By Dr Alex Bond
Foreign Direct Investment (FDI) or foreign ownership of football clubs within England has affected the beautiful game for years, and there have been many news reports and academic discussions about the effects – positive, negative and indifferent. Whilst we will leave those arguments alone, the current landscape suggests we may have a Premier League fully owned by foreign investors in the very near future. Cave & Millar (2016) report on the growth of foreign ownership, identifying that after recent events involving ownership of West Bromwich Albion, Crystal Palace, Everton and Swansea City, 16 out of the 20 Premier League clubs are owned – or have been heavily invested in – by foreign businessmen, corporations, consortiums and conglomerates. Furthermore, Professor Simon Chadwick – a member of the football collective – has been at the forefront of the Chinese’s investments within English Football (Wilson, 2015). Chadwick also commented during a documentary on West Ham’s recent move to the Olympic Stadium that he expects West Ham to be in Chinese, Qatari or American hands in the near future.
The rate of FDI within the Premier League clearly doesn’t need any compounding factors, however there very well may be one due to Brexit – the United Kingdom’s (UK) separation from the European Union. Indeed the conversation of Brexit is endless and effects everything and everyone, providing many opportunities to research, and this research is very embryotic – but I wanted to see what people thought and if people are interested in this type of research.
The most noticeable – and quantifiable – impact Brexit has had so far is the volatility of the financial markets and the weakness of the pound (or the true value according to some). The recent flash crash in the Asian markets took the pounds value to the lowest level’s since the 80’s. Whilst a weak pound brings many negatives, one positive for foreign investors thinking about investing in English football is they are ‘going cheap’. Using market value data from TransferMarkt.co.uk and foreign exchange data from poundsterlinglive.com cross referenced with exchangerates.org.uk the following tables demonstrate the savings foreign investors could make thanks to Brexit.
Table 1: Potential Savings for European Investors Following Brexit
Table 2: Potential Savings for American Investors Following Brexit
Table 3: Potential Savings for Russian Investors Following Brexit
Table 4: Potential Savings for Chinese Investors Following Brexit
Table 5: Potential Savings for Japanese Investors Following Brexit
Table 6: Potential Savings for Qatari Investors Following Brexit
Clearly Russian investors are the biggest winners from Brexit, making the most savings compared to investing pre-Brexit. Followed by American, Qatari and Japanese investors. Indeed out of these three American and Qatari investors demonstrate more interest in English football, with FDI from Japan is yet to happen. However, considering the Bank of Japan’s decision (BBC, 2016) earlier this year to set interest rates at -0.1%, this makes foreign investing more appealing than saving. It would not be a surprise to see investment from Japanese billionaires, especially considering the growth of the J. League, as Perform Media (a UK based company) invested $2billion to obtain digital rights. And Brexit provides the perfect opportunity, with discounted prices.
Out of Chadwick’s predictions it seems there are massive savings for Chinese investors, however it’s the American and Qarati investors who would be getting a better deal due to Brexit. In any case, it seems Brexit might accelerate Chadwick’s prediction – occurring sooner rather than later. Furthermore, Joe Lewis and Daniel Levy of Tottenham Hotspur might find themselves with increased attention from global investors as Brexit offers the biggest savings across the globe out of the 100% British owned football clubs.
Finally, one outcome of this may be we see an increase in short-term investments – buying at the discounted rate and selling if (or when) the pound stabilises and strengthens. At the minute, Premier League FDI would be a strategic business move – however as Jones (2014) found in his thesis, motivations for FDI in Premier League clubs were mainly non-economic – status and image improvement mainly. Therefore, we could see opportunists invest with a view to sell at an inflated rate to the conspicuous consumers.
Indeed a lot more work is to be done and this is merely something quickly put together not academically robust – but the plan is to turn this into a longer term project. Therefore, I am keen to see what people think and if members of the collective are interested in collaborating or getting involved in such research. Obviously there are various issues not considered in this current blog – for example, market value of clubs is hard to determine and fluctuate with on-field performance, and the fact that the savings represented here assume market value would represent the ‘going rate’. I have also done this for the Championship, as it is still a very lucrative league for investment, especially given Leicester City’s rise adding 100m added to their valuation since winning the Premier League.
Please contact me at email@example.com or @AlBondSportBiz for any queries, suggestions or collaboration opportunities.
BBC (2016) Japan adopts negative interest rate in surprised move, BBC News. [Online] Available from: < http://www.bbc.co.uk/news/business-35436187> [Accessed 13th October 2016]
Cave, A. & Miller, A. (2016) Why football’s TV deal is a game changer, The Telegraph, 10th August 2016. [Online] Available from: < http://www.telegraph.co.uk/investing/business-of-sport/premier-league-investors/> [Accessed 13th October 2016]
Duerden, J. (2016) $2 Billion Media Deal Could Bolster Japan’s Soccer Profile, NY Times. [Online] Available from: < http://www.nytimes.com/2016/08/09/sports/soccer/japan-media-deal-could-raise-jleague-soccer-profile.html?_r=0> [Accessed 13th October 2016]
Jones, A. (2014) An examination of the motivations and consequences of foreign direct investment in the Premier League 1992-2012. Unpublished Thesis, University of Wolverhampton. [Online] Available from: < http://wlv.openrepository.com/wlv/handle/2436/333394> [Accessed 13th October 2016]
Wilson, B. (2015) China football revolution can be a financial game changer, BBC News, 14th December 2015. [Online] Available from: < http://www.bbc.co.uk/news/business-35019718> [Accessed 13th October 2016]