The worldwide disruption due to the COVID-19 outbreak has impacted every walk of human life. The football transfer market would be no stranger to it.
Most major football leagues in Europe have been suspended or prematurely concluded as a result of the COVID-19 pandemic. This has resulted in huge financial losses for the clubs. Big European clubs like Real Madrid, Barcelona, Juventus, etc. have already cut down on players' wages to limit their losses due to the pandemic.
The football leagues are expected to resume action soon, with Bundesliga expected to be the first major league to start in May. However, the financial losses caused by COVID19 are not going to be made up any time soon. The games would be played behind closed doors in the foreseeable future that will result in a loss of ticket sales, an important part of clubs' revenues.
COVID-19s impact on the football transfer market:
The COVID-19 outbreak would have an adverse impact on transfer market activities of most clubs. The prices to buy players are expected to significantly come down.
The transfer prices paid by clubs in recent years have been insane. Clubs shelling out more than € 100 million to acquire players have become a new normal. With Manchester United shelling out € 105 million to acquire Paul Pogba in 2016, we have seen transfer fees rising to inexplicable levels. PSG paid € 222 million to Barcelona for Neymar.
Clubs like PSG and Manchester City have investments from oil-rich Middle East countries. The Premier League has a new TV rights deal. And then there are cash-rich clubs like Barcelona and Real Madrid. All of these factors combined to ensure that the transfer prices of footballers skyrocketed to unprecedented levels.
However, the COVID-19 pandemic and the financial losses caused to clubs means that the transfer prices of players would stay low for a while.
The COVID-19 outbreak is expected to lead to a massive loss of revenue for the five major European leagues. The cancellation of the UEFA Champions League would dent a deeper hole in the pockets of the major clubs.
As per a study conducted by KPMG, the top-5 leagues in Europe are set to suffer a loss of around € 4 billion due to the COVID-19 pandemic.
The COVID-19 induced losses would put massive financial pressure on many clubs, even threatening their very existence. In such a scenario, their spending will decrease as a result. Also, many clubs might be forced to sell their players off to ensure they survive. This would mean that they might be forced to part away with their prized possessions for lesser amounts than they would have agreed to before the COVID-19 pandemic.
The impact of the COVID-19 disruption can already be seen in the stock prices of some of the major listed clubs like Juventus and Manchester United fall by over 20% and 16% respectively.
Financial losses due to COVID-19 are expected to put off the transfer plans of most of the clubs, setting off a deflation cycle in the short-term in the transfer market.
The only factor that might lead to higher transfer prices is the recent attempted takeover of Newcastle United. If the deal goes through we can expect Newcastle to dive into the market with some huge cash and chase a few high profile players for huge sums. However, we can expect the transfer prices of most players to collapse in the near future.
The COVID-19 pandemic, though, might turn out to particularly helpful for smaller clubs. These clubs don't have the financial clout and are generally 'bullied' into selling their key players due to the money offered by big clubs.
Temporary or permanent?
The COVID-19 outbreak has adversely impacted the world economy. Football clubs will not remain unaffected by the pandemic, ensure that the transfer prices of players would fall as discussed previously. However, the question is will this fall be permanent or temporary?
I personally feel that it is temporary in nature. Once clubs account for losses due to the pandemic and balance out their books, the player prices would again go up and reach the pre-pandemic levels.
However, until that happens we can expect the prices to fall. There is unlikely to be any big-spending spree even by the big clubs like Madrid, Barcelona or PSG until they themselves ship out a few of their top players.