Leeds United’s cautious approach in the summer transfer market is part of a balancing act, made necessary by Financial Fair Play rules and a wage bill that doubled in 2018.
That’s the interpretation of Kieran Maguire, a University of Liverpool football finance lecturer, who has kept a close eye on the Whites’ financial performance in recent seasons.
He believes FFP, the set of rules that try to ensure clubs do not live beyond their means or buy success with their owners’ wealth, is one of the reasons why the Championship in general hasn’t seen exorbitant spending this summer.
Clubs can run up losses of £15m over a three year period without sanction, but owners can pump in an additional £24m in the form of shares to top it up to a combined three-year loss of £39m.
The issue is complicated by the things that don’t count towards that all-important figure, like promotion bonuses, money spent on academies, community schemes and infrastructure spending.
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Birmingham’s nine-point deduction last season for exceeding losses of £13m a season from 2015-16 to 2017-18 brought FFP sharply into focus for the entire division and may have helped shaped this summer’s spending.
But Maguire points to the make-up of the Championship this season and the reduced spending power of a club who until recently were able to hold financial heavyweight status, when considering why cash hasn’t been splashed liberally.
“I think (FFP) is certainly a contributory factor,” he said.
“I think the other issue is that Aston Villa were historically one of the big spenders and some of the other clubs, such as Middlesbrough, were using their parachute payments as a means of trying to sign players who would increase their chances of promotion.
“Boro have now run out of parachute payments and Villa have been promoted, so two of the big drivers of last year’s transfer market are no longer there.”
When it comes to Leeds United, barring what would be an unexpected last minute spending spree, it’s been a summer of sales rather than purchases.
They’ve sold Jack Clarke (£9m) to Spurs, Mallik Wilks (circa £1m) to Barnsley, Pontus Jansson (£5.5m) to Brentford, Bailey Peacock-Farrell (£3.5) to Burnley, Samuel Sáiz (£2.5m) to Girona and Gamba Osaka paid more to buy back Yosuke Ideguchi than they got when he moved to Leeds in January 2018.
Kemar Roofe’s move to Anderlecht, completed last night, landed the club between £6.5m and £7m, although they have to share 15 per cent of the profit they’ve made on the striker, who cost £3m, with Oxford United and West Brom.
A raft of other departures have brought in either undisclosed fees or simply taken players who were surplus to requirements off the wage bill. Although they posted a £1m profit for the 2016/17 financial year – thanks largely to transfer fees – a £4.3m loss followed in 2017/18.
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Maguire says player sales and a reticence to splurge on transfer fees – this summer’s marquee signing Helder Costa is technically a loan signing, even if Leeds will eventually have to stump up £15m – help to keep the Whites safe from potential FFP-related harm.
“What they have been doing very successfully is recruiting players and also using their academy to sell players on to mitigate those losses,” he said.
“They’ve certainly had one eye on FFP compliance.
“I think the other issue is that the last two owners [Massimo Cellino and current owner Andrea Radrizzani] simply haven’t wanted to subsidise the club to the tunes of hundreds of thousands of pounds per week.
“They’ve effectively set a limit.
“The Leeds wage bill did go up by 50 per cent in 2018, so under (owner) Mr Radrizzani, he certainly spends a lot more money than his predecessor in terms of wages and I think if club therefore said if we’re going to increase the wage bill significantly, we have to be a bit more cautious where the transfer market is concerned.
“They’re trying to get some balance between those two main player cost areas.”
Where Andrea Radrizzani has come in for criticism from sections of the fanbase this summer is in what they perceive as a lack of investment in the squad.
Head coach Marcelo Bielsa has mentioned FFP a couple of times when discussing player departures, but some supporters accuse the club of hiding behind the rules to both justify player sales and mask an unwillingness to spend on transfer fees for replacements.
According to the documents submitted to Companies House, there has been no equity investment by owners at Leeds since May 2018.
This means that for FFP purposes for 2018/19 the maximum loss permitted was £5m, not £13m. And it reduced the FFP loss limit for the rolling three-year period to the end of 2018-19 to £31m, down from the maximum of £39m.
However Maguire says fans don’t always take into account the money Leeds are spending week in and week out on Bielsa and the squad he’s assembled and he highlights the club’s past financial woes as a good reason for exercising caution.
“The average wage at Leeds has gone up from £10,000 to £15,000 a week between 2017 and 2018 so there is more money being spent. But the fans don’t see it because they see, well we haven’t signed a new centre forward,” he told the YEP.
“But if two or three players are given new contracts, it means substantial increases in expenditure as far the club is concerned.
“From the fans’ point of view, he’s still our left-back as he was last season but we don’t know the intricate details of football payrolls. We’ve been conditioned as football fans to believe that new is better and bigger transfer fees are better.
“Leeds have been relatively cautious in the transfer market, they’ve had faith in their academy, they have invested heavily in the manager and getting more out of the existing squad.
“But if that doesn’t turn out to be successful you turn round and say we sold Chris Wood for £15m and still haven’t replaced him with a £15m striker.
Even when the club has spent money, on the likes of Patrick Bamford, if you sign a player and he goes missing for 12 games because of injury, fans forget that very quickly, they turn around and say we should be trying to spend our way out of trouble.
“Leeds historically have done that, under Peter Ridsdale, and I’m not a Leeds fan but I have lots of friends who are and I don’t want to see the club go through those traumatic times again.
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To a certain extent, the hangover of the Ridsdale era still hangs over Leeds, because of what happened in subsequent times with subsequent owners.”
What this owner has done is maximise the amount of cash Leeds United generate through their various commercial revenue streams, which hit record levels in the last financial year.
There’s a sardonic running joke, popular among Leeds fans, that they’re the FFP champions or 2019-20 FFP Cup winners.
But one area in which they do genuinely outperform many of their Championship rivals is in turning reputation into cash.
And for that, Maguire gives Radrizzani praise.
“I think he is very commercial, there’s more money coming in through ticket sales.
“He’s been superb in terms of how he’s organised the commercial side of the club.
“It is without doubt the biggest club in the Championship in terms of using its history and heritage to sign up commercial deals and sponsorship deals.
“We await to see the consequences of the tie-up with the the San Francisco 49ers, but that has potential.
“Leeds, I know it’s a cliche, it is a sleeping giant and everyone is aware of that but what I think he has managed to do is bring some of that awareness of the club into the bottom line in terms of generating revenue.
“From a business perspective I think he’s been very smart.”