English football's winter transfer window spending halves

08 February 2019 Consultancy.uk

Football's Big Five saw their collective spending in the winter transfer window fall by more than $300 million from last season’s levels. Premier League spending in the January transfer window more than halved, meanwhile, as three of the top six clubs decided not to refresh their squads with new recruits.

The mid-season flurry of hectic business that is football’s January transfer window was somewhat muted in 2019, as a number of top clubs chose to watch their waistlines, rather than indulge in the traditional New Year's binge that has come to characterise the weeks leading up to the infamous ‘Deadline Day’. Overall spending during the winter window fell from more than $980 million in 2018 to $650 million in 2019, according to a new report from KPMG’s Football Benchmark team.

It would not be entirely accurate to claim that the window was slow for everyone, however. A few high-profile, strategic transfers commanded huge fees, but will not factor into the total budget until summer. The highest fee was paid for by Chelsea for 20-year old American Christian Pulisic from Borussia Dortmund, for $72 million, but immediately loaned him back to Germany for the remainder of the season. Although Dutchman Frenkie De Jong commanded an even higher fee of $85 million, his transfer from Ajax to Barcelona will only go through in July, and thus technically belongs to the next summer transfer window.

At the same time, Europe’s most cash-rich leagues still saw spending levels fall drastically, with the Premier League’s spending more than halving from 2018 levels, and La Liga’s overall bill tumbling by over $200 million. Again, though, this did not stop other leagues from spending big. While the huge collective spending of these two leagues has been heavily weighting the average spend of Europe’s top leagues for some time, their falling spending came alongside increasing transfer spending for players in the German Bundesliga, France’s Ligue 1, and Serie A of Italy.

Spending on transfer fees by the Big 5 leagues comparing

This continued two notable trends from the summer transfer window. Firstly, as with the longer summer window, spending slowed compared to the rise in transfer fees seen between the same transfer windows which came a year before. At the same time, spending by Serie A clubs increased, with what was once the most lucrative league in the world seemingly stirring from its slumber to park tanks on the Premier League’s lawn. 

While that window was arguably an anomaly thanks to the colossal fee Juventus paid for Cristiano Ronaldo, Italy’s top league made up further ground on England’s big spenders in January, with a total of more than $180 million in fees bringing in new talent to the division. This puts less than $36 million between the two leagues, making Italy Europe’s second highest spender, a marked difference from January 2018, when the league spent a fraction of that – and was the stingiest of the Big Five to boot. AC Milan was among the high spenders, signing Lucas Paquetá and Krzysztof Piatek for $39 million each – nearly half the league’s total spending.

Transfer realignment?

This could be seen as either a brief anomaly, or a sign of a longer term market correction, with Europe’s footballing elites having reckoned with a number of key changes in recent years. Italian football was rocked by institutional scandals in the mid-2000s, seeing powerhouse Juve relegated to the second tier, and AC Milan part ways with long-term owner and former Italian Prime Minister Silvio Berlusconi. Spending was reigned in, and further diminished by a succession of recessions in the national economy.

At the same time, England’s Premier League enjoyed something of a unipolar moment in the period after Serie A’s downfall. Now, though, it has been hit by inflated prices for talent – a premium perhaps illustrated best by Newcastle United’s deadline day deal for Paraguayan playmaker Miguel Almiron. While the deal has pleased fans as it finally saw tight-fisted owner Mike Ashley shell out money to bring in new recruits for Rafa Benitez’s under-resourced squad, Almiron – who arrives from the less than prestigious MLS – cost more than the Magpie’s previous transfer record, Ballon d’Or-winning Real Madrid striker Michael Owen.

Spending on transfer fees during the winter registration 2014-2019

As a result, the collective spending of Italy and England’s premium footballing divisions has been hauled back into alignment. What will be interesting to see is whether this trend continues, with both countries facing varying degrees of economic uncertainty. It is true that the last time Italian teams upped their spending to match their English counterparts, in the summer window of 2011, Italy’s national economic woes quickly led them to scale back spending once more. Following this transfer window, it has been confirmed that Italy has entered a recession for the third time in a decade.

With the nation’s economic woes looking set to continue, some might say the football scene will follow suit once again. However, the financial hubs of the EU each face their own periods of uncertainty at present – even Germany is said to be flirting with recession at present – while the UK is bracing itself for the fruition of Brexit, something which could slow British growth by 8%. With no end in sight for the spiralling inflation of transfer fees, the art of the loan deal could well become prominent in these leagues, as seen with Chelsea’s recent deal for pricey striker Gonzalo Higuain from AC Milan. 

Commenting on the changing market, Andrea Sartori, KPMG’s Global Head of Sports, and leader of the KPMG Football Benchmark team, explained that the changes in spending could also signify a falling out of love with the window from top managers. With less time to think through or complete deals in January, these purchases are often driven by short-term needs to paper over cracks in a squad – and the ability of big money signings to really do that has been called into question.

Sartori said, “We often hear top managers questioning the value of the January transfer period. The maximum 12-week summer window, after a completed season, offers a time for strategic thinking and build-up. Managers focus on longer term planning and aim to strengthen their squads accordingly. In contrast, the 4-week winter period is more about filling the gaps: finding quick and short term solutions to injuries, lack of form, often amid tense competition mid-season to reach better positions or to avoid relegation. Consequently, the biggest deals are usually negotiated during the second part of the football season and made in the summer, when transfers are driven by vision, compared to many January deals motivated mainly by necessity.”

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Champions League glory hard to buy for football’s economic elite

15 March 2019 Consultancy.uk

The thrills and spills of knock-out football can still be one of the sport’s great levelling forces, with the Champions League’s second round having shown that the biggest spenders aren’t always able to buy their way to glory. While a league format broadly favours the squad depth of the beautiful game’s richest teams, half of the tournament’s wealthier teams exited in the first one-on-one elimination round.

As the Champions League burst back into life in February, following an agonising winter break, only two of the 16 teams re-launching their Champions League last-16 bid were from outside the so-called Big Five football leagues. With the exceptions of Portuguese champions FC Porto and Dutch footballing powerhouse AFC Ajax, teams from the world’s biggest spending leagues monopolised the second round. As outlined by analysis from KPMG’s Football Benchmark, the Premier League was represented by four teams, with three clubs come from La Liga and the Bundesliga respectively, while Serie A and Ligue 1 both retained two clubs.

This followed a grimly predictable group phase, which had seen the two most expensive squads progress in all but one of the eight collections of four teams. The one team to buck that trend, Ajax, had last won Europe’s premier club competition in 1995, but those halcyon days have long since faded into memory, and Ajax had failed to progress beyond the group stage in 13 years. With the second youngest squad in the tournament, what now seems to be an awakening football giant had some shocks in store for the second round too.

Group Stage values

Despite an impressive Europa League run which saw the team reach the final two years ago, Ajax had not progressed in a Champions League knockout stage tie since the 1996-97 campaign. That all changed this time, as Erik ten Hag’s men overturned a first leg deficit to trounce Real Madrid 5-3 on aggregate. Having felt hard done by in a 2-1 defeat at the Johan Cruijff ArenA, the Amsterdam club cruised to a 4-1 victory at the Santiago Bernabéu, a result which saw the tournament’s fourth most expensive squad crash out to the third cheapest remaining team.

The supremely expensive team, which had won three Champions Leagues on the trot, had crashed out in spectacular style. For many footballing purists, the end of the seemingly invincible Galacticos would have been enough to restore some of their faith in the sport – but there would soon be more schadenfreude to revel in, as a succession of Europe’s most bank-breakingly costly teams would soon join Los Blancos in their exit.

The pick of the bunch was unquestionably Paris Saint-Germain, who forfeited a 2-0 first leg advantage to somehow crash out of the Champions League. The team, who are fast becoming known as the foremost bottlers in Europe, faced a grim dissection in the French press following a 3-1 defeat by Manchester United at Le Parc de Princes. While it would be over-egging it to paint United as ‘giant killers’, the Red Devils squad is worth markedly less than the club bankrolled by Qatari oil money. PSG hold two of the most expensive players of all time in French World Cup winner Kylian Mbappe and Brazilian playboy Neymar.

Second Round values

Elsewhere, the round’s cheapest squad proved further that money is not everything, as Porto overcame Roma (the Italian club has since parted ways with manager Eusebio Di Francesco in the wake of this humbling) – while Juventus battled back to beat Atlético Madrid. The most ‘balanced’ tie of the round, there was a squad value difference of only €22 million between the two squads, in favour of the Spanish giant. With that being said, €113 million of Juve’s price-tag came from the summer acquisition of Cristiano Ronaldo. Ronaldo’s tie-settling hat-trick went to show that money spent in the right place ultimately makes the difference.

Spending wisely

At the same time, there were also four teams which lived up to their large price-tags. Manchester City pummelled Schalke over the course of two legs, hammering the German team 7-0 in the second game. With the largest squad market value in the tournament, the Citizens showed that their spending had not merely been a frenzy provoked by having large amounts of money to throw about – a la PSG – and that every penny had in fact been used to craft one of the continent’s most well-balanced and dangerous teams, to ultimately contend for the title.

Tottenham Hotspur similarly brushed off Borussia Dortmund, while Liverpool eventually overcame Bayern Munich, to leave no German teams in the tournament. Meanwhile, Barcelona similarly did for the French contingent of the Champions League, bundling out Olympique Lyonnais 5-1.

Operating Revenues

Going forward, the humbled economic superpowers of European football will take solace from the fact that their huge operating revenues will allow them to buy up talent which has emerged in this year’s Champions League. With Real Madrid having re-installed Zinidine Zidane as Head Coach, the club has already committed itself to spending big in the summer, cashing in some €50 million of its €743 billion revenue stream from last year to sign Éder Militão from Porto – who has impressed in this year's Champions League – in the summer.

Whether the PSG project is financially sustainable in the long-term remains to be seen, meanwhile, but with a huge portion of commercial revenues including shirt-sales from the club’s array of superstars, it will likely also seek to bring in more big names in the summer. The club was reportedly in the running to sign Ajax star Frenkie de Jong, before Barcelona finally secured his services from the end of the season.

The likes of Ajax will meanwhile face an uncomfortable wait, as a range of its new crop of outstanding players inevitably attract the attentions of Europe’s top spenders. With the lowest operating revenues of any team left in Europe, the club will face an uphill struggle to hang on to the likes of teenage captain Matthijs de Ligt. However, it would not be the first time that the club has been plundered for its top talent, and what Ajax and clubs of its size can take forward is that with the right eye for lower-key recruitment, they can rebuild, and still challenge Europe’s elite.