Investment is a dangerous and tricky business – any person holding stocks and shares in the FTSE 100 in 2008 can vouch for that.
What looks like a safe and secure investment can turn sour within an instant, yet the desire for rewards ensures investors keep coming back for more. Football clubs, much like listed companies, remain open to potential suitors and supporters crave the backing of oil-rich individuals, almost in the expectation throwing money behind a club wields instant success.
Does an increase in funds really increase a club’s chances of silverware? If not, why are a rapidly increasing number of overseas tycoons continuing to back British football clubs?
People in the highest places of English football clubs must certainly think so. During the
latest transfer window, an aggregate £630m was spent by 20 top flight clubs, producing an average outlay of £31.5m per club. This represents a 29% increase on the 2012 window and exceeds 2008’s previous record by a staggering £130m.
While the Premier League remains head and shoulders above any other competition in terms of spends, other leagues in Europe’s elite show the upwards curve in transfer spends is by no means confined to these shores. Monaco’s well publicised signing of Radamel Falcao on their return to French football’s top flight was believed to have set them back £51m, a sizeable chunk of an estimated £146m summer shopping spree. Over in Spain, Gareth Bale signed for Real Madrid in a world record fee and Barcelona splashed out on talented Brazilian Neymar.
To the naked eye, it is clear to see the impact German star Mesut Özil has had since his arrival from Spain for a stellar £42.4m. Özil’s arrival was an uncharacteristic move by a normally cautious Arsene Wenger, who has finally come to terms with the notion you have to spend big to mount any serious challenge for the Premier League. No surprise then that Arsenal are unbeaten since the German’s move, who has contributed three assists in as many games and led his new side to the summit of the table.
It is also inconceivable to think Manchester United would have strode away with the title as they did last year without Robin van Persie. Despite tailing away when the season reached its climax, RVP had already inflicted the damage and tore away from the chasing pack, finishing with 26 goals and nine assists; in some quarters, that season alone has justified his £24m price tag.
While there are many cases of good and bad signings, much of which can be a subjective argument, the statistics are there to show an increase in spending is directly related to a team’s final league position. Simon Kuper and Stefan Szymanski conducted a study between 1998 and 2008 that showed wages explained 89% of the variation of a side’s league position. The four teams with the largest wages bills during the investigated period – Chelsea, Manchester United, Arsenal and Liverpool - all had average finishes inside the top four. No surprise that we now see Manchester City revelling in a top four
spot, given their ever increasing wage bill.
A separate study by Chris Anderson and David Sally in the magnificent book ‘The Numbers Game’ confirm this theory. They studied the correlation between wages and league finishes between 2001 and 2011, reaching the same conclusion; the higher the club’s wages compared to the league’s average for that season, the higher up the table that club would finish.
Despite an influx in funds almost certainly enhancing chances of silverware, it is by no means a 100% guarantee of titles and supporters appear to ignore the risks associated with immediate backing. As with all types of investment, some produce rewards while others can leave an organisation reeling.
Manchester City remains the shining example of any loyal follower’s dream. As short as a decade ago, City was an established and respected member of England’s top flight yet never strong enough to challenge the big guns; something of a modern day Fulham. A little over a decade ago, they still plied their trade at Maine Road and Bermudian hotshot Shaun Goater was considered the club’s cult hero.
Fast forward to 2013 and a stark reminder of the influence foreign investment has had not just on City, but the way they have reshaped the face of English football forever. Maine Road was swapped for the City of Manchester Stadium (albeit well before any takeover moves), before being renamed as the Etihad Stadium, a company connected via billionaire Arab owners. Goater posters have subsided for international heroes such as Sergio Aguero and Yaya Toure. Yet more crucially, City turned investment into all important silverware, starting with the FA Cup of 2011 and the thrilling Premier League title in 2012.
Previously these types of scenarios were only available on video games such as FIFA; foreign owners can now relive this experience in real life, using our clubs as a game and taking the fans on board the ride. However, the dream can turn sour extremely quickly.
Thankfully for City fans, the Abu Dhabi consortium clouds memories of Thaksin Shinawatra’s ownership. Promising to pump millions of pounds into player recruitment, Shinawatra sole season at the helm showed a mere £21m had been put in by the Thai politician.
A spate of summer signings including Elano and Martin Petrov became a long term burden upon the finances, advertised as big money fees when in fact a large amount of any fee payable was in instalments over a number of years. Accounts showing an enormous loss coupled with continuing transfer activity put the club on the road to financial meltdown, flirting with insolvency and nearly unable to pay staff and player’s wages. Without Sheik Mansour’s intervention, Manchester City could have been a distant memory.
Portsmouth remains the most prominent example of financial games to end in disaster. After an FA Cup triumph and loyal Portsmouth fans living the dream on a journey from League Two to the Premier League, Alexandre Gaydamak sold the club to Sulaiman Al-Fahim as Pompey neared a financial crisis.
Several transfer embargos and winding up petitions later, new owner Balraim Chainrai placed them into administration. Ongoing legal wrangles have ensued and although the supporters have now gained control of the business, Portsmouth have suffered three relegations and now lie in the bottom tier of professional English football.
Next time your club is linked with investment from every corner of the earth, just think of the possible consequences. It can by all means lead to years of glory but by the same token, years of financial heartache could wipe out your club for good.
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