Earlier this year it was widely reported that Arsenal would only have a £45m transfer budget this summer, after failing to qualify for the Champions League, but the club has actually splashed out well over £100m. The authoritative Swiss Ramble explains how this was possible.
Player purchases added up to £143m (including £8m add-ons). This comprises club record acquisition Nicolas Pépé £72m plus William Saliba £27m, Kieran Tierney £25m, David Luiz £8m, Gabriel Martinelli £6m and Dani Ceballos (loan fee) £5m.
The club had player sales of £64m (including £7m add-ons), mainly Alex Iwobi £34m, Krystian Bielik £10m, Laurent Koscielny £5m and David Ospina £3m. Also picked up useful money for selling some Academy products plus a £4m sell-on for Bennacer’s move from Empoli to Milan.
What has become increasingly familiar to supporters this summer is the use of stage payments instead of paying the whole transfer fee upfront. Based on media reports and a few assumptions, we can estimate that Arsenal's cash outlay this summer was only £46m. On the other hand, the club would also not have received the entire £64m due from player sales this summer. Again, the Swiss Ramble estimates the cash receipts at £23.5m. It will not have gone unnoticed that the gross cash outlay is very much in line with the alleged £45m budget. More importantly, spreading payments allowed the club to buy Pépé.
Often the selling club will still get (most of) its cash immediately, as they sell the debt to a third party financing company for an agreed fee. Obviously, this commission then leaves “the game”, but the arrangement still works well for all parties.
It has been noted that Arsenal have a Champions League wage bill on a Europa League budget. The Swiss Ramble's estimate is that Arsenal's player purchases this summer have added around £500k a week to the wage bill, which would work out to £26m a year. He adds, 'However, I reckon that around £700k has also been taken off the weekly wage bill, i.e. £38m a year. Even though no fees were received for Ramsey, Welbeck, Cech and Lichtsteiner, their departures cut wages by around £400k a week, i.e. £21m a year. So combining transfer fees and wages, Arsenal will spend £71.7m in the first year (transfers £46m + wages £25.7m) gross, but only £10.5m net of player sales (£22.5m transfers offset by £12m wage reduction).'
So the net result of the club's transfer activity this summer in the accounts is a relatively small cost increase of £9m, with player purchases growing the cost base by £54m, largely offset by £45m reduction from sales. This will be more than offset by £57m profit on player sales.
The Swiss Ramble concludes, 'Part of the fancy financial footwork has simply been a willingness from the board to be bolder with its cash balances. In the past, it looked like the club wanted to hold enough cash to cover all future obligations, but that always looked to be overly prudent.
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