Brexit blog: A spectacular own goal?
Catherine Stihler MEP, in the first of a series of Brexit blogs, looks at the impact leaving the EU is likely to have on our national sport: football.
Since the vote by the UK electorate to leave the EU there have been a series of questions asked about what Brexit will mean for various sections of society and our economy.
In order to try and shine a light on what is going on and help my constituents keep up to date with the latest developments I have decided to do two things. Firstly, I have established a Brexit Bulletin (published every Friday) to provide updates on the political process and commentary concerning Brexit. Secondly, I am going to produce a weekly Brexit Blog (every Wednesday) to explore different aspects of the impact Brexit may have.
To kick-off (pun very much intended) the Brexit Blog series I have opted to dive into the potential consequences for our national sport: football. Just last week I came across an article in the Telegraph that revealed the game developers of the popular Football Manager franchise had introduced changes ahead of the release of the latest instalment (FM2017) to reflect the vote in the June referendum and some of the possible outcomes i.e. ‘soft’ and ‘hard’ Brexit.
This got me thinking about the sort of future our football clubs face as a result of the vote and what varying degrees of soft/hard Brexit mean for players and fans alike. I decided to begin by looking at player signings: the changing costs associated with signing as a result of the economic impact of Brexit as well as the effect on EU migrant footballers if the UK ends its participation in the Freedom of Movement of people across the EU (and EEA/EFTA).
The plummeting value of Sterling since the vote made the last transfer window more expensive for transfers between currencies. The Pound Sterling (£) is the worst performing currency against the US Dollar in 2016 and if the current level is maintained, or falls further, we are likely to see transfers between UK clubs and those of other nations cost our clubs a lot more relative to pre-June 23rd prices.
An example of this would be the signing of Paul Pogba by Manchester United from Juventus for a record fee of €105 million. The transfer took place on August 8th of this year and cost approximately £89.1m (using an average price of 1.1781 EUR to 1 GBP that day). If the transfer had taken place two months earlier, on June 22nd, this transfer would have cost £80.7m (1.3011:1). The transfer of Paul Pogba, while already a startling sum of money, was made 10.4% more expensive as a result of the Brexit vote.
The story is even worse if you look at that transfer with the price of the Pound from yesterday. That £89.1m would instead be a whopping £95.2m, a 6.8% increase on the actual transfer fee simply because of the sliding power of Sterling. Comparing yesterday’s price to the day before the referendum, as above, we see a massive 17% rise in price.
Not many clubs can compete with the Manchester United’s of the footballing world when it comes to purchasing power but that makes these weakening exchange rate performances more worrying. Small to medium-sized clubs will be squeezed out of the market for the best players altogether or will have to decide between making one large buy to get in the best player possible and buying more players with smaller price-tags.
The Football Association’s (FA) former Chairman, Greg Dyke, said in his parting letter to the FA Board in July that Brexit would see greater opportunities for home-grown talent to succeed as foreign players could reduce in number. This will be because of the rise in the cost of transfer fees between currencies and because of the end of the UK’s involvement in Freedom of Movement regulations.
Clubs have always been able to develop their own players at home and bring them through but had the ability to pick up the best players around Europe at good prices because of the strength of the UK currency. Brexit isn’t creating a new opportunity for clubs; it is closing down other options. This looks more like using the UK’s EU membership as an excuse for clubs failing to develop home-grown players.
What does this mean for Scotland and the game here? Scottish football has had a long running problem in attracting the same kind of money to the game on this side of the border when compared to our larger neighbour. The lower level of investment via TV deals and other advertising contracts means Scottish clubs give some kind of example to their English counterparts as to what lower purchasing power can mean.
Obviously the English Premier League is still one of the biggest leagues in the world and will continue to make billion Pound deals for coverage rights and so the comparison is not direct but Scottish football already exists within a tight fiscal environment. That economic reality is reflected in the proportion of non-UK footballers that ply their trade in the SPFL Premiership (Table 1). A weakening Pound means the gap between Scotland and England is only likely to grow still further in footballing terms.
In Scotland’s top-flight fifty-four per cent of players come from Scotland. Of the total players in the top twelve First Teams, seventy-seven per cent are from the UK. Expanding the net a little further to include players from the Common Travel Area (UK-Republic of Ireland) the numbers increase to eighty-two per cent of all players.
Scotland already draws on home-grown talent for the overwhelming majority of top-flight players but the non-UK market may be about to become even trickier for Scottish clubs to tap into. I mentioned briefly changes to Freedom of Movement could have a material impact on club signing policies and in Scotland the case is clear: ‘hard’ Brexit would be awful for our clubs.
Thanks to Freedom of Movement, Scottish clubs are able to sign players from across the EU (and EEA/EFTA nations that also sign up to this fundamental freedom such as Norway and Switzerland) with minimal fuss in terms of visas.
With the Conservative government moving to prioritise ending Freedom of Movement privileges over maintaining access to the Single Market we may be about to see some big changes to the way players are signed from the EU and a reduction in transfers driven by rejected visa applications.
In 2015 the Scottish FA published guidance on changes to visa application procedures. If a ‘hard’ Brexit takes place footballers from the EU will be subject to the same visa restrictions that currently apply to players from the ‘Rest of the World’ as numbered in Table 1.
The rules require players to meet the following criteria:
1. The player must be sponsored by a club in full membership of the Scottish Professional Football League (SPFL) and can only play for clubs in those leagues during the period of endorsement.
2. The player must have participated in at least seventy-five per cent of their nation’s ‘A’ team competitive fixtures in the previous two years.
3. The player’s National Association must be placed at 70 or above in the official FIFA World Rankingswhen averaged over the previous two years.
If a player fails to meet one of these requirements the visa is rejected and the applicant club has an opportunity to appeal the decision based on mitigating circumstances i.e. the player in question is an exceptional talent or a young talent who has clearly demonstrable ability to make it to their National Association’s ‘A’ team in the future.
This visa appeals process has been used for emerging talent previously. A recent example in Scotland concerns the Celtic signing Victor Wanyama. Wanyama hails from Kenya and they do not meet the ‘top 70’ FIFA World Rankings requirement and so an appeal took place to make the case for his visa application to be granted.
A good way to assess the consequences of restrictions to Freedom of Movement in football on these shores is to look at the EU (and EEA/EFTA) players currently in Scotland and look at whether they would have met the visa requirements at the time of signing. You can see the results in Table 2.
There are approximately fifty players from non-UK EU nations playing in Scotland (If you notice any omissions from this list please let me know so that I can update/correct), of that only one player, yes one player, would have automatically qualified for a visa at the time of signing. Mikael Lustig from Sweden is the only player who would be playing football in Scotland if the visa rules that apply to non-EU players existed at the time of his transfer to Celtic.
There is also the situation with regards to current non-UK EU nationals working in the UK. The UK Government has yet to confirm whether or not new visa restrictions will only apply to EU migrants post-Brexit or if it will also apply to those already living and working in the UK. While the UK Government use this situation as a bargaining chip in their Brexit negotiations, people live with great uncertainty about their future rights within the UK, footballers included.
A big question mark hangs over the continuation of the UK-Republic of Ireland Common Travel Area (CTA). Both national governments have stated clearly they wish to maintain the CTA as it existed prior to both nations joining the European Union and was protected during the time of EU membership.
The CTA is mentioned in the Lisbon Treaty and at no point has the CTA existed when one of the two members of the area were in the EU while the other was outside. As the border between the Republic of Ireland and the UK is set become a land border between the EU and the UK – and the area is catered for within the EU Treaties – the EU will want to have a say on the CTA going forward post-Brexit.
The kind of Brexit we experience will be key to the nature of the CTA going forward. Closing down our involvement in Freedom of Movement and the Single Market will potentially put great stress on the CTA and this creates uncertainty for RoI footballers that wish to play in the UK. RoI players who would not meet visa requirements but who may continue to play in the UK depending on the existence of the CTA are highlighted in Table 2.
The ability of clubs to augment their squads with talent from across the EU would be severely diminished and this would have consequences for the ‘product’ on the pitch, potentially reducing the appeal of the SPFL in the short to medium term and further depressing earning potential from TV deals, ticket sales etc.
A lot of these players are older and not regular internationals, they wouldn’t make the visa requirements or justify an appeal. Perhaps a player like Moussa Dembele would meet the young talent criteria and win on appeal. The fact is, by going down this path we raise a lot of uncertainty within Scottish football.
In England there are some high profile players who come from the EU and could be considered ‘late bloomers’. Dimitri Payet, from West Ham United, or N’Golo Kante, who won the Premier League with Leicester City, weren’t regular internationals or considered exceptional talents prior to signing their contracts but look what they have gone on to produce on the pitch? They almost certainly would not have been granted visas and football on these shores would have missed out on their skills.
EU membership also allows UK football clubs sign EU nationals between the ages of 16 and 18. Going back to Manchester United for an example we see Paul Pogba was signed initially on a youth contract at 16 years of age before leaving and returning for that monumental record fee. Arsenal also signed a young Cesc Fabregas – who is to say the next Fabregas will opt for a top Spanish, German or Italian club at 16 or 17 instead of waiting to turn 18 to sign for a top British club? Would Arsenal’s Hector Bellerin have hung around waiting for his 18th birthday or would he have gone elsewhere? The list goes on.
What does Brexit mean for football fans? In short it means higher costs. If clubs lose out on top players and the product diminishes in any way the revenues from advertisers and sponsors will not be as lucrative. Clubs will have to either reduce their transfer kitty or put up prices to fill the gap. If transfers for EU players cost more, thanks to the weaker performance of the Pound, then either clubs will ask for more cash from their fans to continue buying the best players around or they will have to recalibrate their signing policies.
None of this touches on the rising inflation that is coming nor the potential for higher costs as a result of tariffs being applied to imports. A trip to the football is about to cost even more on petrol, more for a drink in the pub (for those not driving obviously), more for food before or during the match and more for season tickets next season and beyond. Many working class football fans have already been priced out of the game in recent years, this is the last thing they needed when looking to get away from it all at the weekend by watching their favourite team.
In the end we have to ask ourselves: have British voters just scored a spectacular own goal?