What does the transfer window mean for this Premier League season: The empire strikes back?

Football is back…

After the international break, the Premier League is back. I start every season with the same hope: that Stoke City will not be relegated. Any other outcome is a bonus. In recent years the fact the club has been in the Premier League has reduced my concern somewhat, I was more nervous when we were in what is now League 1 as the trapdoor to non-league football was, in my world, only a couple of bad seasons away.

The start to the season has done little to allay my fears, although I believe we must have used up our share of bad refereeing decisions already, but the competition starts again with the transfer window now closed. It feels to me as though Stoke City had a good transfer window and I am looking forward to seeing our new players play at home to Tottenham Hotspur tomorrow – hoping Wilfred Bony will establish himself as a Stoke City centre forward to rank alongside John Ritchie and Freddie Steele. But this set me thinking, what can we glean from the transfer window about the likely nature of the season ahead especially in the context of my previous blogs on the changing competitiveness of the Premier League?

…after a truly spectacular transfer window…

The transfer window was truly spectacular: around £1.2 billion was spent by Premier League clubs, a new world transfer fee record was set by Manchester United in signing Paul Pogba and 13 clubs broke their transfer fee records, including Tottenham Hotspur late into the deadline day evening. Total spend is hard to be definitive about but this window has seen gross spend around 50% higher than last year and almost double the spend in 2013, only 3 years ago. (I have sourced my data from The Times newspaper on the 1st and 2nd September).

…with behaviour driven by more than extra revenue…

The new television deal has provided clubs with more money to spend and this was undoubtedly a factor in encouraging so many clubs to break their transfer records. But this is not the only factor at play. To understand the drivers we need to look at spending in more detail to understand the motives of individual and groups of clubs.

…as the Empire strikes back…

Although the overall value of money spent in the transfer window was spectacular, the big story was the activity of the “big” 4 (Arsenal, Chelsea and the two Manchester clubs) and the “big” 6 teams (adding Tottenham Hotspur and Liverpool). With apologies to Leicester City, these groups have dominated the Premier League in recent years.

Last season was clearly a shock to the system and the response appears to be one of making sure that there will be no repeat with the 4 teams accounting for 45% of gross spend (43% of net) and the 6 for 57% (55%). Manchester United were £10 million shy of their highest net spend in the last 5 years and the rest of the “big” 4 all exceeded their highest figure in that period, Arsenal by more than two times.

And the money has been spent on quality. I have previously written about the distribution of “elite” players, playing for the top 10 FIFA ranked countries plus England and Wales, and how shifts in the mix help to explain why the Premier League has become more competitive in recent years. This window saw the reversal of the recent trends toward a more even distribution of elite players:

·         The “big” 4 increased their share of elite players from 32.5% last year to 39.2%, only just behind their 6 year high of 41%;

·         The “big” 6 share has gone from 50.6% last year to 54.1% this year;

·          The share per club across the rest of the competition is more evenly balanced than in recent seasons with the exception of Everton which has moved ahead of the pack after a strong transfer window.

It does appear that the wealthiest clubs have really pulled the stops out in this transfer window: the impact of Leicester’s remarkable season last year continues to reverberate around the Premier League.

…in a challenging market.

Unsurprisingly given the spending figures quoted above, the 2016 transfer window was one in which the average spend per player went over £8 million. This is close to a 60% increase on 2015 and more than double the 33.5 million average in 2011. With wealthy teams chasing elite players an increase in the price paid was almost inevitable.

But the increase in the average price paid may not just reflect the increased resources of Premier League clubs and the desire of the richest teams to increase their competitiveness – there are signs that the supply of talent may be reaching its limits. There were around 150 transfers in during this window, around 10% down on the last two summer windows.

The sense I had watching Sky TV’s deadline day coverage was that clubs were keen to spend more but there was a shortage of available talent. This is borne out by the numbers of elite players. On my definition, there will be 168 of them in the competition this season, a very similar number to in recent seasons, but more concentrated in the richer clubs. It does seem that there are only so many players to buy of the requisite quality and increased resources can only go so far in attracting new players. With a new television deal in Germany it may well be that competition will become even fiercer in future windows and spending records may tumble again.

And what of the season ahead?

As we all now know from the EU referendum campaign, forecasts by economists are of no value. So you should treat the next section with great care; an economist trying to forecast football…please!

Nevertheless, recognising my limitations, the outcome of the transfer window does suggest to me that the most likely consequence for the season ahead is the return to dominance of the richer teams. For the first time in a while, extra resources have been used to strengthen their playing squads relative to the rest of the competition. We might therefore expect to see more predictability at the top of the classification. By contrast, definitely not what I want to see given my introductory remarks, we should expect even more competition between the rest of the teams and hence a very unpredictable outcome – I predict this season is not for the faint of heart. Watch out for Everton with a new manager and stronger squad.

But don’t forget Leicester City. Last season lingers in the memory and the club appears to have its own way of doing things. Most interestingly, the transfer window dealings and their retention of Riyad Mahrez means they have a unique set of attacking players in Mahrez, Musa and Slimani from outside of the world’s top 10 country teams to complement Jamie Vardy. Will we be sitting back a year from now to discuss how Leicester City’s retention of the Premier League title was built on the innovative and ground breaking transfer strategy of finding value away from the crowd?

@MarkGregoryEY

markgregoryeconomics.ey.com

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