The Impact of COVID-19 on the Football Transfer market
By Imran Khimji
In times of turbulent change to global financial markets, one market that will be interesting to observe is the football transfer market.
While the world’s attention on the financial effects of the Covid-19 pandemic is on the stock market, commodity and house prices for example, the football transfer market this summer may be able to provide a snapshot into the financial consequences of the pandemic. Last year was a record transfer market for the biggest five leagues in Europe with £5 billion pounds being spent, but this year will have a very different market.
The most fundamental point is that footballers are the most important capital asset for football clubs. As the physical embodiment of the world’s most popular game, footballers are more than just overpaid athletes who kick a ball.
Player wages represent 75% of revenues for teams such as Leicester City, and an error in the recruitment of players can make or break clubs financially such as Leeds United and Portsmouth testify. Selling a player for profit, can be the difference between staying in the black and red for lower league teams.
As the physical embodiment of the world’s most popular game, footballers are more than just overpaid athletes who kick a ball.
Footballers are revenue drivers, too, bringing fans into stadiums, marketing and merchandise, and bringing prize money onto the field.
The multinational corporate services network, KPMG, in a study two years ago calculated that the transfer of Cristiano Ronaldo would earn Juventus €340 million in benefits even taking into account fluctuations in the performance of the team. John McGinn, a recent signing for Aston Villa, scored the winning goal for Aston Villa in The Championship Playoffs last year, which earned his team £170 million. Players valuations consequently can be valued from free to the hundreds of millions.
the transfer of Cristiano Ronaldo would earn Juventus €340 million in benefits even taking into account fluctuations in the performance of the team.
So what to make of the pandemic affected transfer market? Firstly, the effect of the pandemic on the valuations of players. Players will be valued differently this summer, because of the pandemic. Top transfer targets such as young French star Kylian Mbappé may have their transfer valuations lowered by tens of millions, as potential buyers have less money to spend. Selling clubs such as his club Paris Saint Germain who are in a position not to sell, may simply wait for player valuations to be adjusted potentially next season. Therefore one consequence may be that the top football players such as Neymar may not move this season, and will stay on the books of the top teams.
Clubs who are in a weaker financial position may be forced to lower their valuations of players, and sell them on at knockdown prices. This can be to the advantage of clubs in financially stronger positions such as Manchester United. Talented young players such as Jarrod Bowen from Hull City may be available at very affordable prices.
The conclusion to be made is that for clubs who in a stronger financial position this could be a wonderful opportunity to strengthen by acquiring players at affordable prices.
Clubs who are in a weaker financial position may be forced to lower their valuations of players, and sell them on at knockdown prices.
Finally, perversely, players who are out of contract and available as a free transfer could see their wages increase as they become more in demand due to a lack of a transfer fee. Players such as Willian from Chelsea and Ryan Fraiser from Bournemouth are examples. For clubs on a tight budget targeting these free agents could form a transfer strategy.
A final effect of the pandemic will be on the level of transfer activity. Clearly as club revenues become stretched with the threat of low attendance, takings which can represent a hugely significant percentage of revenues, this may depress the market in terms of activity.
Clubs may prefer to use academic players, who are on cheaper wages and who may represent saleable assets in the future. Manchester United moved to this strategy this season following an unsuccessful strategy of buying expensive veteran players in the transfer market.
In conclusion, it will be interesting to observe the effects of the pandemic on the football transfer market. The market is due to open on June 10th and the results may provide a snapshot into the future direction of other markets affected by the pandemic.
Imran Khimji, is from the UK. He is currently completing a Masters in Education at Nottingham University. He is passionate about travel. He has been to many different countries around the world and chronicled his visits in detail. His other passion is sport. If there is sport on TV or sport being played, the chances are that he is involved. Imran works as a teacher in the United Arab Emirates.