The football sector is one of the largest industries in the UK, and globally, bringing in hundreds of million pounds (£468m in 2019) to the English economy every year. However, recently in football we have seen markets becoming incredibly inflated, so should there be spending caps in place to prevent this?
Why Is Heavy Spending Bad?
Essentially, it puts lower, less powerful (money wise) teams at a disadvantage in comparison to the bigger clubs, who are able to keep spending and buy their way to the top. In the 1992, Eric Cantona, one of the best players to play the game, moved from Leeds United to Manchester United for £1.2m, and this was deemed expensive at the time.
In 2002, Manchester United went and spent £30m on English centre-half Rio Ferdinand, who was the world’s most expensive defender at the time. In today’s terms, £30m can buy you Donny Van de Beek, who has sat on the bench all season and is nowhere near the best in his position. In order to buy someone like Ferdinand in the modern game, you will need to spend £75m, on Virgil Van Dijk, one of the best centre-halves in the current era. Clearly there has been a lot of inflation, but how did it all begin?
Owner Injections
‘Oil money’ is a term thrown around in football, when an owner takes over a club and uses their own money (usually from their oil business) and injects it into the club, instead of using club revenue and reinvesting that. The most renowned team for doing that is Manchester City, who’s owner injects millions of pounds into the club for transfers each year. This is shown here with Man City’s net spend booming after the Abu Dhabi Group buys them.
While City do spend smart, getting loads of bargains on players, Pep Guardiola (Manchester City manager) has spend £832m on players in 5 years, which is an incredibly large fee. To put this into context, Watford, who have been in the PL for 4 years since 2016, have only spent £200m. Now, should the big owners be allowed to inject such huge amounts into the club, or does it make the league too uncompetitive and creates an imbalance between teams?
Personally, I think the owners shouldn’t be allowed to inject this much into clubs, especially if they aren’t earning as much in terms of club revenue from ticket sales and merchandise. It evidently creates a divide in the league, with Manchester City winning it 3 times in the last 5 years, and shouldn’t be allowed as it puts smaller teams at a disadvantage. Having said that, it promotes competition as owners are rightly able to put more money into their club as long as it meets FFP regulations.
Owner injections for footballing operations can be good, but it can also be detrimental to the long-term development of the football club, especially if the source of the money is a loan. It should be known that most football clubs are actually in heavy debt due to the loans that the owners take out to pay for things such as stadium maintenance and transfer fees.
Examples of these clubs are Manchester United and Barcelona, who are both run very poorly within the hierarchy. Manchester United have suffered from a lack of owner injection since the Glazers took over, they rely heavily on the commercial revenue that the club makes (a lot since they are one of the biggest clubs in the world). While the club should be able to continue to run off the commercial revenue with a lack of owner injection, the Glazers take out millions from the club.
At the end of the 21/22 campaign, the Glazers paid out £11m in dividends to shareholders. That has risen the debt to £496m according to SkySports, an increase in 11% from the same period last year. With that much debt, the club are in big trouble once the Glazers sell them as the next owner will have the burden of the debt on them. The club will have to pay it off one day, and it will continue to accumulate as long as the owners take out big loans.
Barcelona have a similar story, but are in a much worse situation. They’re in far worse debt, but the club continue to spend more and more in the transfer market without addressing their current issues. So far, they’ve signed the likes of Lewandowski, Kessié, Christensen and Raphinha without addressing their current debt issue.
They’ve adopted a ‘short-term gain, long-term loss’ strategy, a plan that will help them to do well in the short-run, but could extinct them as a club in the long-run. Recently, Barcelona have sold 10% of their TV rights for £231m, a move which no one could see coming as clubs tend to hold onto them. Instead of fixing the structural issues, they made this sale so that they could register new players, going along with the short-term gain with the hope that they win trophies.
Player Wages
While transfer fees are an issue, player wages are an even bigger one. Is it right for players to be demanding 500k a week contracts, and agents demanding even higher fees for negotiations? The Chinese league recently introduced a wage cap on foreign players preventing them from earning more than £49,000 a week, in attempt to prevent leakages from the Chinese economy, and preventing bubbles from building within the wage market in football. Players such as Oscar, playing in China, are currently earning £400,000 which is over 8 times the new wage cap.
Should a similar system be put in place within English football? There’s a big argument for and against this system, but it will allow clubs to retain most of their revenue instead of having a large expenditure on player wages, which could in turn be sent away from the UK e.g. if they have family who like abroad. Allowing clubs to retain their revenue will boost the economy massively, and by allowing them to reinvest that money there will be a huge boost in long-term growth within the football industry in the UK.
To conclude, spending caps in English football would be a very interesting addition, both when it comes to transfer fees and wage caps. However, for this to work effectively, the rest of Europe would have to implement a similar strategy, as otherwise the Premier League would fail to attract and retain their top players as they would look to move abroad for higher wages.
