Category: Premier League

The Premier League transfer window has officially shut with approximately £1.3bn spent by Premier League clubs ahead of the new season up from just over £1.2bn in 2018.

Clubs have to be wary of Financial Fair Play when purchasing players to avoid penalties and bans (for more on this click here) and also need to ensure they are running sustainably for their owners etc.

This brings us to this article, which will explain the true costs of transfers from the 2019 summer transfer window as explained briefly below:

When clubs sign a player, from an accounting perspective this is not all charged in the year of the transfer as the payments are matched to how the player will be used. So, taking Harry Maguire as an example, his £80m transfer to Manchester United costs United just over £13m a season based on him signing a 6-year contract. Leicester on the other hand brought him for £12m on a 4-year deal, so save £3m a season from selling him.

Another key element is profit on player sales. In this regard the profit the club gain is not simply the transfer fee received minus the transfer fee paid, it is the transfer fee received less the remaining value of the player sold. So, carrying on the Maguire example, he will be ‘worth’ £12m minus the amortisation charges to date, so after two years of charges (from a 4-year contract), the player will be ‘worth’ £6m. Hence, having been sold for £80m, a profit of around £74m will be recorded, rather than £68m like many people believe.

This article will analyse each Premier League club’s business and compare them to their counterparts.

Due to the availability of data, this excludes the costs of loans and player wages. All transfer fees and contract lengths are via Transfmartk.co.uk and may not include add-ons etc. In order to simplify the amortisation costs, we have ignored contract renewals which make the calculation more complex without much added insight.

Let’s Not Talk About Spend, Let’s Talk About Net Spend

Premier League clubs had an active transfer window, spending £1,298m, while receiving only £598m in return (a figure that may increase due to the European windows still being open), leaving clubs with a net spend of £700m, down significantly on 2018’s £909m net spend as clubs look to spend more shrewdly this year.

This was largely due to a lack of spending by certain clubs, with Liverpool spending around £150m less than in 2018, while mid-table clubs as a whole also spent less.

Aston Vila followed Fulham’s lead by spending over £100m after a barnstorming transfer window which saw 12 players arriving for transfer fees and no significant departures. This led to the Midlands club having a net transfer spend of £134m with Wesley and Mings the most notable of the players signed.

Arsenal were uncharacteristically one of the biggest spenders, breaking their club transfer record to sign Pepe for £72m, spending £113m in total with no huge transfer fees received in return, leading to a net spend of £97m.

Both Manchester clubs also spent big, with Manchester United breaking the record fee for a defender in their purchase of Maguire. While Manchester City broke their record with the signing of Rodri.

Brighton were the biggest surprise spenders, backing new man Graham Potter with a net spend of £57m.

Chelsea were also somehow big spenders despite their transfer ban with Pulisic (a pre-arranged January transfer) and Kovacic (a loan made permanent) both signing this summer as Chelsea managed to use the money from the sale of talisman Hazard.

Despite these signings, Chelsea (£9m) were one of only four clubs to record a net transfer income alongside Liverpool (£25m), Crystal Palace (£47m) and Norwich (£0.4m).

Additional Amortisation Costs

Premier League clubs face additional transfer costs of £300m this year alone after a huge transfer spend of over £1.3bn, with this cost spread of the players signed contracts which average at just over 4-year contracts.

Amortisation costs are, as explained above, based on transfer fees and contract lengths and as such, the costs are higher for larger fees and also higher when contract lengths are shorter. A key example is Pepe, a £72m signing who signed a 5-year contract, costing Arsenal around £14.4m a year and Rodri, a £63m purchase on a 5-year contract cost Manchester City around £12.6m a year.

Aston Villa saw their amortisation costs rise the most at £32.5m after signing 12 first team players to prepare themselves for the Premier League. The sheer volume of signings, despite no fees in excess of £23m, meant they accrued a big additional amortisation spend as the likes of Wesley, Mings and Target joined. Aston Villa will benefit from a surge in revenue following promotion that should more than cover these additional costs.

No other club saw additional amortisation in excess of £30m with Arsenal the closest at £29.6m. The signings of Pepe (£14.4m), Saliba (£5.4m), Tierney (£4.9m), Luiz (£3.9m) and Martinelli (£1.2m) have added around £30m to their amortisation costs. With Arsenal’s revenue relatively stagnant, these costs will eat into profitability.

Manchester United (£26m), Manchester City (£24m), Leicester (£23m), Everton (£23m) and Wolves (£21m) were the only other clubs to add more than £20m to their amortisation costs.

On the other side of the scale, Burnley (£4m), Crystal Palace (£2m), Liverpool (£0.3m) and Norwich (£0.3m) added less than £4m to their amortisation costs in what were surprisingly quiet windows for the quartet with Burnley, Crystal Palace an Norwich taking their chances with relatively similar squads to steer themselves to safety, while Liverpool hope the likes of the Ox and Brewster will be like ‘new signings’.

Amortisation Costs Savings

Premier League clubs saved £51m on amortisation cost after player sales of £598m with many players sold either brought cheaply or have been long serving players that no longer attract amortisation costs after staying longer than their original contract.

Amortisation costs savings are driven again by the transfer fee paid when the player was brought and their original contract length. So, for instance Eden Hazard signed for Chelsea 7 years ago for £31.5m on an initial 5-year contract, costing Chelsea £6.3m a year for those 5 years. Since Hazard had been at Chelsea for 7 years, Hazard costs Chelsea nothing from an accounting perspective, so no amortisation costs are saved and hence no savings included in our calculations.

As such many Premier League clubs didn’t recorded any savings as the players sold had already seen their entire transfer fee amortised. This includes players signed as youths such as Wan-Bissaka at Crystal Palace or long serving players such as Delph at Manchester City.

Manchester United were the biggest savers, saving around £15m after selling Lukaku, a £76m purchase.

West Ham (£9m), Everton (£5m) and Tottenham (£5m) were the only other clubs to save in excess of £5m on player sales after the sales of the likes of Arnautovic, Gueye and Janssen.

Aston Villa, Brighton and Sheffield United sold no players hence the reason for their lack of amortisation costs savings.

Chelsea, Crystal Palace, Burnley and Wolves also had no amortisation costs savings despite player sales due to the players sold having been at the club for at least their original contract lengths or former academy players such as Hazard, Wan-Bissaka, Heaton and Hause.

Profit, Profit, Profit

Premier League clubs due to this made profits on their sales of £494m after selling players for £598m, a 83% return on investment.

When players are sold, as seen above, this may not lead to amortisation costs savings if the players amortisation costs were low due to the price paid or they have been at the club for a long time.

This doesn’t mean there is no effect in their accounts, as the amount earned is recorded as a profit on player sales. This is calculated as the transfer fee received minus their remaining value as explained in the introduction. However, to avoid you having to scroll up, here is an example from this season using Lukaku.

Lukaku cost Manchester United £76m 2 years ago on a 5-year contract, costing the club £15m a year initially. Each year he is worth less of his transfer fee, so after 1 year he is worth £61m and after 2 years £46m, his value now. Having been sold for a reported £59m, Manchester United will record a profit in their accounts of around £13m, despite making a loss on his actual transfer fee of £17m.

Clearly the biggest benefiters here were Chelsea after their sale of Hazard which was essentially all profit and hence the club recorded a profit of £90m.

This helped Chelsea record the biggest profit of all clubs, with the additional sales of Aina, Kalas and Luiz leading to a huge total profit of £107m.

Leicester also recorded a large profit (for the second season in a row after the sale of Mahrez last year) due to Maguire’s transfer, recording a profit of £72m in total.

Crystal Palace (£50m) and Everton (£48m) were the only other clubs to record profits above £30m due to the sales of Wan-Bissaka, Lookman and Gueye.

Norwich, Aston Villa, Brighton and Sheffield United all recorded nil profit/loss on player sales due to a lack of sales. No club recorded a loss.

Burnley (£8m) and Wolves (£3m) were the only other clubs to record a profit of less than £10m after selling 1 player each in Heaton and Hause for relatively low fees.

The Summary – The True Cost

To work out the true cost of this transfer window we use the following formula:

Additional amortisation costs – Amortisation costs saved -/+ Profit/Loss on player sales.

This gives an interesting picture for Premier League clubs with a net transfer costs of a staggering minus £245m! Meaning Premier League clubs as a whole have saved on transfers this year from a Financial Fair Play perspective.

This is due to only 5 clubs having a net costs this window after significant sales by most teams led to large profits on player sales.

Chelsea, due to the Hazard deal have made a saving of approximately £88m after their new signings, while Leicester (£53m), Crystal Palace (£48m), Everton (£32m) and Liverpool (£26m) all saved costs in excess of £25m.

Aston Villa unsurprisingly have the highest net costs of £33m after their sensational transfer window in which they spent hugely for a Premier League newcomer, making a statement of their ambitions.

Wolves (£18m), Brighton (£15m), Arsenal (£14m) and Sheffield United (£11m) were the only other clubs to record net costs.

To put this all into perspective there is a mismatch. The profits received are all given in the period of sale, while new transfers are spread over their contract. This means that Chelsea, despite making a profit on Hazard, and hence their net costs are negative, will indeed see amortisation costs rise in the long run as next year they will not have that Hazard profit.

The same is the case for amortisation costs saved, for some of the players sold, they may only have had one more year of amortisation costs and as such this saving will not be there next year and hence they will see amortisation costs rise the following year.

Amortisation costs have risen over the years and will continue to as long as clubs net spends are still as large as they are.

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