With the business end of the season beginning to arrive, with European qualification well in Manchester United’s sights, how crucial could this be to the club’s transfer budget, with a major summer window fast approaching?
Following what grew to become Manchester United’s most disastrous season in Premier League history, seeing the Reds finish 15th, as well as lose the Europa League final to Tottenham Hotspur in Bilbao, a summer of spending shortly followed in an attempt to infuse new life into what seemed to be a desolate squad.
With the target of Champions League football being set by Jason Wilcox and Omar Berarda prior to the season commencing in August, following an impressive start to life as head coach, Michael Carrick looks like he could well be on his way to achieving this goal following an impressive three-game winning streak featuring victories against league leaders Arsenal and bitter rivals Manchester City.
Not only will re-securing a European spot feel like United returning back to where they belong, but it will also provide a lucrative budget increase, which could be a real difference-maker for United’s season next year and the further development of the first team squad.
United’s £200m budget increase
Since the crushing loss in Bilbao at the hands of Tottenham Hotspur last May, which saw the Reds miss out on European football for the first time since the 2014/15 season, United have had to face the music financially, with the club losing out on revenue, as well receiving a 10% reduction from the annual deal from adidas for failing to qualify for European competition.
After also failing to renew the club’s training kit sponsor deal with Tezos and the shirt sleeve sponsorship deal with DXC Technology, set to come to an end this season, the club will be in desperate need of commercial success following the recent decline.
Champions League qualification will not only restore the full annual sponsorship payments from adidas, but also boost the teams’ transfer budget by close to £200m according to a report from Flashcore.
How much can United actually spend this summer?
An exclusive recent interview given by Adam Williams to United in Focus has been able to shed more light on United’s upcoming summer window, clearing up any misconceptions fans may have surrounding the club’s current financial situation.
“There are a few caveats we need to get into here,” Williams said.
“First, is ‘£200m’ a net figure? Or is that what club sources are saying that United can spend regardless of sales? If it’s the latter, I have to say I am highly, highly sceptical.
“Even if they finish in the top five and get Champions League football, they simply don’t have the resources to be able to spend that much without a huge equity injection from the owners
“It’s the club’s access to cold, hard cash that is stopping them from that kind of spend, not PSR. They have plenty of room for manoeuvre under both UEFA and the Premier League’s systems.
“They generated an operating loss – that’s their bottom line before player sales – of £67m last season. Without European prize money and matchday income this season, I expect the operating loss to be bigger this season, even accounting for Ratcliffe’s cost-cutting.
“You have to fund those losses from somewhere. To pay for the summer spending, they increased the limit of their revolving credit facility, which is essentially an overdraft. Per their last accounts, they owed £268m there, including interest. I believe the limit is now £350m.
“But I expect them to get closer to that figure by the end of the season because of the seasonality of cash flows. Theoretically, they could extend that overdraft, but they are already paying so much money in interest – about £40m per season – that it is a sub-optimal move.
“Champions League football could be worth north of £100m to United in prize money depending on performance, plus probably an extra £25-30m in matchday income. But there are costs associated with qualifying too – bonuses to players, administrative expenses, matchday costs. On a net basis, the benefit is much lower than £130m.
“And the biggest issue, in my view, is their transfer debt. They owed nearly £470m as of September. About £250m of that is due by the end of the financial year. They are owed money on transfers too, but that doesn’t offset it very much.
“When you’re paying £250m in transfer debt, £300m-plus in wages, £40m in interest and probably £150m in other expenses, it’s not easy to fund £200m in new signings, even if you structure those deals on long-term instalments. With Champions League money, revenue would probably be £720m-ish, but that doesn’t cover your costs even before new additions.
“To spend £200m, they need to sell players and cash in on some of the sponsorship deals they have to offer. With Europa League, there’s no chance. With Champions League, it could work, but only with some horse-trading first.“
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