£100m on Declan Rice. Over £60m on Kai Havertz. And probably more to follow.
Arsenal are spending big this summer. For the club, this continues an ambitious
pattern. But having spent the better part of the last decade outside of
the Champions League, how can they afford to spend this much money?
Arsenal’s ambition is impressive. £145million was splashed in the summer of 2021 and
the next year a further £165million was spent to turn Mikel Arteta’s squad into title contenders.
Each summer now trumps the last. Since 2020, £300million has been spent and
without significant sales to balance the books. The restrictions of financial fair play (FFP) are
being felt elsewhere in the Premier League, yet not at Arsenal, who have posted pre-tax losses
of £226million in the past three years. (Design note: Affected clubs are Chelsea,
Everton and Newcastle) But Arsenal maintain a relaxed
outlook. They will play Champions League football next season for the first time since 2016-17 and,
almost inevitably, record-breaking revenues will follow. While the summer recruitment of
2021 and 2022 might have carried risk during seasons of reduced income streams, this time
around it comes on a far stronger footing. “I don’t see too much reason why they should
be worried about FFP,” says Kieran Maguire, finance lecturer at Liverpool University and
co-host of The Price of Football podcast. Maguire also points to the bonuses that will
be achieved from front of shirt and stadium sponsor Emirates as reward for qualifying for
the Champions League, and to the £30m they’ll earn just for playing in the group stage.
Arsenal ultimately have to comply with two sets of FFP rules:
the Premier League’s and those overseen by UEFA. The domestic regulations permit clubs to lose as
much as £105million over a three-year monitoring period, but within those
assessments are a host of caveats. Losses attributed to the pandemic
can be knocked off, as can other allowable deductions, such as stadium developments,
youth and community development and women’s football. The current assessment period also
gives added leeway to the financial damage done by Covid-19 in 2019-20 and 2020-21,
with those seasons bolted together and an average taken from the two.
That leaves Arsenal effectively posting a pre-tax loss of £168million for the period ending 2021-22
but the deductions permissible are enough to satisfy the Premier League’s number crunchers.
It’s estimated that the club could potentially write off as much as £162million of that.
These figures do not include last season’s hefty spend. Or obviously the outlay ahead of this one.
But Arsenal’s financial strength has also been transformed by events of the last 12 months.
The resurgence last season is likely to have brought central distribution from the Premier
League in the region of £180million, owing to increased merit payments and additional
income from overseas broadcast rights. The run to the Europa League last 16 is likely
to have added as much as £30million in prize money and matchday revenue.
All that guarantees a marked uplift in turnover and next season an extended run
back in Europe’s elite club competition would be worth more than £70million in prize money
A club who were in danger of falling behind the rest of England’s elite,
with revenues £75million less than neighbours Tottenham Hotspur in 2021-22 and £114million
less than fellow Londoners Chelsea, has come bounding back in the last two years.
In fact, Arsenal are back at the levels of 2016-17, when annual revenues peaked
at £419million. Accounts for the 2022-23 season, due to be published this winter,
will depict a club catching up with its rivals. The returns for 2023-24 might
even see them overtaking one or two of them. Sales would help, too. Unlike the last three
seasons, Arsenal could raise something in the region of £100million via outgoing players.
Another strength has been their cost control. The wages paid out in 2021-22 accounted for just
58 per cent of turnover and only in 2020-21, the season played almost totally behind closed doors,
has the ratio gone higher than 70 per cent. The £212million paid on wages in 2021-22
was dwarfed by Manchester United’s £384m, Manchester City’s £354m and Chelsea’s £340m.
“If we take a look at their wages, they were lower in 2022 than they were in 2018,” adds
Kieran Maguire. “What we’ve seen over the course of the last five or six seasons is Arsenal getting
their costs under pretty good control, even though they’ve not been a Champions League club.
Again, that puts them in a strong position.” Arsenal’s wage structure has since been
expanded with the arrivals of Zinchenko and Jesus last summer, as well as the improved
contracts for Bukayo Saka and Ramsdale, and the signings of Rice and Havertz.
These will matter more under UEFA’s revised FFP rules,
now known as financial sustainability regulations, which came into force in June
last year. Clubs will not be able to commit more than 90 per cent of turnover on wages,
transfers and agents’ fees in 2023-24, with that falling to 80 per cent in 2024-25 and
ending at 70 per cent in 2025-26. The losses allowed over a three-year period
have also climbed from €30million to €60million (£51.3m/$65.4m) under UEFA’s revised rules.
Unlike Chelsea, Leicester City, Manchester City and West Ham United, Arsenal were not one of the
19 clubs placed on UEFA’s monitoring list last September, and the expectation is they are not
among those sailing close to the wind. And the outlook is good.
“Because of the TV revenues, the big English clubs are already well set to conform with UEFA’s
rules,” says Dan Plumley, a sports finance expert and lecturer at Sheffield Hallam University.
“Arsenal have actually got more scope than most. They’re back in the Champions League,
crowds are back in and they’re in a position where they’re confident in their ability to invest.”