Tuesday 26 July 2011

Are United trying to cut the wage bill?

It pays not to believe anything Sir Alex Ferguson says about potential transfers. This is not a man who loves sharing secrets with the media. So we should all take his comments in the US yesterday with a pinch (or perhaps a bucket) of salt. Having said that, Fergie said some quite specific things about the financial implications of the club's summer sales and purchases which are worth a closer look at. This is what he said (my emphasis):
"At this moment, I can't see another addition. The type of player we might have been looking for is not available.
"We lost five players in their 30s this summer. That helped finance the three younger players I have brought to the clubI am happy with the players I have got at this moment in time." 
The "five players in their 30s" are presumably Wes Brown, John O'Shea, Owen Hargreaves, Gary Neville and Paul Scholes. In addition of course, one rather important player in his forties, Edwin van der Sar, has also left the club.

Of these six departures, only Wes and JOS were sold for a fee, so presumably when talking about exits helping to "finance" new arrivals, Fergie is talking about wages. The question therefore is how much has been saved in wages?

Needless to say, we are entering a world of guesswork when it comes to players' salaries. These are my best guesses, but if anyone can find sensible sources for more accurate figures, please let me know.

On these figures (and indeed on anything roughly near them), the club is currently sitting on some significant cost savings. The estimated £10.7m per annum in annual wage savings is 8% of the total club wage bill in 2009/10 and around 11% of the club's annual cash profits (EBITDA).

The estimated saving of c. £200k per week is also (coincidentally?) around the level that the press has speculated United would have to pay Wesley Sneijder to prise him from Internazionale.

So what is going on here? The cash for transfer spending is definitely available. As I wrote in June, when the club publishes it's full year results in October, they will show a cash balance of c. £180m at 30th June 2010. Only around £47m of this has been spent. There is over £130m still available.

The club is clearly crying out for more creativity in central midfield. Scholsey made sixteen league appearances last  season and has gone, Gibson is for sale, isn't good enough and hasn't travelled on the US tour, Fletcher is still ill, Giggsy is a stand-in midfielder entering the end of his career. Meanwhile, Barcelona passed through us and around us at Wembley in a way that makes the need to strengthen crystal clear.

I don't know why Fergie said what he said yesterday. I hope it is more smoke and mirrors to keep the rest of the world confused. I hope it isn't a sign that not only do new signings need "financing" by player exits, but that the edict has gone out to reduce the wage bill. Is the subject of dividends to the Glazer family back on the agenda? Is this an attempt to boost short-term profits for a Hong Kong float (at the cost of the long-term development of the club)?

Frankly, what's the point of being the most commercially successful club in England with a "global fan base" of 330 million and £130m+ still in the bank if we can't afford a decent new central midfielder?

Good old Glazernomics.