The end of transfers as we know them?

SHOULD Lionel Messi and Barcelona fail to repair their differences over the coming months, and the little Argentinian magician decides to leave Catalonia for a swansong, who will be able to afford him? Messi will be costly, unless he opts for a charitable mission, perhaps one that elevates or enhances an under-achieving club while adding to the legend.

With the financial and cultural cost of the pandemic still uncertain, the full extent of which may not be known for another 12 months, Messi and others of his kind could find the cost of securing a world-class superstar, albeit one that is at the tail-end of his career, may deter clubs that would normally have bitten-off the hand of the players’ agents in an instant. There may be a whole list of stars, such as Mbappe and Neymar, and would-be stars that could find themselves temporarily priced-out of a moribund market, which may stop transfers or, at the very least, put moves on hold.


The question is, should the transfer market be rightfully depressed in a time when clubs have lost a significant slice of their income, wages have been suspended or cut and, outside the rarified cauldron of professional football, people have lost their jobs, been furloughed and the pandemic has claimed thousands upon thousands of lives? Would tempered enthusiasm for high-spending and a curb on spiralling wages not be more empathetic than somewhat hollow gestures of solidarity and agenda-driven virtue signalling?

The Premier League has its critics concerning its activity in the transfer market. In the summer of 2020, around £ 1.2 billion was spent, which prompted politicians to question the wisdom of such spending when the UK government was considering financial support for sport.

There are signs that the transfer market, which has over-heated like a 19th century Californian gold rush in recent years is losing momentum. Just consider that the recent transfer window was arguably the most uneventful in years. The covid-19 pandemic is far different from the financial crisis of 2008-09 in that clubs are actually being affected operationally. In 2008, there were pressures, but by and large, football was able to continue almost as normal. There has never been anything like the financial impact of the pandemic to test the solidity of football’s business model in the post-WW2 world. According to Deloitte, the top 20 revenue generators in European football could lose around € 2 billion over the course of 2019-20 and 2020-21.

The January 2021 window saw gross expenditure in the Premier League total just £ 70 million from 24 transfers, of which 75% of the spend was connected to just three transactions. A year earlier, the amount was £ 230 million from 46 transfers. Moreover, the gross spend in January 2021 across the Bundesliga, La Liga, Serie A and Ligue 1 was around one third of the January 2020 window.


In all of the big five leagues, 2020-21 spending has dropped dramatically versus the three-year average, most notably in Spain, which has dropped 70%. Germany has fallen by 51%, France 40%, Italy 33%. The Premier League, in 2020-21, has declined by just 20%.

Interestingly, in 2020-21, only one a small number of the elite clubs has increased their gross spending in the transfer market. Chelsea, who paid the equivalent of € 247 million versus € 45 million in 2019-20, were the biggest spenders, accounting for approximately 20% of overall Premier expenditure. This was partly attributable to the transfer ban imposed on the club in 2019. 

Of Chelsea’s rivals in England, Manchester City only just increased their outlay, while Liverpool spent € 83 million compared to € 10 million in 2019-20. Internationally, all the major clubs spent far less than normal, notably Real Madrid, Atlético Madrid and Juventus. The elite clubs are all net buyers, but some clubs rely on transfer income to balance their books and to remain competitive. If the pandemic induces a prolonged period of transfer inactivity, these clubs are likely to experience some real challenges.

For example, Portugal’s top clubs have generated over € 2 billion since 2011-12 from transfer sales, resulting in a net gain of more than € 1 billion. Similarly, the Netherlands’ trio, Ajax, PSV Eindhoven and Feyenoord have earned € 1 billion, on a gross basis, from the market. Should a lack of liquidity hit the football market, net-sellers like Benfica, Porto and Ajax could be squeezed in the short-term. English clubs will also be faced with additional hurdles due to Brexit such as a restriction on the amount of under-21 players and a ban on making under-18 signings. 


The transfer market has shifted in recent years in so far that fund managers have realised the opportunities in professional football. InterTrust Group, a specialist financial services company, said in its paper, All change – how player transfer funding has evolved, “the game changer to football player transfer funding has been long coming”. In the past, bank lending was the primary source, but bespoke financing arrangements have become more common, including the use of special purpose vehicles.

However, the pandemic has seen some funding sources retract from the market. The consequences of a diminishing appetite have included loans being subject to early repayment, payment holiday requests and in the worst cases, payment defaults which have impacted cash flows and investors. 

The next key period will come in the summer, which will provide pointers to the long-term health and capabilities of the transfer market. There’s little doubt that clubs will come under enormous financial pressure over the coming year, but the after-shock of a depressed market will extend beyond the balance sheet of the clubs themselves and the personal wealth of players. 

A lot of the football industry’s peripheral business will suffer, starting with intermediaries such as player agents, not to mention the smaller clubs that rely on regular sales of home-produced talent to more affluent members of the football hierarcy. We could be at an inflection point in the transfer market, which some will wholeheartedly applaud, but others will fear because of the dislocation. Change is certainly needed and long overdue, but slow, measures may have to be adopted to ensure the eco-system remains intact and shock-proof.

Source material: KPMG Football Benchmark,  Deloitte,  Keiran Maguire,  InterTrust Group,  Transfermarkt.

Photo: Flickr Mo640 CC BY-SA 2.0

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