The fact that Premier League clubs spent £1.2 billion on transfers this summer may advance the sense that English football is returning to normal, but the reality beneath the surface is very different.
The headlines certainly point to a continuation of the madcap money-slinging that has made it the most exciting league in the world: teams spent approximately £1.24bn ($1.6bn) on players during the summer window, with a net spend of around £880m ($1.1bn). Trusted finance experts Deloitte are yet to publish exact figures for the latest window, but the estimated numbers fall into line with their reports from recent years: £1.41bn ($1.8bn) in 2019, £625m ($813m) net; £1.23bn ($1.6bn) in 2018, £865m ($1.2bn) net; £1.43bn ($1.9bn) in 2017, £665m ($865m) net.
(For comparison, FIFA's recently published "International Transfer Market Snapshot" showed how the Premier League was far above its peers for spending: Italian teams spent £418m, or $544m; Spain's clubs a combined £375m, or $487m; French clubs £350m, or $455m; and German teams under £270m, or $350m.)
That the 2020 net spending figures are on course to be one of the highest on record, despite a global pandemic forcing employee furloughs and significant losses across the sport, is nothing short of remarkable. Some may interpret this outlay as a reassuring robustness against deeply troubling market forces, but in fact it has only deepened the paralysis around discussions aiming to safeguard the future of the English game.
Sources have told ESPN there remains a widespread belief among key decision-makers at many Premier League and English Football League sides that the British government will ultimately step in to avoid any clubs disappearing from the pyramid as the financial crisis at lower levels deepens. The EFL believes it needs £250m ($325m) to complete the season without losing any teams. However, while the Department of Culture, Media and Sport have not ruled out offering state aid, no such package has been forthcoming, instead urging a game collectively still outwardly awash with millions to get its own house in order.
Private financiers have made multiple offers to step in, and some clubs have struck individual deals to help with their cash flow, but any multilateral agreement between the Premier League, the EFL and DCMS is a long way off because of the steadfast belief that government will intervene. One source close to the talks told ESPN: "there are any number of potential solutions and everybody knows financial support is required, but nobody wants to make the first move on the basis that might not lead to the best outcome.
"It is a very dangerous game if everybody sits tight not wanting to make that decision because a club could potentially go out of business while the stand-off is in place. That has to be too high a price for this game of brinkmanship."
The government's decision to potentially ban supporters attending matches until March 2021 is a devastating blow for many clubs. Man United estimate they are losing £4m-£5m per game, while League One and League Two clubs are missing out on between £30,000 ($38,000) and £100,000 ($130,000) every match. Clarity and leadership is required with time running out.
Where will the money come from?
Premier League clubs are insulated from the worst financial effects of COVID-19 thanks to the staggering income from television rights, currently worth £8.65bn ($11.2bn) for the cycle 2019-22. However, around half of that money goes on wages and with other revenue streams suffering, the present status quo increasingly appears unsustainable. To compound the problem, the League had to pay £300m ($390m) in rebates due to the disruption caused by the pandemic, with more to follow this season.
Fans not being allowed back into matches could cost £700m ($910m), while clubs have scores of stadium contracts that will demand repayments. For example, at least one London Premier League club receives its money up front from licensing its catering. With no supporters to serve, a significant chunk of that money will have to be repaid.
Sources have also told ESPN that there is no consensus among Premier League club executives over precisely how much responsibility the top flight should bear for acute struggles in the lower divisions. The real battle for survival is at League One and League Two level, also to a lesser extent in the Championship, with clubs in those leagues dependent on matchday income rather than television revenue. Some £250m ($325m) is said to be needed to see out the season without seeing any clubs disappear.
Sources have told ESPN that a cash offer has been made by the Premier League to the EFL, but it contained a host of caveats including support for future rule changes -- most significantly, the relaxing of visa rules post-Brexit to ensure an easier acquisition of foreign players -- while some of the money was segregated as a loan and another part simply classified as an advancement of solidarity payments already in place. According to sources, this proposal does not even have uniform support among Premier League clubs, with chief executive Richard Masters facing a difficult task in convincing executives already looking at large holes in their own balance sheet to find cash to help others.
This summer's transfer window provided some evidence of the creativity required by Premier League clubs to balance their books while still investing heavily in recruitment. Many buying clubs pushed for season-long loans with options to buy, effectively deferring acquisition costs. Some clubs secured arrangements with private equity firms to maintain their competitiveness in the market -- or avoid having to sell their best players -- while others asked owners to dip into their pockets, as Arsenal did in the 11th-hour acquisition of Thomas Partey from Atletico Madrid for £45m ($59m).
Private investment funds have offered another bridge to the world beyond COVID-19. ESPN reported in May how a £1bn ($1.3bn) fund had been assembled and offered to the Premier League, but it was ultimately declined due to disagreements over how the money would be distributed and, more significantly, an overarching belief once again that government would ride to the rescue. It was originally anticipated that fans would return to stadiums at the beginning of October, but a nationwide increase in coronavirus cases forced a delay in that plan. Private financiers have begun to circle once again.
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ESPN can reveal that American investment company TPG Capital, previously known as Texas Pacific Group, have made a cash offer in return for an equity stake -- rumoured to be 25% -- in the EFL. As part of the agreement, they would potentially take a seat on the board and therefore help decide which clubs would receive financial assistance on a case-by-case basis. The deal is similar in nature to the one struck by CVC Capital Partners with Premiership Rugby, when the firm took a 27% stake in 2018. Talks are ongoing between TPG and the EFL, but there is no broad support as yet.
Entrepreneur and former football agent Jon Smith is involved in bringing another group together, including banks from both sides of the Atlantic and American pension funds, offering £150m ($195m) secured against the three remaining years of the EFL's current television contract, worth £50m ($65m) per season.
"We proposed the interest would be paid by the Premier League, something that would cost them less than £20m ($26m) but would stand as a clear indication they were helping the clubs lower down the pyramid," Smith told ESPN.
"I'm fortunate enough to know [DCMS Secretary of State] Oliver Dowden as he is my Member of Parliament. He is a sizeably good human being who genuinely cares and is trying very hard in these most difficult of times to be supportive.
"It would be good if the government could become the Lender of Last Resort while we sourced additional funds. And there is more money out there if required, a lot more. One fund in my orbit has over $60bn [$78bn] under management. Everyone in the game knows we are there, but they are continuing to say 'the Premier League owes the EFL' and in any case they expect the government will come and bail them out."
The prevailing consensus is that the government's mixed messaging continues to cloud the issue. As long as they refuse to help, yet at the same time not rule out the possibility of future intervention, clubs will cling to the hope the state will come to their rescue because it is the cheapest and simplest option.
Can TV income save the system?
The Premier League clubs have one other source of optimism: future television income.
"There's going to come a moment in the not-too-distant future when the pressure on football collectively will build to the extent that wage bills become unsustainable," explains Smith. "And this is from someone who has always defended the players' right to earn commensurately from the income they bring to the game. But if the income drops, which it might, then there might have to be an obvious adjustment, and that's where the bottom could fall out.
"In two years' time, there will be another TV deal. What if Sky say 'we don't need to spend as much as last time'? Here's £2bn [$2.6bn]. Look at BT's share price. Unbelievably, they could become a takeover target.
"I think the big clubs are hoping -- and possibly with some substance -- that it doesn't really matter because in two years, we've got Amazon, Google, Apple TV and the Qataris who could all make a play. It is possible that a dark horse could be beIN SPORTS, who follow up their Qatar 2022 World Cup success with Premier League rights, and that's if Jeff Bezos doesn't stump up £5bn [$6.5bn] because he can!
"If one or two of them come in at the current levels, the player wages continue. If not, the whole wage structure in football, I guess, will change, led by government asking for prudence in the sector. It could go either way, or it could be a combination of all of that. But one thing is for sure: football is going to change in some shape or form, certainly in the lower leagues."
Premier League wages are estimated to be an average of £158m ($205m) per club per season, with Manchester United above £350m ($455m), Manchester City at £315m ($410m) , Chelsea at £314m ($408m) and Liverpool at £310m ($403m). Deloitte reported in 2018-19 that the 24 Championship clubs had a wages-to-turnover ratio of 107%, while clubs in League One and League Two voted in August for a salary cap, limiting League One clubs to £2.5m ($3.2m) a year and League One to £1m ($1.3m) a year.
One thing that all parties seem to agree on is that the storm is coming. One source close to the EFL claims there is a "common assumption" that "more than one and as many as eight" clubs will struggle to pay player wages at the end of this month if nothing is done. Some Championship clubs this week threatened to withhold PAYE payments (automatic salary deductions from employees for income tax and national insurance paid to the government) to HMRC in protest at the government's decision not to allow fans inside stadiums when theatres and music venues are able to stage events.
"It is not the most subtle approach, but the underlying message behind it is 'you can provide financial support by being patient,'" said the chief executive of one EFL club.
The overall picture is confused by a lack of leadership. There are some within the game who believe the Football Association should be more prominent in discussions rather than the competitions it governs.
"Nobody is leading from the front," said Smith. "If anyone challenges the wages, [Professional Footballers' Association chief] Gordon Taylor will argue breach of contract, contraventions of European law. Nobody has the stomach for that fight. Where is the chairman of the FA [Greg Clarke] in all this? He's a good guy who cares for the game but surely this is his moment to raise his voice above the cacophony.
"The government can find the money, but they have so much else on their plate. Whole sectors -- hospitality, theatre and conferencing to name but three -- are on the brink of collapse. And that's of more significance right now to the Chancellor than propping up football, which has just spent £1.2bn ($1.6m) in the transfer window."
Instead of this summer's spending spree pointing to a revival, it is evidence of a game that is yet to face up to the gravity of COVID-19's financial impact.