The Pound, The Window, The Premier League

Only hours until the transfer window opens, and fans and managers alike will be hoping for those vital mid-season signings that will rejuvinate their season. But they should prepare themselves for disappointment. The transfer market is facing up to possible stagnation this winter with so many clubs, already heavily indebted and facing the consequences of the economic downturn, also having to contend with a weak pound which is making European talent increasingly expensive and making their own assets cheaper and more attractive to foreign clubs.

On the final day of the last transfer window, the pound was valued at an already relatively low €1.24 but is now worth only €1.04. In comparison, the British currency was worth €1.36 12 months ago, and €1.47 18 months ago. A long term trend that, although isn’t likely to threaten the Premier League’s status as the richest league in the world, is likely to alter the balance of transfers between the UK and mainland Europe. It is a truism in economics that a weaker Pound Sterling will lead inevitably to a fall in imports and a rise in exports. Football will be no exception.

In Leyman’s term, the €42.5 Million outlay which Manchester City spent on Robinho in the summer converted into £34.22 Million at the time but would today translate into £40.8 Million. A startling £6.6 Million pound difference. Although it may not deter British clubs completely from spending, with so much money at stake they will be more wary of splashing out on talent from overseas in the current economic climate.

Arsene Wenger categorically declared on Boxing Day that he wouldn’t be signing any players in the forthcoming window but he is unlikely to be alone. It could well come to those much maligned foreign owners who do not operate in Sterling, such as at Manchester City, to rejuvenate the market.

This also goes some way to explaining why Real Madrid, amongst others, are suddenly coveting Premiership talent such as Lassana Diarra, Ashley Young and Jermaine Pennant. It should also be noted that, in Madrid’s eyes, Cristiano Ronaldo is becoming cheaper by the month.

The slump in the pound is also affecting teams who have arranged previous overseas transfers with installment payments. For example, Tottenham’s acquisitions of Luka Modric (€21m from Dinamo Zagreb) and Roman Pavluychenko (€17m from Spartak Moscow) are becoming increasingly expensive and will continue to deplete their transfer budget for the January window.

The pound’s devaulation must also be deemed important because it means that the wages offered in Britain are suddenly less attractive to European players. Fabio Capello’s contract which is believed to be worth £6 Million over four years, which is paid on pounds but banked in Euros, has devalued by €1.2 Million since it was signed just over a year ago.

The weak pound in combination with the credit crunch and a less affluent fan-base (which could manifest itself in lower attendances, lower merchandise sales and, most pertinently, the threat of a lower than expected Sky TV deal) could lead to a more stringent transfer window than usual this winter.

The flip side of all this, of course, is that this January English clubs are more likely to buy players from each other. Boosting the prospects of lower league footballers to be signed by bigger clubs, aiding the financial woes of troubled lower league clubs, and possibly increasing the number of English players in the top flight. Perhaps giving Fabio Capello a silver lining after all.

Conversion Rates
01/06/2007 - £1 - €1.47
01/01/2008 - £1 - €1.36
01/06/2008 - £1 - €1.27
Today - £1 - €1.04