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Perish or prosper: The Premier League tackles Brexit

Tuesday, July 12, 2016

Perish or prosper: The Premier League tackles Brexit

As the Remain reds went up against the Leave blues, the Chairman of England’s Premier League voiced his support of the remain campaign. After a Remain fuelled build up, leave snuck in a late winner and now the Premier League will have to manage the consequences of an out vote. There will be changes to the way football is looked upon as an industry, but how much of this is scaremongering and how much of this will evolve into tangible changes yet to be seen. 

The beautiful game is the most important part of football, but money is a close second. The price of signing players from overseas for Premier League clubs could increase substantially as a result of Brexit.  This time last year, the exchange rate was 0.709 €/£ (Google Finance); one year and one referendum later we could see this move to 0.900 €/£ or even further as grave uncertainty looms upon us.

Just to put this in context, €160 million, the phenomenal price tag for Juventus’ Paul Pogba, arguably the hottest property in the footballing world right now, presents just one of many examples of the issues a Brexit can cause in the immediate term. The premier league Fat Cats, the likes of the Manchester clubs and Chelsea, could see the star’s price rocket from £113.4 million last year to around £144 million now, based solely on the impact of Brexit uncertainty on sterling. Real Madrid and the other EU clubs however, would see no change in the quoted price, whilst the Premier League clubs must fork out more.

As such, figure 1 illustrates how players (potentially like Pogba) coming into the Premier League would be more expensive in the current sterling landscape. This is further exacerbated when considering current possible signings. Chelsea, widely expected to sign Batshuayi from Marseille, could have acted quicker and got his signature on 20 June for €40 million, which at the time equated to £31.3 million. At this point the exchange rate was 0.78 €/£, however, after the leave vote, sterling plummeted to 0.83 €/£ and now Chelsea will have to fork out £33.1 million to meet the equivalent Euro price tag. All this talk of millions makes it easy to forget that the additional £1.8 million could have been used to subsidise hundreds of thousands of tickets for fans and pay for hundreds of juniors to go through full coaching courses.

Figure 1 Transfer Fees before and after Brexit

Source: Sky Sports

It’s also a double edged sword as players leaving the Premier League would have resulted in a lower transfer fee to be acquired in sterling terms. Two of the world’s best players, Ronaldo and Bale, were both sold at extraordinary prices, each breaking the record transfer fee at the time. However, had the transfer been completed in today’s economic climate as shown on figure 1, Manchester United and Tottenham would have lost around £2 million and £3.7 million, respectively. The weakness of the pound resulting from Brexit has effectively devalued club assets in the form of their players, making Premier League players being sold for less in pounds following the 23 June referendum. 

Not only are transfer fees to be impacted by Brexit, but there is the chance that wages will as well. As of now, with EU legislation, wage caps had been blocked but as we enter an environment where EU laws won’t uphold in our nation, the introduction of wage caps is a real possibility. Whilst this could help better governance and increase sustainability of the club (as underperforming signings wouldn’t be such a waste of money), this may hugely discourage star players to move to Britain as clubs won’t be able to pay ridiculously high salaries (in regions of £100-200 thousand per week), which could heavily hurt Premier League revenues. But let’s be honest; many of us are of the opinion that footballers are overpaid nowadays. 

Another worry, for us beloved fans, is that foreign players may be unlikely to play in the Premier League because of the restrictions of the current free movement across the EU after complete autonomy from the EU. Just to shed some light, had we not been part of the EU a year ago, players like Dimitri Payet, Riyad Mahrez and N'Golo Kanté, all of which have had stellar seasons with their clubs, may not have been able to get a work permit so easily (because they don’t fall under UEFA’s qualifying conditions of having played a number of international matches). This may have even possibly discouraged managers from acquiring them at all because it could have cost more. 

However, coming back to the theme of scaremongering, this may be far-fetched at best. No retrospective action can be taken, so no players will be forced to leave the Premier League and clubs will still be able to acquire foreign talent with approval from UEFA. The government will also work in conjunction with the FA on player immigration rules, and considering how economically prosperous the Premier League is, it is unlikely that any reshuffle will take place and even more unlikely it will destroy the Premier League we know and love.

Chirag Jasani & Jack Mason

 

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