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Financial Stability v Expensive Signings

Sat, 29 May 2010

A lot has been said about Manchester United’s debt arising from the takeover of the club by the Malcolm Glazer in 2005, but as far as I am concerned, Manchester United’s surplus on the sale and purchase of players is a red herring.

The lack of spending on expensive players (as compared to other big clubs)  is frequently cited as an example of how damaging the Glazer debt has been to Manchester United.   For example, there are many such comments in response recent articles on BBC Sport blogs relating to Manchester United’s finances, in particular, the following by David Bond:

For me, it is equally explicable as financial prudence.

Expensive or big name signings are more often a sign of desperation than a realistic means of achieving or sustaining success.  For example, in the past year, the biggest net spenders have been:

  • Real Madrid, in an effort to regain the Spanish title from Barcelona, and to become European champions again.
  • Manchester City, in an effort to break into the top 4 in England.

Chelsea spent more to achieve their earlier titles in 2005 and 2006 then their latest one last season.   It may be inferred that they were spending to establish themselves as a force in English football, rather than to maintain their standing in England.  The signing of Andrey Shevchenko in 2005, motivated by Roman Abramovich’s own purposes, somewhat distorts the picture.

The clear inference to be drawn is that when clubs of similar financial size are compared, clubs that are already living up to expectations generally don’t spend as much as clubs that feel they should be achieving more, perhaps much more.

Unless they have a very wealthy benefactor like Chelsea or Manchester City, clubs that seek to make the leap to a higher level by signing more expensive players than they could ordinarily afford risk over-extending themselves in the medium and long term.  Leeds United and Portsmouth are two good examples, but the Football League and Football Conference are littered with many more cases.  Apart from the transfer fees paid or owing, there is the increased wage bill.

Expensive players don’t necessarily make for greater success.  Sometimes, even success doesn’t justify the outlay, as Portsmouth have discovered, since their FA Cup triumph of 2008.

Building a team takes time, and a capable manager.  Most successful teams are built on the following:

  • Key players with experience of the level of football at which the club is seeking to achieve success.
  • Talented players who add an extra dimension to the team’s performance.
  • Finding or developing a good fit between the players.
  • A manager able to bring in the requisite players, work on the fit between the players, and inculcate a winning mentality in the team.

None of the above necessitates expensive signings.   Players who have been at the club a long time, or older players signed from other clubs playing at the same or a higher level (players approaching the tail end of their career in the case of the latter), and younger players developed by the club, whether from the club’s youth team, or signed from another club while still relatively young, often do better.

Paying a large transfer fee for a player can be particularly short-sighted.   The transfer value of a player falls rapidly as his contract with the club nears its end.  Unless the club is able to renew the contract well before the end of the contract, the player can leave on a free transfer at the end of his contract.  For highly prized players, this often involves agreeing to an increase in his salary.

Clubs that pay high transfer fees therefore often get caught in a cycle of ever-increasing player wage bills.

There are two potential problems for clubs that over-extend themselves in terms of expensive signings and paying high salaries to players:

  • If player wages, as a recurring cost, exceed regular income, losses increase, and are unsustainable in the longer term.
  • The transfer value of players identified as assets in the club’s accounts may  not be realizable.

There is a risk of an “implosion”.

UEFA have introduced regulations to control expenditure by clubs on players.   How effective these are, or whether they can be circumvented by the biggest clubs, remain to be seen.

It really falls on football clubs to see beyond the short term.  To again quote Arsenal’s Arsene Wenger:

“What we need to focus on is continually developing and not live in dreamland where we are linked with players of £30 to £40 million because that is not realistic.”

Clubs are increasingly realizing that having the right manager is more important than expensive or high-profile players.  Even Real Madrid have turned to Jose Mourinho, a manager who has repeatedly proven himself at the highest level of European football.

Likewise, the Glazers have made sure they keep Sir Alex Ferguson on their side.

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4 comments

  1. [...] Insights A collation of my football-related articles and posts « Financial Stability v Expensive Signings Building Stadia – Reinventing The Future Sat, 29 May [...]


  2. [...] is one thing to prevent the financial excesses of English football over the past decade, it is another to protect the dominant forces in Europe.  It is not apparent that UEFA’s new [...]


  3. [...] new financial regulations may be aimed at reducing levels of  debt in European football, but if it is also applied to restrict the ability of wealthy owners to pour [...]


  4. Wow that was odd. I just wroote an incredibly
    long comment but afrter I clicked submit my comment didn’t appear.
    Grrrr… well I’m not writing all that over again.
    Regardless, just wanted to say wonderful blog!



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