One of UCFB’s our programme leaders has given a business-focused insight to the recent January transfer window.

Christopher Winn, programme leader for MSc Football Business (link), has spoken about the billions spent across this season, and what effects this can have on clubs, particularly in relation to UEFA and Premier League regulations.

Christopher said: “This January’s transfer window has seen an unprecedented level of gross expenditure, taking clubs’ total outlay for the 2022-23 season close to the £3bn mark.

“With this season marking the commencement of the latest Premier League broadcast rights cycle, now worth in excess of £10bn to Premier League clubs over the three-year cycle, the ability to invest in playing squads to compete towards the top of the table and associated European qualification, or indeed the incentive to safeguard top-flight status, has never been greater.”

Christopher then went on to talk about the media focus on Chelsea’s spending in the transfer window.

He added: “Much has been made of Chelsea’s large expenditure this window, with total gross expenditure of almost £300m.

“To put this in context, a similar amount was spent by all Premier League clubs in the January 2022 transfer window.

“Many have questioned how Chelsea can do this without breaking financial regulations such as UEFA’s Financial Sustainability Regulations and the Premier League’s Profitability and Sustainability Regulations.”

“However, both the accounting treatment, as well as the cash timing of such transactions, need to be considered.

“When a player is purchased by a club, the cost of the player (plus any attributable costs such as agents’ fees) are recognised over the life of the player’s contract, a process known as amortisation.

“This means that only a fraction of the player’s cost is expensed annually - this being the element that is factored into regulations such as those described above.

“For example, in signing Enzo Fernandez for a reported £107m fee on an eight-and-a-half-year contract, only £12.6m cost will be recognised in Chelsea’s profit and loss annually, as opposed to the full £107m up front.”

“Naturally, this has raised questions as to Chelsea’s manipulation of a potential loophole in the financial regulations - as perceived excessively long contracts will reduce their annual expenses based on the above accounting treatment.

“UEFA have, in recent days, stated an intention to clamp down on such behaviour as of summer 2023, by imposing a five-year limit on player contracts for amortisation purposes.

“It appears that clubs would still be able to offer longer term deals, but the cost of the transaction would not be allowed to be spread over longer than a five-year term, limiting the extent to which the accounting treatment can be manipulated to reduce costs from a regulatory perspective.

“Of course, there remains the actual cash element of such transactions, but in reality, it is rare for clubs to pay large transfer fees in one go up-front.

“Whilst Chelsea have spent close to £300m this window, this would not have all left the bank account immediately.

“It’s common practice in football to structure deals into instalments, spreading payments out and enhancing the club’s short-term liquidity in the process.

“As long as cashflows are carefully monitored and planned, what appear large outlays on paper are often timed to precision to balance against the club’s expected cash inflows over several years.”

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