©2018 by Esteve Calzada. 

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Brexit, Premier League’ first own goal

July 17, 2016

The unexpected UK exit from the EU puts at the borderline the most powerful football league in the world for the first time and translates into an excellent opportunity for LaLiga

 

On June 23rd a "match" not organised by the Premier League was held in Great Britain and its consequences could be a huge blow for the admired English clubs tournament. By voting in favour of "Brexit", British fans did a disservice to its favourite competition, probably in the best time of its history. At a sporting level, the revolution on the benches will mean big changes in the most important teams in the tournament. The arrivals of Guardiola, Mourinho and Conte to Manchester City, United and Chelsea respectively, with the first full season of Klopp at Liverpool and the signing of Ronald Koeman by Everton, will translate into new sports projects at top Premier League clubs.

And all this at a time of top economic prosperity, with the entry into force of the new TV contracts, which will bring English sides a total income in excess of 10 billion euros over the next 3 years (51% more than in the previous cycle), meaning an average of no less than 167 million euros per team and season. This means that the team who earns the most will receive 184m € every year and the one earning the least a whopping 121m€.

Therefore, with most exciting season in recent years just few weeks ahead, Brexit victory could provoke a major setback at the Premier League, depending on how events develop at a regulatory level. Let's see…

 

The depreciation of the pound, main short-term issue

One of the first consequences of the result of the vote was the major hit suffered by the sterling pound, which value since June 23rd went down 9% compared to the euro. If we add the effects of the devaluation that had already taken place before the vote, we can notice that signing players out of the UK is almost 20% more expensive for the English clubs than in the previous summer. For example, if Manchester United could manage to sign the most wanted player, Paul Pogba, say for 110 million euros, when calculating in pounds the Red Devils would be hit with 13 million pounds of extra cost in transfer fees. And then add a similar additional cost in wages if a 5 year contract would be signed.

 

 

 

Therefore, the depreciation of the pound translates immediately into a cost increase for EPL clubs when signing overseas players (last summer signings outside England accounted for half of the investment). And at the same time it means greater economic strength of the other European leagues to “fish” in England thanks to a stronger euro currency.

 

On the other hand, and considering that an exit from Europe could result in severe restrictions for European players to obtain a permit to work in England, and assuming that such restrictions do not affect players already in the UK at the time of its entry into force, we may find ourselves before a record number of players moving to England this summer. Although it may seem a contradiction, it is a real possibility even with the English sides buying more expensive.

 

At mid-long term, even a greater impact

While we wait to find out about the new rules that end up being approved - for which we will have to wait no less than a year - the prospect that European players become truly foreigners should terrify the executives working in the EPL and its clubs. The arrival of non-European players at the Premier is regulated through the granting of a work permit, which only the players who regularly play with their national team or those who can demonstrate objectively before a court "extraordinary quality" can get. In other words, for the purposes of the EPL, Spanish, French or Italian players would be the same as Brazilian, Argentinian or Colombian.

 

This change would also significantly affect the youngest players, since English clubs could no longer attract talent in Europe of less than 18 years old (instead of the current 16). In addition to the impediment of signing academy players from main European leagues, the strictest version of the new regulation would have a significant impact on three fronts.

 

Firstly, it means a loss of talent recruitment potential for EPL sides. Hence, players like Payet, Kanté or Pelle could not have arrived at the English competition...

 

 

 

 

...because they would not reach the minimum international matches required to obtain the work permit in England. Secondly, the severe reduction in the number of players eligible to be signed could result in a significant increase of the cost of each player (inflation), with many English clubs looking for a few players, and many of them English. No wonder spending on signings by EPL accounted for almost half of investment of top 5 European leagues last season. 1,4 billion euros in total to be spent on fewer players available.

 

Finally, and perhaps in the most extreme and catastrophic vision, the reduced presence of the best talent in the world could end up resulting in stagnation or even decline in the value of television rights in the round of negotiation of the following three years (2019-22).

 

The great opportunity for LaLiga

These circumstances could not have arrived at a better time for LaLiga, whose clubs have seen their purchasing power to sign new players has almost doubled in just two years, thanks to the new television contracts, by which each team (excluding Real Madrid and FC Barcelona) earn an average of 55 million euros in the 2016-17 season.

 

In addition, LaLiga clubs could have a better chance to have access to top players that currently tend to go to the Premier League and therefore negotiating players’ wages without inflationary pressure from the UK. Furthermore, Spanish clubs should be in a better position to retain their talent, since the improvement of their accounts would be coupled with a stronger negotiation power with the absence of usually whopping amounts in the contracts offered by English sides. 

 

Finally, an improvement in both the recruiting capacity and the retention of the best players should provide an additional revenue boost in future TV contracts.

 

All in all, the most optimistic version of the consequences of Brexit means an excellent opportunity to narrow the gap with English Premier League. So why not being optimistic?

 

 

 

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