Foreign leagues profit from Premier League wealth.

The UK has long been a country that imports more goods than it exports. For decades we’ve been buying more food, cars, and other consumer goods from the rest of the world than we've sold. We tend to purchase more than we produce, and in recent years this has also become true of another type of commodity: footballers.

EPL clubs are rolling in the money received from the lucrative sale of TV broadcasting rights, sponsorship and match-day revenue. A large proportion of this wealth is being used to buy players for exorbitant transfer fees and service huge wage bills. This season, English clubs have paid nearly €2 billion in transfer fees, of which €1.1 billion has been spent on imported players. Income from player exports is significantly less – €0.4 billion – leaving English clubs with a net overseas expenditure of €0.7 billion: another large trade deficit.

English football has been running a trade deficit for some time. In the last six seasons, clubs have spent a total of €4.6 billion importing players, receiving only €1.4 billion in return. Since 2012, the EPL has accumulated a transfer trading deficit of €3.2 billion: that’s an average of €0.5 billlion per season flowing out of the country. The "Big 6" clubs – United, City, Arsenal, Chelsea, Liverpool and Spurs – account for nearly €3 billion (65%) of player imports and €1.1 billion (83%) of player exports since 2012. Of the Big 6, only Liverpool have produced a surplus.

Where is all this money going? Figure 1 below shows the transfer trade relationship between the EPL and other major leagues around Europe and beyond. Spain has been the EPL’s biggest trading partner in the last six years, with nearly €1bn spent on bringing players from La Liga clubs, and €0.6bn received from players moving in the opposite direction. However, England’s biggest deficit is with France: €0.9bn has flowed from English to French clubs in transfer fees since 2012 with only €0.2bn being received in return.

Figure 1: Total transfer fees paid (imports) or received (exports) by English clubs for players bought or sold to clubs abroad since the 2012/13 season. Over the last six seasons English clubs have generated a €3.2 billion deficit in overseas player transfers.

How does England’s transfer trade deficit compare with other countries? Figure 2 gives the total value of players imported and exported for each of the major European leagues, the smaller European leagues ("rest of Europe") and the rest of the world. The bottom line indicates the net trading surplus (or deficit) for each country or region.

The accumulated English transfer deficit since 2012 is nearly fifteen times greater than that of German clubs, who have run up a deficit of €0.2 billion over the same period. Italian clubs are effectively in balance, spending as much as they receive, while the Spanish, French, Dutch and Portuguese leagues have produced a net transfer surplus. Dutch and Portuguese clubs in particular have been running a profitable trade in player exports, generating €0.6bn and €1bn respectively from player exports while paying significantly less for imported players.

Figure 2: Total spent, in €billion, on imported players (columns) or received for exported players (rows) for each of Europe's top leagues. Rest of Europe (RoE) encompasses all other European leagues; rest of world (RoW) encompasses all non-European clubs. 

Since 2012, nearly a third of Spanish overseas transfer spending has gone to English clubs, with about a sixth going to their Portuguese neighbours, and a tenth to South American clubs. Real Madrid and Barcelona account for €1bn, over half the value of all Spanish imports. However, they also generated in €0.8bn in exported player sales, with Real Madrid – somewhat surprisingly – almost breaking even. The remaining Spanish clubs produced a net surplus of €0.3bn.

France has a €0.2bn net trading deficit with Spain, although that could be put down to a single transfer: the €220m paid by PSG to Barcelona last summer for Neymar. Indeed, PSG have spent a total of €0.8bn on imported players in the last six seasons, accounting for nearly two-thirds of the total value of all players imported to France. However, unlike Real Madrid and Barcelona, PSG’s player sales abroad were only €0.2bn. If PSG were excluded, France would have the largest trade surplus of any major European league.

German clubs have spent a total of €1.2bn on imported players, with Bayern Munich accounting for a quarter of the value of players imported and just under a sixth of exports. German clubs are the biggest importers of players from smaller European leagues, bringing in nearly €200m worth of players from Switzerland and the Ukraine alone over the last 6 years. Italian clubs recruit broadly from across Europe and South America, but principally sell their players to clubs in Italy, France, Spain and Germany. 

Portugal and Holland have both profited from the international transfer market. Dutch clubs have imported only €40m of players in the last six years, while exporting €600m: a testimony to the quality of Dutch youth development. Portuguese clubs spent just over €100m importing players from Spain and South and Central America since 2012, but have received over £1bn from selling players abroad. A significant fraction of the exported players were not Portuguese nationals, indicating the success of Portuguese clubs in identifying and developing foreign talent.

Are English clubs being held to ransom?

The most recent publication of Deloitte’s Football Money League, which ranks clubs by their total revenue, emphasizes the wealth of the premier league. There are five English clubs in the top 10, and ten in the top 20. With their financial fire power so clearly evident, are Premier League clubs being milked by foreign clubs looking to sell their players at premium prices? 

This is difficult to assess, but there is some evidence. The median transfer fee paid by EPL teams (for transfers in which there was a fee) has more than doubled over the last eight years, whereas transfer price inflation has been far more sedate in other countries. So unless the quality players bought has also increased, it would appear that transfer market prices are rising faster for English clubs than those in other countries. 

EPL clubs spent nearly £400m last month, smashing the previous record for the January transfer window. With fierce competition at both ends of the table, EPL clubs are willing to spend heavily to survive and succeed. Managers may feel they must “use it or lose it” when it comes to the funds at their disposal, with “lose it” often also referring to their jobs. However – as a number of analyses have shown – emergency mid-season spending does not improve results. Given the overcooked prices, and the fairly low success rate of new players, perhaps club owners and directors would be better off squirrelling away some of their capital away for a rainy day.