£4.5bn is in outstanding transfer fees, and few have got the money to pay.

By Tony Attwood

Slowly it has been realised: the clubs across Europe owe around £4.5bn in transfer fees.

Of course in one way it can be said that that is not a crisis since everyone owes everyone else, so if A pays B then B pays C etc and ultimately we’ll be ok.  But in such a situation a logjam can arise especially where a few clubs have absolutely over-committed themselves with purchases made in the belief that Player X will be sold to cover the cost.

The sort of thinking that is at the heart of the strange FoLo “analysis” of the six players that Arsenal should sell, which we looked at yesterday.

Arsenal don’t need to make that strange combination of six sales to stay solvent, but one can imagine how the club’s accountants would be feeling if we did.  Panic I think is the word that comes to mind.

And it is not as if Arsenal have no worries, because on the books will be several debts from clubs that are starting to look decidedly dodgy.  And then, if a club to whom Arsenal has sold a player simply goes into liquidation, and there is no one to bale it out, what then?  The player returns to Arsenal.  Arsenal don’t want him, but can’t sell him, so let him go on a free transfer.  Arsenal have a bad debt.

That doesn’t matter too much, as Arsenal have reserves, but for clubs living on the edge, this can be a disaster.

Plus what makes the situation worse is that so much of the debt is focussed in just the five big leagues.  It is said that they are responsible for over 85% of the due debt – around four and a half billion pounds. with about one-third of that having been accumulated by Premier League clubs.

La Liga has a far lower level of debt at around half a billion pounds, but so much of this has focussed on the top three clubs that six directors of Barcelona have now resigned over the way the situation is being handled.

This is the sort of situation one gets where everyone takes the joint view that first, everything will be ok because it always is.  But as anyone in business will tell you, companies fail generally not because they are making a loss, but because they run out of cash to pay their debts.

To compare this to ordinary life, in the day to day world people generally take one of three positions with the income from their job.

a) They make sure some cash is left over each month, so that this covers them for sudden difficult times, or if there are no difficult times, for a big project like a down payment on a house.

b) They don’t bother saving for the unforeseen or even for a house deposit, but they don’t like debt, so generally speaking they spend what they earn.

c) Life is for living, so spend and enjoy.  That is how the big boys got so big – they took risks and gambles.  It’s all very well being cautious but that way leads to being average, middle of the road.  So take a risk, and ride the ride.

Now this division into three groups is fine when the numbers in each group are about equal.  But when, as now (particularly in certain leagues such as Italy and Portugal) the debts mount up and up in the expectation of a bonus from selling a brilliant youngster, or winning a cup, it can all go horribly wrong.  The clubs in those leagues owe far more than they earn.

And this happens because everyone is looking at everyone else and adopting a “got to keep up with the rest” attitude.

In order to stave off collapse for as long as possible the clubs have begun to negotiate transfer fees so that they are paid over ever longer periods.  Again there is nothing wrong with this as such, except that it eventually gets to the point where the amount of time needed to pay back the debt becomes so long that the chance of the club with the debt getting relegated in that period gets to over 50%.

And since relegation spells utter disaster, then the system starts to collapse.  Relegated clubs can try and hold onto their star players and bounce back, but this rarely happens.  The players have just failed, the communal psychology is negative, and they hate playing in the lower league.  So the club needs some fresh faces; players who see the situation as an opportunity, not the result of failure.  But the club doesn’t have the money to buy these, because it owes so much on the players that have taken it down.

The whole situation spirals out of control.  Nothing much happens as long as there is a plentiful supply of billionaires ready to step in and support the clubs on the way down, each believing that he would never make the mistake that others made in leading the club into such a mess.  But when they start to lose interest because a general downturn means that all their investments are declining, then suddenly the edge of the cliff looks very close.

And now, today, we are standing on it.  The edge of the cliff.  And worse, a crack has started to appear along the clifftop just behind us.

One Reply to “£4.5bn is in outstanding transfer fees, and few have got the money to pay.”

  1. It’s called the Happisburgh effect .( pronounced Hazeboro )

    Since the entry of Television football finance the game has been sleepwalking into an abyss .

    Too many people that ride gravy trains don’t see the buffers until it’s too late.

    It goes back to what my Grandad used to say in his smithy .” If you want it but can’t afford it , make it or go without.

    A principal lost on modern society.

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