Clubs in English football's top tier have splashed out more than £1.4 billion ($2.6 billion) on new players ahead of this season.
When Manchester United agreed an £80m ($149m) deal to sign Harry Maguire from Leicester City last week, many football fans and pundits winced at the enormous price — a world-record fee for a defender.
The signing kicked off a frenzied final few days of dealmaking among English Premier League clubs before its summer transfer window — a three-month period when teams can acquire players — came to a close on Thursday afternoon ahead of the season's start on Friday evening.
Total spending by the 20 teams in the world's wealthiest division reached £1.41b ($2.62b) during the past 12 weeks, falling just short of the £1.43b ($2.66b) record set in 2017, according to consultancy Deloitte. It is the fourth consecutive summer that Premier League sides have spent more than £1b ($1.86b) combined on transfer deals. More than half the clubs broke their own transfer records on a single player.
The willingness to invest was evident across the league: champions Manchester City and newly promoted Aston Villa both spent more than £100m ($186m).
"Wherever you look in the Premier League, there is a good reason for teams to be spending," said Dan Jones, partner in the Sports Business Group at the consultancy Deloitte. "Whether it's to stay up, whether to get into Europe, whether it is to win the title, there is always a reason to keep investing."
While this may look like wild expenditure, analysis of these deals suggests the strategies employed by clubs are more rational than they first appear.
Clubs achieved record revenues last season, on the back of the rising value of broadcasting rights, which has ensured English teams have more money than ever before to replenish their squads.
The cost of the Premier League's broadcast rights in the UK has fallen, but there has been strong growth overseas, meaning the overall value of television deals will be worth £9.2b ($17.1b) during the next three years — a rise of about £1.2b ($2.2b).
And while the gross spending on transfers is huge, English sides appear to have become savvier at securing good prices for outgoing players.
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Manchester United spent £145m ($270m) on transfers this summer but partially offset this by offloading Belgian striker Romelu Lukaku to Italy's Inter Milan for a reported €80m ($139m), just hours before the window closed.
According to Deloitte, the net transfer spending of Premier League clubs — purchases minus sales — was 12 per cent of overall revenues, a slight fall from last year, at £625m ($1.16b). This was the lowest amount in a summer transfer window since 2015.
While clubs are making savings from transfer fees overall, Deloitte predicted that wages, the largest expense for most clubs, would increase at a greater rate than their income, amounting to more than 60 per cent of overall revenues.
The relatively sober spending on transfer fees by Premier League clubs can be explained by regulatory factors, such as so-called Financial Fair Play rules designed to stop clubs splashing out beyond their means.
Also, one traditionally big spender, Chelsea, is subject to a one-year transfer ban imposed by Fifa, football's global governing body, for past breaches of transfer rules that prevent the London team from signing players this season.
Still, there remains a vibrant market for players, as clubs are incentivised to keep building their squads rather than hoard cash and achieve even larger profits.
Manchester United has a net spend of well over £600m over the past six seasons. Though the club can comfortably afford this because it has the third-biggest club revenues globally and the highest in the Premier League, it has struggled to replicate its financial dominance on the pitch, finishing in a lowly sixth place last term and failing to qualify for the Champions League.
In response, the club has adopted a new transfer strategy as its seeks a return to form. Omar Chaudhuri, head of football intelligence at 21st Club, a football consultancy, described the plan as "looking for players who are on the up, hungry, willing to improve". This is rather than seeking to buy superstars such as Frenchman Paul Pogba, bought from Juventus in 2016 for a then-record fee of up to €110m ($190m).
United manager Ole Gunnar Solskjaer said earlier in the summer that the club intended to overhaul its squad over time with younger players. "We've got to be patient, because it's a long haul and it's very important we get the right ones in. We can't just jump on a different path when you hit a hurdle," he said.
This reformed approach follows that of Liverpool, which in recent years has sought to identify the best players from lower down the league table, such as Andy Robertson from Hull City and Georginio Wijnaldum from Newcastle United.
The strategy appears to be paying off: Liverpool won last season's Champions League, the most prestigious prize in Europe. Rather than tinker with a winning team, the club has eschewed any first-team alterations and made a net profit of roughly £30m ($55m) in this transfer window.
"Our window was checking options, thinking about it and making decisions," manager Jürgen Klopp told reporters on Thursday. "If nothing happens, it's because it was the right option for us."
Unlike Liverpool, Manchester United so far appears willing to sign relatively unheralded players and still pay high fees.
"United have definitely tried to pluck the best players from teams lower down the league," said Chaudhuri. "Harry Maguire is the standout player at Leicester, Aaron Wan-Bissaka at Crystal Palace [who was signed for £49.5m/$92m]. Clearly, [the team has] struggled defensively over the past year or so. They are addressing their problems. But there have been cheaper signings from other bottom-half Premier League clubs than other top six clubs have managed."
But with more money than ever before, teams comfortably have the financial resources to spend big. There have been large investments by clubs seeking to break into the Premier League's top four positions, which provide entry to the Champions League, where more than €2b ($3.5b) will be distributed to competing sides this season.
The highest-spending club was Arsenal. It paid £155m ($288m) for six players in an effort to rejuvenate the squad, after several disappointing seasons in which it has failed to qualify for the Champions League since 2016. Clubs with ambitious owners, such as Everton — led by British-Iranian billionaire Farhad Moshiri — and Wolverhampton Wanderers, backed by Chinese group Fosun, also splashed out, spending £110m ($205m) and £80m ($149m) respectively.
Sides lower down the division also had reason to loosen their purse strings. Aston Villa spent roughly £125m ($233m) on transfers, as the club seeks to hold on to its new Premier League status after promotion last season. The Birmingham club, which was taken over in July 2018 by Egyptian billionaire Nassef Sawiris and Wes Edens, co-founder of Fortress Investment, is guaranteed £170m ($316m) over three years for re-entering the top division after being absent for three years.
But new signings are no guarantee of success: Fulham spent more than £100m ($186m) on transfers before the start of last season, but still dropped out of the top tier to which it had been promoted the season before.
Heavy investment among newly promoted sides is a recurring phenomenon. New entrants to the Premier League spent close to 30 per cent of revenues on transfers between 2012 and 2017, compared with just 19 per cent for the established top six teams, according to 21st Club.
Meanwhile, feverish transfer activity is taking place at clubs in the other four of the "big five" leagues in Europe: Spain, Italy, France and Germany.
Fees paid in La Liga, Spain's top division, have surpassed £1bn this summer for the first time. Just three sides — Real Madrid, FC Barcelona and Atlético Madrid — account for two-thirds of this spending. This could increase further because, unlike in England, the transfer window in Europe continues to be open until the start of September.
Deloitte's Jones said the spree in Spain was partly due to La Liga's new three-year domestic broadcasting contracts, worth €3.66b ($6.34b), which represent a near 20 per cent increase from the previous deal, as well as a determination from the country's top clubs to return to the top of European competition last season dominated by Premier League sides.
"The Spanish clubs have had a great run in the Champions League but had — by their standards — a slight blip last year," said Jones. "I'm sure they are keen to get back to the top of the tree in Europe, as well as fight it out domestically."
Written by: Murad Ahmed
© Financial Times