Strong Sterling-Euro rates earn premiership football clubs £85m
English premiership football clubs have benefited from a strong GBP/EUR exchange in the latest transfer window (1 July -1 September) saving a total of £85m on the £483m spent on buying players from European clubs.
Analysis from corporate FX broker Foenix Partners shows that acquisition costs for players from European clubs have been up to 17% cheaper since the transfer window closed last year on 1 September 2014.
Since mid September 2014, GBP/EUR has steadily risen from below 1.2400, reaching a high of 1.4415 in July 2015 and gaining more than 20 cents (17%) in 10 months. As a result, UK clubs buying players in Europe have enjoyed a sharp fall in the sterling costs of their European transactions.
However, when selling players to European clubs the situation has reversed. When Manchester United bought Argentinian winger Angel di Maria from Real Madrid on the 26 August 2014 the cost was £59.7m at a rate of 1.2558. When the club sold the same player to Paris St – Germain for just £44.3m on 6 August not only did they lose £15m on the player, but they are also likely to have lost a further £7.5m (exact figure is £7,575,300) due to the exchange at the time.
Although payments to the top UK clubs playing in the UEFA Champions League have risen dramatically for the 2015/2016 season, increasing from €37.4m to a maximum of €54.5 (a hike of 46%), the exchange rate from the date of first round matches in 2014 (16-17 September 2014) to today has dropped 11%. As a result English clubs will lose 11% on the currency exchange as a result of the weaker Euro.
Richard de Meo, managing director of Foenix Partners, said: “The ongoing uptrend has punished anyone who was tempted into booking forwards as they would have subsequently missed out on favourable moves thanks to further Euro weakness. Yet when the rate is above 1.40 we are seeing clubs being strict about currency hedging to protect the cheaper costs of players bought from European clubs in this transfer window.
“Most football clubs don’t pay the total transfer fee in one go and will typically pay over a schedule of instalments lasting two to three years in addition to any performance related fees. Given the fluctuating currency markets it has become even more important than ever for football clubs to carefully manage their FX exposure.
“Ongoing questions about the underlying Eurozone economy and expectations for the first UK rate rise being brought forward have all played their part in GBP/EUR price hike. However, the key driver has been the ongoing Greek saga with its default on IMF debt, staggering political brinkmanship and bungled repayment deadlines all causing sustained Euro weakness.”