Transfers in Recession
When Sky News in manufactured excitement describes Robbie Keane`s loan move to the footballing backwater of the SPL as the major transfer story of the day then you know just how subdued this window has been.
January transfers have been conducted in an atmosphere which reflects the tightening grip that financial reality is bringing to bear on the game. With a report in this week`s Financial Times that HMRC are taking an increasingly aggressive attitude to raising much needed revenue, issuing winding up petitions more readily than in the recent past, Crystal Palace has gone into administration with Portsmouth teetering on the brink. This 'get tough` policy, the report suggests, is forcing clubs to consider their cash position with ever greater caution. Though the club was successful in raising £500m of bond debt Manchester United supporters can see a threat to long term financial stability strongly enough to plan a protest at the Milan game in March. Liverpool supporters have been unhappy with the fragile state of their clubs finances for some time. West Hams new owners have publically declared the parlous state of their finances. For football it isn`t just a matter of clubs going to the wall but the extent to which this distorts competition. Playing Portsmouth isn`t exactly getting harder as this season progresses.
All just the tip of the iceberg according to a Uefa report due to be published next month. Despite the game generating record revenues half of all European professional football clubs are running at a loss, with more than 20 percent recording enormous deficits in the past year the study reveals. Uefa`s general secretary Gianni Infantino said the principal reason for the losses was inflationary wage and transfer costs driven by clubs relying on owner finance or debt. "Around one-third of the clubs are spending 70 per cent or more of their revenues on wages. Revenues across European football grew by 10 per cent last year, but the salaries of players and coaches have gone up by around 18 per cent."
As a pre-cursor to the planned Uefa 'financial fair play ' rules due to be introduced form the 2012/2013 season this background is beginning to shape the financial behaviour of clubs. Chelsea and City`s conversion of 'soft loans` into equity makes the proper adjustment to the balance sheet but still leaves them with the need to break even or turn a profit within the next 2 years if they are to compete in European competition. Wage costs will be capped by financial realism and the need to adhere to the planned rule changes.
Back in December Wenger predicted this reality would be hard to ignore in the transfer window indicating that when we loan players to clubs it isn`t always certain that we`ll be paid the wages agreed.
"January won`t be busy," he warned, "because people don`t realise there is no money in football, in Europe, in general. We still live in dreamland in football because if you look at how many clubs are struggling in the Premier League and the Championship in England, it is time for us to get a wakeup call and not think the situation will last as it has until now.
"What is so terrible about debts is that at some stage you have to pay it back. If it was just an intellectual problem it is not terrible but at some stage somebody will knock at your door and say 'Please, can you pay me back?` And that is what is going to happen in football.
"It is certainly the worst financial situation in football in my 13 years in England," said Wenger. "I can`t see the reason why the transfer market should be very busy because many clubs struggle financially.
"When you have players out on loan, they [clubs] struggle with the wages of the players.
"I don`t know if a club will disappear, I hope not. But what is happening at the moment, all the clubs live in debt and think a rich owner will come and buy. That is what happened to Chelsea and that is what we thought happened at Portsmouth but you will find out that not necessarily everybody has the amount of resources needed today in football."
The scale of resources needed seem to have dawned on a number of clubs as short term loan deals with little ongoing commitment have coloured the transfer picture in this window. A period which some are claiming could be the lowest spending since the introduction of the January transfer window seven years ago. If this is the first indication that football has to adjust to a new era of fiscal responsibility then the game will be better and fairer for it.
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