By Max Clarke
£225m: that’s the figure spent in just one month of transfer activity this January, as the Premier league’s big hitters bought and sold some of the best talent in the game during the transfer window.
It’s no secret that football is big business, but this year’s record total spend suggests that the industry’s top teams have not been put off making huge financial investments by the trifling matter of a recession.
Whether it is the £50m spent moving Fernando Torres from Liverpool to Chelsea or the £35m Liverpool paid Newcastle for the 21 year old Andy Carroll — the sums involved are huge. These two transfers took place between British clubs, but often international payments need to be arranged.
For those deals that involve moving these significant sums of money between countries, i.e. from one currency into another, there are also some hidden variables which can make a serious impact on the figures involved.
Take another of the January transfer window’s big money signings as an example. David Luiz of Portuguese club Benfica cost Chelsea £21.3m when the figure was finally settled. That equates to 25.35m euros that the Premier League champions would have to pay Benfica based on today’s exchange rates.
However if the transfer had gone through earlier in the window the same player would have cost Chelsea close on £300,000 less.
Small change for a Russian oligarch you might think, however to most of us that’s a serious amount of money. The exchange rates move every day, and can change by as much as 10% in the space of just a few days.
“2010 was a volatile year, to say the least, and this caused significant variations in the value of international currencies,” says Jeremy Cook, chief economist at World First foreign exchange.
“Whether you’re managing player transfers from South America or Europe, merchandise sales in the Far East, or sponsorship deals in America, the money involved is always at the mercy of fluctuating exchange rates. That’s why managing your risk with the right kind of hedging product is strongly recommended.”
“Anyone who is involved in moving large sums of money internationally should consider a complete 'health check’ when it comes to their approach to foreign exchange.
“With the exchange rates continuing to be as difficult to predict as the outcome of the Champions League, when it comes to management of your currency transfer it’s important that you ensure you’re supported by the right team.”