With the UK having exited the European Union on January 31st, it is time to look at the effect of the exit on Liverpool Football Club and the EPL in general. While there were originally concerns over store shelves being empty and problems traveling to the rest of Europe, day to day operations and financials seem to have worked out, but the impact on players and teams in terms of transfers and homegrown talent is scary.
Exchange Rate
The primary damage in terms of Brexit was done to the British currency (the Pound) in around the time of the Brexit vote. You can see in the chart that a fall happened at the end of 2015 and continued into 2016 when the vote to exit happened. This loss of value of the pound against the Euro means different things for different clubs.
If a club has most of their revenue from the British market, so game day revenue, broadcast revenue and commercial revenue is all in local currency, than the drop in rate doesn’t have much effect. This would primarily be the case for the smaller clubs that don’t pull international revenue.
However for larger clubs like Liverpool (and the rest of the big 6), this will affect their operation, both positively and negatively. Money that is earned outside the UK will now be worth more when translated into British Pounds. On the other hand, money spent outside the UK will cost more in terms of pounds. It is generally a safe assumption that Liverpool makes more money outside the UK than it spends and so this exchange difference will be a net gain to the bottom line.
However Liverpool (and the other big teams) may find themselves in a difficulty with player salaries. The best players in the world want to be paid like the best in the world. However if they are paid in Pounds, than their actual contract value in Euros is lower. As such, there are already rumors (unsubstantiated) that top players (not at Liverpool) are asking for salaries in Euros and not Pounds. Conversely, if top players are willing to take Pounds they may ask for higher salaries.
This trend would affect the Liverpool financials, however it would be a similar effect to other EPL teams. The hit would be felt more when comparing to other European teams who do not need to worry about the fall of the Pound.
Player Transfers
Players transferring to the EPL could become a huge issue in the new Brexit world. There have already been issues for Liverpool players trying to obtain visas to play for the team. Allan Rodrigues de Souza could never secure a visa and was eventually sold without ever playing for the team, Taiwo Awoniyi is now playing for Mainz in the hope that he can progress enough to earn a visa, and even Mo Salah’s start with the club was delayed due to a visa issue. And all those were under the old visa rules.
Now it will be even harder to gain a visa, so players may have a hard time coming to the UK. The rules require entrants to have skills that cannot be found already within the UK, so it might be a case where only the top players can gain a visa, which would significantly affect youth teams and players who are on the verge of breaking out.
These rules have not yet been thought out and the exact way they will be applied has not been seen yet, however the statistics site FiveThirtyEight analyzed all transfers and found that half the foreign players who have transferred into the EPL since 1992 would not qualify under the new post Brexit rules.
Particularly they found that players from Brazil would have a much harder time entering the EPL. Many of those players were able to first transfer to Portugese teams as they already know the culture and speak the language (which counts in visa rulings), and that foothold in Europe allowed them to then go to the EPL (or other leagues in Europe).
For Liverpool this means that finding low cost high potential players, signing them and letting them develop within the Liverpool system may no longer be an option. This could be a fundamental change to the way the team has to operate and Liverpool will have to find a way to adapt if the current rules aren’t changed.
Quotas on Homegown Players
The other massive change could be to the homegrown players rule, where the FA is looking to reduce the number of non homegrown players from 17 of the 25 to 12 out of 25. An increase of 5 more homegrown players from 8 to 13 total would have a huge effect on many teams, including Liverpool. In fact last year only 3 teams would not have been affected by the rule change.
Last year and this year Liverpool show 8 players that are considered homegrown on the squad of 25, but those include players like Isaac Christie-Davis and Andrew Lonergan who won’t actually be playing but are there to make up the numbers. Increasing the number by 5 would mean there would be more players like those two whose presence is there to make up the necessary number but are not contributing like the rest of the foreign players.
And this would have a knock on effect that homegrown players would be able to start commanding a premium to play for an EPL team. While a Liverpool player like Adam Lallana might be valued at €12M in a general football sense, for an EPL club he would have more value as he would be a playable player (not just there for appearances) and so clubs would big up his salary in an attempt to get him.
This artificial increasing of price for homegrown players in the EPL would take money away from foreign top players and thereby make the teams less competitive in acquiring foreign players.
Brexit Effect
Liverpool would still be one of the biggest clubs in the EPL, but their ability to sign younger developing players from around the world would be reduced. Likewise, Liverpool’s monetary strength would be slightly diminished as they would have to overpay for homegrown talent and would not be able to carry as many international players as they do today. While thus far Brexit has not shown significant affect to the team operations, there are worries that the future for Liverpool (and other EPL teams) may now have additional complications and problems that will challenge their ability to compete with the best teams in Europe.
Daniel is a professionally designated accountant who has spent 20 years in the finance and data analytics field which has skewed his view of the sporting world. Instead of seeing simply an athletic competition, he sees a financial exercise waiting to be unlocked by data analysis. He enjoys reading professional publications such as the annual deloitte football report and team financials as well as spending hours putting together and analyzing football data, which saves his readers from having to do it themselves.
