by Sterling is down… and we’re not talking about the Chelsea forward’s lackluster form against England during the international break. The British pound has seen its value slide significantly in recent days, briefly hitting an all-time low against the US dollar before rallying from its lows. The shockwaves of Chancellor Kwasi Kwarteng’s mini-budget, the announcement of the new government’s changes to economic policy, are being felt across the economy. In the case of the country’s national sport, the events of the past few days may just be accelerating a trend that was long established. The sporting gold rush that is American money flying into English football may have only just begun.
Understanding what this means for football means at least studying the basics of what caused Kwarteng’s “financial event” on Friday. There was a quick reaction from the financial markets. Sterling plummeted after the chancellor pledged tax cuts at a time of rising inflation. In response, the Bank of England tried to ease the immediate market panic by committing to a £65bn package to buy back government bonds, although this left the pound hovering at just over a dollar. In addition, the bank looks set to raise interest rates to cushion the impact of Kwarteng’s tax cuts for top earners, a move that would have a significant impact on the country’s homeowners while seemingly putting the central bank at odds with the government . In technical terms, things are a big huge mess.
Financial uncertainty won’t hurt the Premier League
The UK economy may be on a crisis footing, but as the pound falls, so do opportunities for foreign investment, including that great bastion of British soft power, the Premier League. Joe Ravicz, the banker who helped Roman Abramovich complete his blockbuster sale to Chelsea earlier this year, offered a bullish assessment of the state of play earlier this week. “No one is suffering because of the falling pound when it comes to English football,” the Raine Group co-founder told the Forbes Global CEO Conference.
Britain’s economic woes will not, Ravitch said, prompt a rush by investors to cash in on the UK football market. Indeed, his recent experience suggests the English game remains an enticing prospect. “Regardless of the currency, these are huge opportunities,” he said. “Based on the diverse and wide range of buyers we’ve had for Chelsea, I think that’s proven.”
Manchester United face unique challenges
The collapse in the value of sterling brings some complications to the UK game, including Manchester United, which saw the value of its debt rise from £419.5m to £514.9m in the 12 months to the end of June; which they partly credited to the pound’s deterioration against the dollar. In that regard, the balance sheet will look less attractive for United, which has traded on the New York Stock Exchange for more than a decade.
United have publicly stated their desire to redevelop Old Trafford, if these plans go ahead the debt burden on the club will increase significantly, although in the process it would give the club an asset from which to raise significantly his income. “It’s a challenge for clubs that have dollar debts,” says Kieran Maguire, the expert behind the Price of Football podcast, book and website.
But United’s circumstances are unique. There are factors that are more universal, for example that there are outstanding transfer fees to be paid, often in euros. The pound’s fall against its European counterpart was not as deep as the dollar’s. Indeed, the euro fell below the $1 mark earlier this month after Russia said it would cut off its main natural gas pipeline to the continent.
Some clubs will need to find a few more pounds in their wallets to pay off their transfer debt in euros than they would otherwise, but even then the impact is not as profound as one might assume. the larger groups paying the most significant fees offset the value of exchange rate fluctuations.
Increased likelihood of American Investments
Where the impact of the pound’s slide may be most deeply felt is the money coming into the English game from the US, in particular. The reasons to move now were captured by Tariq Panja of the New York Times. In May, the Clearlake-Todd Boehly consortium secured Chelsea for a dollar price of $3.15 billion. The same deal struck Monday, Panja noted, would return the Blues’ new owners $2.68 billion.
Whether you prefer Yorkshire tea, Barbour jackets or Premier League clubs, it’s a good time to be a foreigner and shop in England. “The overall impact of sterling over the last five years has been quite spectacular,” notes Maguire. “Today I look at a dollar equaling £0.94 compared to five years ago when it was around £0.77. It has made buying in the UK a lot cheaper.”
Jordan Gardner, an American sports executive who has invested in several football clubs, including Championship side Swansea City, agrees. “There is no doubt that it is more attractive. The US dollar goes further in any investment, whether it is buying clubs, inflowing capital, infrastructure, equity or debt.
“It’s going to take time, but certainly in the next couple of months you’re going to see this economic climate push deals through. I’m sure that’s going to happen. I think you’re probably going to see more institutional investors looking. Most of the investors I talk to want agreements they don’t just want to throw money at something.
“At some point the pound will probably recover, at which point the people who got in now will feel pretty good about themselves.”
Premier League a good deal at a great price for American owners
Of course this is not an overnight phenomenon. The Glazer family at Manchester United, the Kroenkes at Arsenal and the Fenway Sports Group at Anfield have been embedded in the Premier League for some time. But there has been rapid expansion in recent years, from the billions spent by the race-winning consortium to secure Chelsea to the Ryan Reynolds-Rob McElhenney tandem seeing an opportunity for content in the market for National League side Wrexham. If a consortium led by Vegas Golden Knights owner Bill Foley is successful in its pursuit of Bournemouth, then more than half of Premier League clubs will have American shareholders.
Their number could still increase. Gardner, who sees his Swansea stake as a “long-term play”, believes institutional investors such as CVC, which have previously looked at larger-scale deals at league level, may also look to make the most of their power . offers them big dollar funds, perhaps even with more “micro-transactions” at the club level. These could include infrastructure projects as well as direct investment in a team. Maguire suggests Leicester and Wolverhampton Wanderers, bought by Chinese group Fosun before Beijing backtracked on its plan to make the country a footballing superpower, could be in the future.
Even without the dollar’s favorable position on the continent, it’s no surprise that American soccer investors are looking beyond their borders. On Wednesday, Sportico put the average value of an MLS franchise at $582 million. LAFC, the league’s most valuable club, was valued at nearly $1 billion. Their revenue for 2021 was $71 million.
“The valuations of assets in North American sports beyond soccer are so overblown,” notes Gardner. “A Championship club could be anywhere from £30-40m to £100m if they have Premier League infrastructure. That’s a fraction of what we’re talking about versus MLS. The moment a club goes up to the Premier League rather you’re talking about it being worth two to three times that.
“The bottom line is you can get into the Premier League for a third to half the cost of getting into MLS. There you get $5-10 million in TV money. In the Premier League you get £100 million.”
Boehly believes there is much more juice to be squeezed from the fruits of the Premier League. Suggesting that Chelsea’s value could double in the next five years, Ravitch pointed to non-tradable brands, business-to-business data and markets in Asia as untapped resources. For Maguire another source of income is in east London, where a Swedish pop group is giving fans the chance to see them in their 1970s glory through holographic avatars.
“US investors are very bullish on the metaverse and bringing augmented reality either at home or having been to ABBA’s Avatar show [something similar] in this. If this is the technology in 2022 what will it be like in 2030?
“It’s potentially feasible to have 12,000-seater indoor venues in New York, Boston and San Francisco showing Premier League games in some form of 3D representation, essentially broadcasting from Old Trafford and Anfield to events where people are willing to pay much more than they would in relation to watching the match on television. It is becoming a fact.
“When you crunch those numbers and factor them into the Premier League, it must look like a bargain. If you’re charging $30-$40 a ticket and that’s in six cities in the United States, six cities in China, a few more in Africa and Australia and after the rest of the Asian market. Suddenly you have a million people ready to ‘watch the game’. Manchester United on a good day will make £5m from a home game. That £5m becomes £30 or £40m.”
If this vision can become a reality, then suddenly the fluctuations of the British currency and the economy do not seem to be a cause for concern. Whatever the state of the pound, American investors see huge growth potential in the Premier League. Right now they can get a piece of the action at a knockdown rate.
