Weak pound takes toll on premiership transfer business
For the second consecutive season, the weakened Pound is having an adverse impact on English Premiership club finances as the 2017 summer transfer window closes.
The current value of UK Sterling, which plummeted to its lowest level against the US dollar since 1985 after the 2016 vote in favour of leaving the EU, means that English clubs have had to shell out significantly higher sums to conduct their transfer business. According to London-based foreign exchange specialists, Global Reach Partners, one key factor behind the record £1.47bn spent by Premiership clubs this summer is the decreased buying power of the weaker Pound.
Research by Global Reach Partners suggests that the expenditure of clubs in England’s top tier is around worth £400m less than it would have been two years ago due to the lower valued Pound.
In 2015, the last summer transfer window before the pro-Brexit vote, Premiership clubs spent around £870m. At that time the Pound was worth approximately 1.35 Euros, which made the value of these fees equivalent to over 1.117bn Euros. Two years later, with a deflated Pound now worth approximately 1.09 Euros, the £1.47bn spent by Premiership clubs equates to only 1.6bn Euros, significantly lower than the nearly £2bn it would have been worth in 2015 exchange rates.
Mark Smith-Halvorsen, CEO at Global Reach Partners, said: “As we have seen from the record-breaking amounts spent on summer transfers, the English Premiership remains the world’s richest football league. While clubs are increasing overall spending from previous seasons in real terms, one of the reasons behind this is the weak value of Sterling which means more Pounds are needed to secure the best talent within football’s international market place.
“The dramatic fall in the value of the Pound against the Euro and a number of other foreign currencies since the June 2016 Brexit vote is having significant impact on all UK clubs which conduct transfer business. It also means they must pay a higher premium to stop leading players being lured to European and other foreign leagues.
“With uncertainty over the future direction of Brexit negotiations, the low value of the Pound could continue for some time, creating an on-going financial challenge for English Premiership clubs which want to keep investing in top international talents.”
Currency fluctuations are an on-going concern for football clubs. While the value of Sterling against the Euro hit its lowest level since 2013 after the Brexit vote, the average monthly move between the two currencies is around four per cent, equating to upwards of £200,000 on a £5m transfer fee.
Mark Smith-Halvorsen continued: “There are ways to mitigate some of the costs with foreign exchange specialists like ourselves working closely with a number of football clubs to help reduce their exposure to fluctuating currency markets. We can assist them by offering access to a huge range of major and local market currencies and by providing same day settlements to ensure efficient and timely transactions. Clubs can also put in place a foreign exchange trading strategy for longer term transfer payments if they are concerned that future currency fluctuations might end up costing more in transfer fees.”
Name: Bill Shaw
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PLEASE NOTE: Source for GBP/Euro exchange rates: Bloomberg.