The Price of Sterling | The Football Boardroom

17:08Christian Purslow:check for 19 to 20 million and can walk into another club within a week i think that's about

17:14Henry Winter:evens okay if it's about evens for raheem but from chelsea's standpoint okay yes as rational financiers they've saved maybe 10 million pounds of cash maximum but let's look at it from an accounting and and from a financial fair play standpoint they're writing off the footballer for whom they paid 45 million pounds. Now, just again, for our listeners' benefit, please excuse the numbers. 45 million pound five-year deal, that famous word amortisation. What does that mean? When he arrived, he goes into Chelsea's books for the 45. And for each year, over the five years of the contract, he goes down by a fifth or 9 million pounds.

17:55Henry Winter:So today, three and a half years into that deal, Raheem is still in Chelsea's books at probably 13 to 15 million pounds. And as of last week, that's written off. That is a£13 million loss in Chelsea's financial accounts and a£13 million loss towards their financial fair play account. I can only conclude in their willingness to do that, to save the cash, that they must be confident about having FFP profits elsewhere in the system to make up for that meaningful loss. And by the way, the payoff is also taken straight to the profit and loss account. So if I'm right and it's maybe 19, 20 million pounds, that's on top of the 13 million pounds write off.

18:41Henry Winter:So you think about that. That's a huge loss for FFP reasons. And that is not welcome. This is not a good news day for Chelsea. Yes, everybody can move on. And yes, they've saved real money in Raheem agreeing to take a pay cut. but with adverse consequences to their accounts. Loans. Loans. Loans. Listen, it's a transfer, a big money transfer that hasn't worked for either side and a loan that followed that transfer that also hasn't worked and arriving at a point where the unique circumstances he finds himself in, a 31-year-old player with a fantastic reputation, hopefully a few years left on the clock having the financial independence to back himself as a free agent to have a next good chapter to his career and having an owner in chelsea who are financially sophisticated who see the value of saving the cash and have found a way to get raheem to the table i mean and of course the human element you always remind me about henry turning up to work when you're Raheem Sterling.

19:52Henry Winter:You know, I used to work at Cobham. It's a big place, you know, running around the academy pitch and looking over to, you know, where the first team trained. I mean, that must just feel terrible. And the thought of doing that for another 18 months, that must have weighed heavily too.

20:08Christian Purslow:I wonder if it's going to be poignant with him this summer with the World Cup going on. A player who was actually targeting the World Cup at the other end of his career. is Harvey Elliott. And I cover both of the under-21 tournaments and back-to-back English champions, Harvey Elliott, particularly in the recent one of last summer. You know, he was outstanding. I think he was player of the tournament. And coming out of the tournament, I remember speaking actually to his father, which I was incredibly proud, and rightly so, of how well Harvey had played. He was doing well at Liverpool. They were obviously sort of, what was he going to be in the next stage.

20:50Christian Purslow:You looked at the players in that team. Elliot Anderson was going to sort of take the senior team by storm. Alex Scott, Jarrell Kwanza went to Germany. New move. You know, that was a good young English team who did well under Lee Carsley. And I remember sort of watching Javier Elliott walk through the mix zone and get on the bus and I thought, where are we going to see you again? Are you going to sort of make your mark at Liverpool or just convince Arnislot to keep you? Or are you going to go and have a new adventure elsewhere? And the adventure has turned sour, hasn't it? Because Arnislot obviously didn't feel that he really fitted in with Liverpool.

21:32Christian Purslow:He was obviously upgrading in certain areas. So he played 100-odd games for them.

21:36Henry Winter:One that got a league-winner title.

21:38Christian Purslow:Start the season, he only played twice in the Community Shield and then came on for Mo Salah for the last five minutes of Liverpool's game against Newcastle. And that period as a substitute has caused complications with this loan, which I hope you'll be able to explain to me why he's in this impasse at the moment with Aston Villa and Liverpool.

22:02Henry Winter:Well, before we get to the impasse itself, let's just think about the loan market. I was really struck yesterday when reading all the reviews of the January window. I think there were over 30 incoming deals into Premier League clubs. I think 14 of those were loans. So for... The Athletic did a very good breakdown of that, didn't they?

22:27Christian Purslow:That was fascinating to read.

22:28Henry Winter:Yeah, I was struck by just the sheer numbers. And I'm not surprised because over my career, the loan market has developed quite dramatically. I checked my history. Loans have actually been part of top flight football for a very, very long time. They first came in in the 1960s in English football. But in that time, they were just a very simple device, almost always used for up and coming players or players, you know, at the back end of their career who had some contract left. and they were between higher and lower level clubs, an opportunity to get a player some playing time and to save some wages while they did so.

23:08Henry Winter:And it was only in 2003 that loans between Premier League clubs were allowed. That was a seismic moment in the loan market and it has developed in the last 23 or 4 years. Rather like financial markets develop, more and more sophisticated financial instruments come in as market forces dictate and as investors and market participants become more sophisticated. And if you think about it, that really is the journey of top level football and Premier League football. We now have many clubs owned by major financial institutions, run by extremely sophisticated financial investors. So it's no surprise to me that the plain vanilla loan of a of a young player um has become these loans plus obligations with conditions you're going to have to explain this to me because i mean it's i

24:09Christian Purslow:understand friends and friends with benefits but these are loans loans with obligations and

24:14Henry Winter:well the simple let's let's think about it very simply put and we should use harvey elliott as a good example. But the basic loan, no problem. Six months, back end of the season in January, off the wage bill. Well, let's now do the slightly more complicated loan with options. And they've been around for the last 10 to 15 years. And this sprung from the very simple fact, I think, that receiving clubs started to wake up to the fact that, look, you've got a player who may be, you know, not performing, maybe fallen out with a manager, maybe coming back from injury. we're taking him off you we're paying some of his wages we get him playing again it goes well and we've effectively contributed to rehabilitating that player and then he bounced back to you and you sell him to somebody else for a load of money we've done the hard yards and you make the benefit so we saw options creeping where that receiving club could say if he comes to us and he does well and we like the player at the end of the loan period we'd like to have first dibs on buying the player, the option to buy him.

25:17Henry Winter:A pre-agreed price if all's gone well. And we saw lots of those deals. But then this loan with obligation next stage crept into the market. And there's a very simple reason for that, because clubs loaning players out and granting options, clubs now owned by sophisticated financial investors who understand the basic truism of financial markets, the options are very valuable. You're granting all the power to the club with the option. And this doesn't work well for that club if the receiving club chooses not to take up the option and sends the player back because the player's out the door, thinks he's halfway to this new club, he bounces back.

26:01Henry Winter:And so clubs said, hold on, we're not going to make this an option free at your description if you take the player on loan and he does well you have to buy him at the end of the loan period and the receiving clubs would say well hold on i might not be able to afford to i haven't got the money um we're buying him to chase promotion or we're buying him to chase european football or very common henry we're buying him to try and survive the Premier League and so clubs said okay fine if any of those good things happen you have to buy the player that's a loan with an obligation sensible balance of risk between the selling club and the buying club you've bought this player to help you achieve your sporting objective if you achieve that objective your financial performance improves you have to buy the player

26:52Christian Purslow:so this is what's happened in the Harvey Elliott case the agreement between

26:56Henry Winter:But that is rather than an obligation with a condition that is purely the sporting outcome where the team finishes. That is an obligation linked to the players contribution. And you can see the logic of that because it's all very well saying, OK, we're Aston Villa and we will take Harvey Elliott at the end of the season if we make the Champions League. But from Aston Villa's perspective, they could reasonably say, but actually what we don't want to be in is a position where we made the Champions League, but it had absolutely nothing to do with Harvey. Either he got injured or was terrible and didn't play at all.

27:37Henry Winter:And so that is where you have a loan with an obligation to buy conditional on him playing a minimal number of games. which in Harvey's case was if he played 10 games between last September the 1st and the end of this season and we have an impasse, your word.

27:55Christian Purslow:Just rewinding on the impasse, Villa had done all their scouting on him, they'd done all the data on him, this is obviously pre-season, they liked the look of him, they brought in, there's an extra dynamic here and you would understand this having worked with both and knowing the club, Aston Villa so well from your time as chief executive there. The fact is that Monchi was leaving the building and obviously Unai Emery was basically taking over everything, it seems, at the club. And there is this famous picture of Harvey Elliott signing his loan agreement with Unai Emery on his right and Monchi on his left.

28:30Christian Purslow:And then Monchi's leaving the building. So does that put the player in a difficult position? Because he's almost been brought in by one person. Obviously, the scouts liked him. And then maybe Unai Emery looked at him and thought, actually, you don't quite fit into the way I want to play.

28:48Henry Winter:Yeah, a different form of one of our favourite buzzwords, politics, that some political issues there between the sporting director and the manager. We read about that that didn't go well. The simple facts from the outside looking in are that Monchi did leave two or three weeks after that window. And so the inference, surely, and the briefing seemed to be, in fact, not just briefing. Let's be absolutely fair to Unai. He could not have been clearer on the record very quickly that Harvey does not fit into my long term plans for whatever reason.

29:19Christian Purslow:For tactical reasons. Yeah. Presumably there must be an element of financial as well, because there's a sort of slight disagreement, you know, whether it's 30 million pounds was the obligation that Villa would have. 30 or 35. Or 35 from Liverpool's perspective.

29:33Henry Winter:Reading between the lines, it's 30 plus bonuses would be my guess. That's just the outside. Right. Let me be clear. I'm just reading what we're all reading. But I'd like to ask you when on the 1st of September, if you were Harvey, Elliott or Liverpool and you're going to Aston Villa. OK, as a title winning player, 140 games for Liverpool with a 30 million, 35 million transfer next summer. I did you think that that was a transfer or did you think it was a loan? If you're Harvey or Liverpool, in other words, did you expect to become a full time Aston Villa player?

30:06Christian Purslow:Because he would have backed himself, because he's got the momentum of doing well with the under-21s, playing for Liverpool, even if he didn't fit into Slott's plans for this season. Absolutely, that he would be going there and doing well and he would have backed himself. Yeah, 10 wouldn't have seen a...

30:22Henry Winter:I don't think 10 games would have seen like a high hurdle.

30:26Christian Purslow:No, not for him. I mean, he's a very sort of exuberant, positive character. Life and soul of the dressing room, his under-21 teammates were saying. And there was also, there's a lot of goodwill towards Harvey Elliott. A, because of his character and B, because he is, well, he's gone on with things there in a very difficult situation. I think it's incredibly sad what's happened to him. And I think this is like this great career was just taking off and it was reaching for the skies, reaching for the stars. And then it's been stopped. Fair enough, a manager like Unai Emery, if he doesn't fit into his plans.

31:04Christian Purslow:Fair enough, Ivano Slott at Liverpool, Harvey Ellick doesn't fit into the Liverpool's future development. But surely there's some way they could have sorted some sort of agreement.

31:15Henry Winter:I would just like to say that the theme that we're discussing here are different variations on how the loan market has become so much more complicated than where it was 20, 30, 40 years ago. And in my opinion, sometimes these performance related criteria to those obligations have unintended consequences. And in this case, in plain English, the deal that was done, maybe by Munchi, not by Unai, has a perverse incentive for Unai not to pick the footballer. because if he picks him two more times, they will have to write a cheque for£30m to£35m in the summer and more importantly, take a player to Villa who Unai has said categorically he does not want in the building next season.

32:09Henry Winter:That is utterly and completely dysfunctional. But no one wins in this case. Who benefits? Nobody benefits. But common sense would suggest compromise is required.

32:24Christian Purslow:So you're the mediator. What would you do? What would you recommend? You know both clubs well. We've got a kid in the middle who just wants to play football, who is being so professional.

32:34Henry Winter:Is that my new job, the mediator?

32:35Christian Purslow:Yeah, I think the mediator. Absolutely.

32:37Henry Winter:OK, well, that's a very good job. You go on, Bennett. OK, I'll take the brief. I would, well, mediation, you know, you have a quiet word with the two sides and then try and get them together. So I'd start with Unai Emery. He's the key decision maker at Villa and he has been utterly clear, admirably straightforward. Some people won't like the fact that they changed their mind on whether they like the player so quickly, but he's at least been honest about that. And Unai needs to get together with probably the key player on the Liverpool side. Richard Hughes would be involved, but I think this is at the Michael Edwards level.

33:13Henry Winter:He's the CEO of football. he believed he had sold Harvey Elliott on a deferred transfer where he would move next summer after a period of being on loan and it hasn't worked out and Unai and Michael in a room Unai would say he's not going to play because we do not want to buy it I'm in the middle of an injury crisis we're in three competitions we may play another 20-25 games

33:38Christian Purslow:no Telemans, no McGinn, no Kamara

33:40Henry Winter:Correct. They've brought in a couple, but they're shorter players, as we know, because Harvey has had minutes in recent weeks. I'd be saying if I was Unite, Michael, there's a really good chance if I didn't have this contract hanging over my head that Harvey would get plenty of football between now and the summer. And come what may, he's coming back to Liverpool. And I'm sure unless your plans have changed, you want to sell him in the summer.

34:06Christian Purslow:Can they change the contract to this stage of the season?

34:08Henry Winter:Yes, I believe they can. I believe if the three parties, the player and the two clubs, all agree, then they could modify the agreement. And my suggestion to Michael would be, look, Michael, I know right now it's important that Aston Villa are playing the wages. Liverpool's a very well-run club. They have plugged into their financial models this season that Harvey's gone and his wages are being paid by Villa. and next summer they're receiving a transfer fee. Well, the transfer fee bit of that model no longer exists. He is not going to be bought by Villa under any circumstances. So what do you do in that situation?

34:47Henry Winter:If I'm Michael, I would be saying to myself, if he gets more minutes at Villa between now and the end of the season, his value will be maintained higher. He will be a player proven at a fantastic club under a brilliant manager playing in real high jeopardy football to try and be in Europe, to try and win the title, to try and win the FA Cup, to try and win the Europa League. All of those are minutes available to Harvey if I tweak that contract. Listen, if they had gone into the market and signed a player like Harvey on loan last week, a really good footballer, proven Premier League, his age, his profile, his salary, a typical loan fee for that would be£1 to£2 million, maybe£2 million.

35:31Henry Winter:but if he plays a lot they reduce the loan fee so an incentive to play him so my logic as a deal guy is if I'm Villa to get off of the hook to play an obligation which means I'm now able to play this player more often I should pay Liverpool a loan fee for that and if I'm Liverpool I'm happy because the boy's going to be playing and that's the deal I would try and media

35:54Christian Purslow:and then they sell him in the summer to someone else

35:56Henry Winter:he comes back in the summer hopefully he plays 10 games more this season at least on or off the bench in a fantastic season for Villa he bounces back and he's the Harvey Elliott he was last summer a highly desirable young English footballer still worth the 30 to 35 million that Villa paid but if he sits not playing football for a purely contractual reason for the next five months I think everybody loses

36:21Christian Purslow:so just to clarify because he played for Liverpool at the start of the season and has obviously played for Villa he can't play for another Premier League or European team. He could go to MLS. He could. He did look at one of the clubs there and it didn't sort of quite work. Well, let's wish him well because, you know, we cannot forget there's a human being in the middle of this who desperately wants to play. Yeah. And because of effectively red tape, he can't. So let's hope that they take your route through the jungle.

36:55Henry Winter:Yeah, I would say it's emblematic of what our common theme here, that as complexity has crept into the loan market with these obligations and conditional obligations, they can have unintended consequences that go to the very heart of what we're really talking about. We're not talking about a derivative option in the stock market. We're talking about a human being, a footballer. So a clever, astute financial agreement actually in practice produces a ridiculous dysfunctional outcome that a coach can't pick a footballer. Would you take my point?

37:33Christian Purslow:I do. And let's move on quickly to what I think is a slightly more straightforward loan deal in Calvin Phillips, who went to Manchester City from Leeds United. He's had very few starts there. Pep obviously had a look at him, didn't feel that he sort of fitted in. I have to declare an interest here, by the way.

37:55Henry Winter:Your interest is? So Calvin Phillips is a player that I tried to sign, I think, three times. From late 2018, I had a Spanish sporting director called Suso. And he loved Calvin Phillips. And we watched him five times. When we got out of the championship into the Premier League and Leeds didn't, after that infamous Derby semi-final game, tried to buy him. tried to buy him as they were coming out and even tried to buy him when they were in the Premier League. And I always felt very chuffed that he eventually broke through into the national consciousness. Obviously, Leeds knew what they had, but he broke through and became, I think, at the Euros, one of the players of the tournament in the heart of midfield.

38:42Henry Winter:With Declan Rice in the middle.

38:44Christian Purslow:He was outstanding and then got voted England player of the year. Yeah, I mean, he was, Pep just obviously didn't rate him, whether that was tactical or technical elements with him. What did he pay for him, 45 million or something? Yeah. Yeah, and he was on, you know, good money there. It was reported at sort of like 150 grand a week. And look, you know, you've met Calvin, you've talked to him. He's a really engaging character.

39:09Henry Winter:He is a lovely lad.

39:11Christian Purslow:I remember going to see him for the first time at Thorpe Arch when he was at Leeds. And I got there early and I parked in a small car park over the road next to the prison. I think it's Wilston Prison. And I said, oh, I got up here early and was talking to Calvin. He said, oh, yeah, my dad's in the prison. So you just thought, you know, sometimes you find with the younger players that they are missing that sort of mentor or father figure individual in his life. So I sort of followed his career and thought, well, he played well under Bielsa, who has that presence. He was the absolute center of that system.

39:40Christian Purslow:And he played very well under Southgate, who's got that sort of emotional intelligence of dealing with players, young players like Calvin. And I thought when he went with Pep, Pep's occasionally a bit wired, but you look at the young players like Foden and O 'Reilly, who's developed under him. He hardly gave him a kick. He hardly gave him a game. And then obviously he went out on loan to West Ham. It didn't work there. And he went out on loan to Ipswich Town and it didn't work out there. clearly the player has to take some culpability responsibility in not delivering for those well

40:12Henry Winter:let's think about the common theme here apart from the fact these are all English footballers who find themselves in in differing types of sticky situations and and in different forms of you know let's face it failed loans loans that haven't worked either for a performance reason or a technical reason and I feel terrible for Calvin because you know he held on at Leeds and The romantic in me hoped he'd be a one-club legend, be the main man at Leeds.

40:40Christian Purslow:They always think to him whenever he returns,

40:42Henry Winter:you're Leeds and you know you are. Yeah, I always thought he might be. He never was tempted to leave to join us and he stayed. Ultimately, money talked, as you say. I don't know what his peak salary at Leeds was, but it went up hugely with a move to Man City. And the club presumably couldn't resist the type of money that was being put to them. Yeah, I mean, I didn't think it was a spectacularly big transfer fee for Calvin at the time, by the way. I didn't but they'd have paid him well it was a six-year deal he's still got two and a half years left on that deal he went there in 22 so to answer your question about the loan this is just a bit like this is a bit like Raheem when you have a couple of loans that don't work Henry they're very damaging they they they damage your market reputation and so I caught it caught my eye he's gone to Sheffield United, obviously round the corner.

41:31Christian Purslow:Chris Wilder will be superb for him. I agree. Patrick Bamford's there back in Yorkshire. Let's hope it works out for him.

41:39Henry Winter:Let's just be clear. You know, this is a guy who's earning you think 150? That's the reported figure. Okay, reported figure 150 grand a week, two and a half years to run. Sheffield United's budget for players you know, they are tight. They run the tightest tight. I'll be surprised if they're paying City much more than 20, 25 grand a week. So this is nothing to do with money. This is the end of the line. And I'm going to say it. I'm sad to say it. But he's entering that, you know, last chance saloon where three loans and you're out. You know, if this loan doesn't work, if he can't do it in the championship, near to home under a great coach like Wilder, then his options in the summer will be limited.

42:20Henry Winter:And he'll be in the Raheem situation. he'll have two years to run on a high salary does he want to pick up his paycheck or do they does he become the next raheem sterling i wish calvin all the best i hope it goes well at shefford united and i wonder what the future holds for him alone again naturally it's terrible

42:41Christian Purslow:gordon bennett you can't have a go at me look i hope you've enjoyed the episode and please leave a review we're up and running on emails now so for all your questions our addresses get in touch at the football boardroom dot co dot uk

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