Why Manchester United’s spending is NOT the same as Chelsea’s

With Manchester United’s recent summer buying, many non-United fans and pundits alike have come out saying that United are now the same as Chelsea in the transfer market – that United are attempting to “buy” success and that they are spending uncontrollably; much like Chelsea did. As a true United and football fan, I say “no, thats not true” and my argument is an unbiased one.

If you take a look at the Chelsea era pre-Abramovich compared to now, there is a revealing stat: Chelsea never spent as much, or even close to as much, as they are spending now. Since the Russian took control in the summer of 03, Chelsea have spent around ₤325m on transfers – that averages ₤81m peseason over the 4 years (I havent included 07 transfers yet). Over the same period they have received only ₤49.4m for players sold which means their net transfer expenditure is 275.6m (average of around ₤70m).

Manchester United, on the other hand, have spent ₤36m over the 2 seasons since the Glazers took over but more importantly, we have sold players to the value of ₤21.5m (again, not inclusive of 07 summer). This season, thus far, we have purchased Hargreaves (₤16m), Nani (₤14m), Anderson (₤18m), and Kuszczak (₤4m). The fees for Nani and Anderson, muck like that for Carrick, are not paid up front, but have clauses and sub-clauses attached but for the ease of simplicity, lets take the entirety of the fee. Thus far, that equates to ₤52m for the summer and with rumours of Tevez moving for around ₤20m, it is easy to see why people believe we are following in Chelsea’s footsteps.

But, there is a massive difference. Unlike Chelsea, who never spent that sort of money pre-Abramovich, Utd have always been able to spend and spend big. Driven by success on and off the field, Utd bought van Nistelrooy (₤19m), Veron (₤28m), Ferdinand (₤30m) and Rooney (₤27m) all for big money and all before the Glazers took over. Chelsea, on the other hand, bought no one for “mega bucks” before 03. Such has been Chelsea’s spending lately that it actually drove the club into all-time record losses.

Since the Glazers took over, it’s clear that the transfer kitty is dictated by how the club performs on the field. Performing well means that there is higher prize money and hence, a greater kitty used to re-invest into the club. If you look at a couple of seasons ago, we finished 3rd in the league, performed miserably in Europe and the overall result was less money available for transfers. This season was completely different. We won the league (₤20m), reached the semi finals of the CL (₤21m) and reached the final of the FA Cup (₤7.5m?). Thats close to ₤50m already in prize money. Add the ₤6m we are still owed in compensation for Mikel, ₤6m for Smith (who is likely to leave) and possibly another ₤5-6m for “dead-wood” players (Richardson, Silvestre etc etc) and you can see exactly where the money for our transfers has come from.

Unlike Chelsea, our transfer funds are self generated and not contributed by our owners. Looking into the future, if the investment does indeed pay-off and contributes to our on-field success, expect more big money transfers. League winners of the 07-08 season are expected to receive ₤50m in prize money – a record new – and when you add prize money from Europe and the local cups, you can see exactly why Utd have decided to spend their entire transfer kitty this summer: to drive the club forward in search of continued success; a kind of ‘ripple-effect’.

Note: all prize money is inclusive of TV deals.

Utd source for transfers: Soccerlens and Red11

Chelsea source: SoccerBase

Update: Jade writes:

For those of you who want to talk about the debt, you should at least apprehend how Debt Refinancing works:

There are two elements to the Man Utd debt, the hedge funds and the senior debt. The hedge funds have no security over the club and no influence over it either. Yes, they have to be repaid but that is something the Glazers will do from their own resources or refinancing plans in time.

Manchester United is supporting the senior debt, which is around £265million to £275million. People need to recognize the cost of servicing the interest on that debt is not in excess of the what Man Utd were previously paying in dividends and corporation tax as a publicly quoted company.

The core of the senior debt will be repaid when the Glazers resell a part of their shares. For that to be done Man Utd should have enough successful seasons to drive share prices through the roof and that has already started.

The company is liquid and solvable, its finances are far from being at risk, however as Shaheen said in his final paragraph this puts Man Utd in a spot where it needs constant on-field success to be able to keep up with Chelsea on the Transfer Market.

Also see:

Football Debt, Spiralling Wages and the future of European Football
Manchester United’s debt, analysed
Chelsea FC’s financial accounts and understanding Roman Abramovich

Classy Argentina storm into semis
How MLS Has Ruined Eddie Johnson

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