Chelsea and Newcastle rely heavily on external investment, Man Utd and Tottenham pile up loans, and Liverpool use team profits to reinvest.
Tottenham is building a new stadium that will cost $1.5 billion, while Chelsea has just spent $667 million on transfers for the 2022-23 season despite having a total revenue of only $619 million. The net transfer spending of the 20 Premier League teams in January 2023 was $920 million, accounting for 79% of the spending of teams in Europe's top five leagues. Why do they have so much money, and where does it come from?
The answer varies from team to team. The top teams in England have four spending styles, with two main sources of funding: internal or external.
Owner Todd Boehly is covering most of Chelsea's operating budget. Photo: Reuters
In accounting, gross profit (EBITDA) is the difference between revenue and the cost of sales, excluding expenses such as interest, taxes and depreciation. In football, this depreciation is essentially the cost of recruiting players. A team with a large gross profit means they have plenty of internal funds to buy players. Otherwise, they would have to borrow from financial institutions or owners.
Liverpool has the third highest gross profit in the league, at $123 million . Under Jurgen Klopp, Liverpool has always made a profit of more than $96 million each year, excluding 2020, which was affected by Covid-19. Profits from selling Liverpool players in the 2017-2021 period also amounted to $352 million, second in the league after Chelsea. Meanwhile, Man Utd's profit was only $104 million.
Liverpool’s internal cash flow is also high for that reason, as they reinvest profits without needing money from the owners. FSG’s net investment in Liverpool over the past five years is -$47 million, meaning the owners have received a profit of $47 million on what they spent on the team. Over the same period, Man City’s owners spent $104 million on the team, and more in previous years.
Liverpool is a well-run business, but that doesn’t necessarily mean stability. To keep their stars, they have increased their wage bill to $468 million, now the second highest in the Premier League, behind only Man Utd at $491 million. Compared to six years ago, Liverpool’s wage bill has increased by 76%, higher than the 63% increase in revenue. If this situation continues, Liverpool will soon have to rely on external sources of capital.
Coach Jurgen Klopp during the match between Liverpool and Leeds at Elland Road on September 12, 2021. Photo: Reuters
Man Utd and Tottenham are such examples, with total debts of the two teams being $812 million and $1.087 billion respectively . Large debts mean high interest costs - around $30 million per year, eating away at the team's gross profit.
Man Utd, with the highest wage bill in the league and a transfer spending of nearly $1.1 billion over the past five years, cannot survive without borrowing. The money invested in players has not paid off on the pitch, as the team just won the League Cup after five years without a trophy. They have also spent $159 million of their profits over the past five years to pay their owners, the Glazers. No owner has benefited more from an English club.
Tottenham maintain a $267 million wage bill and a healthy transfer budget, so their debt is largely for the new stadium. That debt is long-term, and is expected to generate a stable high income in the future, so it is not a big problem.
Man City is run in contrast to Man Utd, where the owners pour money into the team, instead of making a profit . They have the highest gross profit in England, at $167 million, showing abundant internal resources. Man City's financial debt is only $82 million, equivalent to 10% of the debt of the neighboring team. This is the result of an investment of more than $1.6 billion by Abu Dhabi's owners since buying the team in 2008. This amount is decreasing because Man City can "support itself".
In the past 10 years, Man City’s owners have spent $874 million on the team, while the Glazers have made $197 million. The American owners see Man Utd as a money-making machine for them, while the Abu Dhabi owners see success on the pitch as a way to assert the UAE’s position. And they have succeeded, as Man City is the strongest team in Europe, with the world’s leading financial resources.
Man City players celebrate their victory over Inter in the Champions League final at Ataturk Stadium in Istanbul, Turkey on June 11, 2023. Photo: Reuters
Chelsea and Newcastle are trying to learn from Man City by investing heavily today to wait for the results later . The combined profits of these two teams are not high, at 35 million USD and 31 million USD respectively, so that amount is not enough to spend on player transfers, not to mention interest payments.
Former owner Roman Abramovich spent $747 million on Chelsea between 2012 and 2021, before he had to sell the team to billionaire Todd Boehly. Abramovich wrote off more than $2 billion in debt to Chelsea before the team was taken over by American owners.
In the 2022-2023 season, Chelsea will spend up to 667 million USD on transfers, thanks largely to investment from Boehly and Clearlake Capital. This amount is considered debt, but Chelsea does not have to pay interest because the owners expect to receive a stable source of profit in the future. Clearlake Capital is considered a cautious investment fund, so experts are surprised that they accept the risk of pouring money into Chelsea at this time.
Newcastle is different, when they achieved positive results with a place in the Champions League next season, although the Saudi Arabian owners have not spent too much money on investment. But in the summer of 2023, the team may strongly strengthen its personnel for the most prestigious arena in Europe.
It is difficult to say which spending style is the most reasonable, because each option has its positive and negative points. For example, a safe option like Liverpool will be risky, when player transfer fees increase so rapidly that they cannot keep up. Or a risky option like Chelsea contains risks if the results on the field are not commensurate.
However, it can be affirmed that Man City is in a position that other teams crave, both on and off the field.
Xuan Binh (according to Athletic )
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