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Arsenal's Money Pile

Arsenal's Money Pile

Among the themes popular with those critical of some of the club's policies over recent years is the claim that as we are sitting on cash reserves it somehow confirms that we have under invested in the team. In most other businesses healthy cash flow would be considered a positive indicator of investment capacity. In football we've persuaded ourselves that the normal rules of business don't apply.

Alan Sugar, as former chairman and an owner of Spurs, once spoke despairingly of the 'prune juice' effect in football finances which prevented their sustained development as cash that came in left just as quickly. To illustrate how this might happen it's worth taking a look at the balance sheet in the interim accounts published last November. You'll see two figures for creditors - one payments due in more than one year of some £250m+ (mainly stadium debt) and another for creditors due in less than a year (mainly relating to season ticket obligations and other operating costs) of £167m. It's this second figure which should be kept in mind when looking at our cash reserves of £143m. While much of this is met from income (including debtors) the idea that cash is static and therefore serves no purpose other than to spend on players is misleading. From our cash reserves net current assets when set against liabilities are £60m.

Healthy cash reserves aren't a weakness in businesses that generate cash and self sustaining clubs like Bayern or ManU also hold good reserves. In 3 of the last 5 years ManU have shown reserves at or above £150m though it had dropped lower before rising again to some £100m in their last accounts. The recent agreement by PL clubs to adopt FFP is designed to try to limit wages and transfer costs sucking increased broadcasting income straight out of the clubs encouraging them to build up reserves. Uefa's own FFP rules, which also limit the amount owed between clubs, are also designed to promote healthy financial practices. There is a growing recognition that in an environment in which money has grown exponentially over the last couple of decades a more robust financial discipline is needed not just to avoid ever greater failures but to promote a fair competitive landscape.

For these reasons, when you hear or see supporters claim that the club is holding lots of cash which 'proves' that they're not interested in investing in the club tell them politely that they're living in the past. It helps provide the flexibility, opportunity and choice we need to compete. Cash reserves are a healthy indicator of our ability to invest on an enduring basis and should be seen as a strength to be celebrated - not a stick Arsenal need be beaten with.

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Date:Tuesday May 27 2014
Time: 9:03AM


Thanks so much for posting this, Amos. I have been waiting for an article like this to set out clearly what I had an inkling about but did not understand well enough to articulate. I hope I'm not being unfair when I say that Swiss Rambler bears the bulk of the responsibility for many misconceptions in this area.

Football fans do indeed have a warped view of finances - financial responsibility is seen as a sign of a lack of passion for the club or the game. High ticket prices and the lack of grassroots development are (rightly) bemoaned and yet many are happy to see all the extra billions going into football siphoned off by agents and a lucky few footballers at the top of the game.

27/05/2014 10:32:00
Swiss Rambler produces excellent financial summaries but his last on Arsenal was some three weeks before the last summer window closed, hence transfer deals had not been completed, and in comparing ManU's cash balances he used a figure which was for ManU in recent times very low and therefore misleading. It has since climbed while ours had declined slightly. There's no doubt that Arsenal has the financial strength to invest in players - and in the last 3 seasons they have spent more on player transfers than in the previous 8 seasons combined. To be in a position to do that consistently is exactly where you would want them to be. But an expensive mistake for Arsenal could significantly inhibit future spending so taking the time to make sure, as far as possible, we're getting value for our spend is still essential and to be encouraged.
27/05/2014 12:02:00
Most fans consider spending to be just the 'transfer fees' and completely ignore the wages that come with a player. We sure can buy a Diego Costa but can't afford his 250-300k a week bill. Arsene's philosophy of buying 1-2 stars, having a core from within the club and scouting for lesser known gems will help the club move forward in building teams in this destructive transfer market (David Luiz's 40m move to PSG shows just why). Cash reserves or no, football is what matters. People will forget the cash if Sanogo starts banging them goals in week in week out despite him being a free transfer on 25k per week.
Kaushal Vasa
27/05/2014 12:31:00
I wasn't sure which one of these 'labels' was more frustrating: 'they haven't won anything since ... Arsenal won't spend any money ...". The surprising thing was how 'reputable' media houses played the money angle and got away with it. And as 'fair' as Swiss Rambler aspired to be his commentaries and conclusions --- as his reputation soared, in my opinion --- oftentimes veered from the story the financial figures were writing. I know we the fans suffer from relative depravation and deserve some slack with our irrational expectations especially when our neighbours spend obscene amount of money year in and year out. However, we should at least show some interest in the 'economy' of the game. What I will add to this excellent write-up is we should not be fixated so much on Arsene's philosophy but rather on the basic financial framework the club elected to follow. The self-sustainable model should be our point of reference whenever we wonder about cash reserves. Of course, this model is not what bind us to the club but it helps to have it in mind. If we have done so in the past perhaps we could have influenced those at the helm who for so long failed to see the commercial potential of our beloved Arsenal and did virtually nothing --- as far as available records indicate --- to open additional revenue stream. Thankfully, that is getting better.
27/05/2014 13:55:00
Good points NYArse. I also have the feeling that Swiss Rambler wrote the conclusion to his piece first as much of his analysis provides support for the clubs policies. As you allude to much of ManU's consistency of success is owed to the fact that for the most part they ran their business on pragmatic and commercially driven lines.
27/05/2014 18:29:00
Another very good point, Kaushal Vasa.

@ NYArse - that is exactly what I mean about Swiss Rambler. Also, he could have piped up at any time to correct misunderstandings or issue caveats.

27/05/2014 20:33:00
Quite an interesting piece Amos. Tis always reassuring to drive home the point that spending about one's pay grade will only lead to decline. Rangers, Anzhi are a few examples. I identify with this club cos of its realistic approach to the game and the business. I think most fans are only endeared to the footballing aspect of the club and seem to forget that the financial health is also as critical. I mean if that were in jeopardy, then we will have no Arsenal to celebrate along with 250,000 others. Thank you Arsene and Thank you Board.
28/05/2014 00:28:00
So where is this 100 mil pounds the media keep rambling about? The so called war chest...
28/05/2014 00:29:00
Good write up Amos. I have argued these points with my colleague but keep getting shut out. " the game has moved on"; "we have to play according to the dictates of the times"; "everyone has a sugar daddy" etc. Even when I ask them to show me one prostitute that is happy doing what she is doing they shout me down. Luckily I have been a gunner long before the premiership started so I understand the impatience of the premiership fans. However nothing makes me prouder of my club than the fact that we need no Russian/Sheik sugar-daddy to achieve. We have not only achieved but have been a force to reckon with. Belittle us at your own risk!! However, I will join any revolution next season if we do not bring in some notable players to strengthen the team as the only thing we are hanging on to is the fact that we when the banter gets too much we can beat our chests and remind our haters that "we are the only team in the UK that has consistently made the champion's league". So understand that I do not want Arsenal to ever lose that WHATEVER IT TAKES!!. As of now it makes for good and consistent bragging as well as shutting up all the haters.
28/05/2014 00:56:00
@ Guyfox.

The war chest is a media creation - "Arsene's £100 million war chest" sounds sexier than saying "Increased commercial revenue is available to be spent on players, and purchases will as always be assessed on a case-by-case basis, taking into account value to the squad". And it's shorter.

28/05/2014 11:05:00
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