player is now worth is massively reduced. So the option of selling the player to pay off the debt, is diminished.
So let’s say Arsenal have a player aged 25 who was bought for £25m. All being well they might expect his value to increase twice in the coming two or three years. Once because he becomes a better player, and once because all players are going up in value.
Except now, player values are dropping by between 16% and 25% a year generally. And that is in addition to any decline because the player is getting older, has been injured, is deemed to be in decline etc.
So clubs need to cut their costs because they are earning less from player sales. In response they try to sell more players, which swamps the market and which reduces player values ever more.
So second, clubs are still paying instalments of the original price. In fact it is very likely that a third or fourth instalment on many players will itself cost more than the money the player can bring in if sold. The market becomes swamped with players who must be sold to balance the books… and prices go down further.
In the end clubs can’t pay, and so default in a payment to another club that was going to use the money to pay an instalment on one of their own players. The banks start calling in the loans.
And third, some very risky deals were done even before this crisis occurred.
Initially, we noticed club after club borrowing money which was guaranteed by the following season’s expected TV income.
Our subsequent article “It is not the virus that is shaking football” set out some of the problems already piling up. Burnley sold to a group of American bankers who then mortgaged Turf Moor to an American private investment firm at 15% annual interest. Southampton’s accounts show them paying 9.14% interest on the loan of around £80m they took out last year and which – as things stand – they have no chance of paying back ever, unless they sell their ground.
And those deals were done before this summer’s transfer window revealed just how much player values are collapsing.
It is all a bit like property booms. People buy a house they can’t afford in the thought that in three years time it is going to worth twice as much. If it is, they sell, and make a lovely profit and then buy a smaller house. However if prices go down…
Of course everyone is in denial. And those journalists aren’t writing about it. So maybe it’s just me making it up.
Arsenal’s financial woes and the media’s call for more spending.
Arsenal’s finances are really in a mess
Football finances: the numbers are not making sense
The finances of the top clubs are weird and not wholly making sense.
And as more and more players run down their contracts to move on free transfers to maximise their earnings, the market will have to adjust even further. It won’t affect the clubs funded by sovereign wealth immediately, but eventually they will have their own super league. There won’t be anyone left to play against.
The irony of this article is that Arsenal spent vast sums in the latest transfer window and the jury is out in terms of just how much has been borrowed or is still owed .
Has the market collapsed? My guess is that it’s more to do with a realignment but some clubs needing to sell players have placed valuations on players that the limited number of buying clubs just won’t or can’t pay.
Historically very few players are sold for a true profit . The bulk of player trading profit comes about because of two reasons. 1) The player is an academy product so no incoming fee was paid or 2) The player is sold for more than their amortised value.
It’s perhaps best illustrated by looking at a couple of my clubs, Chelsea’s transfer dealings in this window
Moses. Bought for around £7 million in 2012 on a 4 year deal . He had various loans and a couple of contract extensions meaning that this summer when sold for around £4.5 million his book value was less that £500k so in accounting terms that’s a nice little profit of £4 million but still some £3 million less than he was bought for.
Abraham/ Tomori/ Gheui/ . Collectively sold for around £80+ million. All three came through the academy so that £80 million is all profit both in cash terms and in accounting terms.
The latest transfer window was all about clubs operating in a smart way. Many clubs made transfer decisions that haven’t involved spending big . Some have spent big and gambled big. Some have been smart.
Arsenal have tried to do it in a slightly different way and whilst I have to be honest I am far from convinced of the strategy the powers that be clearly think they have scouted well but the proof of the pudding and all that. After all I would be amazed if any PL club will buy players without scouting and as we all know for every transfer that works out well a huge number don’t!
As a total aside I have looked through Southampton’s accounts, I have read the Swiss Ramblers summary of their accounts and whilst they pay out around £3 million in interest I can’t see any mention of a loan that would need around £7-8 million to service