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One transfer market for the EPL — and one for the others

When the new three-year English Premier League (EPL) television rights deal was announced in February 2015, many analysts predicted that transfer spending could reach new heights. But nobody could have known just how much that £5.1 billion (S$9.2 billion) of revenue would change the market.

When the new three-year English Premier League (EPL) television rights deal was announced in February 2015, many analysts predicted that transfer spending could reach new heights. But nobody could have known just how much that £5.1 billion (S$9.2 billion) of revenue would change the market.

For the first time, EPL spending topped £1 billion even before transfer deadline day arrived. The £1.165 billion total, up 34 per cent on last year, dwarfed the spending by other major European leagues. Serie A, at £590 million, reached just half that level. Even relegated sides Newcastle and Aston Villa together spent more than Barcelona and Real Madrid combined.

As English pundits lamented the eye-watering inflation of fees, chairmen around Europe were making the most of the windfall.

This summer saw a record number of players leaving La Liga for England, yet they were not the star names you would expect at these high values. Indeed, a Spanish agent said: “When they see an English club coming, Spanish sporting directors rub their hands together in glee. When the call comes, they think of a fee that’s ridiculous and quote that.”

Arsenal manager Arsene Wenger summed it up: “There are two markets — one for English clubs and one for others.”

English clubs’ newfound wealth has transformed the traditional pecking order, with 13 EPL clubs breaking their transfer records: Crystal Palace spent more on Christian Benteke alone than they had ever done before in an entire transfer window, expected relegation-strugglers Watford spent £53.4 million while reigning champions Leicester built on their surprise title win by spending £67.8 million — changing the narrative for a club whose success last season was founded on bargain finds and journeymen.

While the six biggest spenders were all still established financial powers — the two Manchester clubs, Chelsea, Arsenal, Tottenham and Liverpool — they have not had things all their own way.

Perhaps Leicester’s success helped force the hand of many of the established clubs and convinced the lesser lights of the league to gamble. As Manchester United, Liverpool and Chelsea seek a quick route back to Europe, teams such as Everton, West Ham and Southampton seek their own unlikely miracles.

If you had said two years ago that Bournemouth would be signing Jack Wilshere (and paying his full wages for the loan), and that Watford would be buying £13-million players from Juventus, people might think you had gone mad.

But the stakes of staying in the league have never been higher. Every extra year in the top flight means more time feeding at the TV rights trough, so the gamble of paying an extra £10 million for a player pales in comparison to the fear of losing that.

The unpredictable nature of the current climate was summed up by my brief conversation with a director of a major EPL team just hours before deadline. He told me the club was completely satisfied as they had fulfilled all the needs they have identified.

A few hours later, the team made one of the biggest deals of the transfer window to bolster their squad, simply because a quality player was available and a deal could be done.

In this new financial reality, clubs stay at the table until the last minute as the purse strings remain loose.

While a lot of the spend headed to the continent, EPL clubs still spent £445 million with English clubs, including a record £140 million in the Football League. Hopefully a “trickledown” effect will follow, boosting the lower leagues and encouraging lower league teams to focus on developing talent for the future.

Another interesting development has been the increasing stockpiling of players by cash-rich clubs, which has resulted in an incredible 168 EPL players sent out on loan: 38 from Chelsea alone. Loaned players such as Juan Cuadrado, Eliaquim Mangala and Wilfried Bony all commanded significant fees previously and one estimate puts the total value of loaned players around £200 million.

What can we expect next?

Well, if this year is like recent years, we can expect several new managers in place by January and looking to make a mark on their squads in that window, while other teams seek an injection to push for glory or avoid relegation.

Still, matches are not won at the transfer negotiation table. Many high-profile signings will never justify their fees and there are only so many trophies and European places to go around. Premier League teams have dominated European spending for years, but there has not been an English team in the Champions League final in the past five years.

As the old saying goes, football is played on the pitch and not on paper.

Spending money is the easy part: Turning that investment into success is where the hard work really starts.

James Walton is a clients & markets partner for Deloitte Singapore and South-east Asia, and heads the Sports Business service line.

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