Deal or No Deal: The Impact of Brexit on the Premier League
With the Coronavirus pandemic currently dominating the news, it is sometimes easy to forget that Britain's exit from the European Union is impending. Much like COVID-19, the effects of Brexit will be significant and widespread, but what exactly does it mean for the Premier League?
In this article, Fin Piper and Kayleigh Jenkinson give their views on what changes Brexit will bring to England’s elite level of footballing competition.
“To hell with the rest of the world… I think we’ll be far better out of the bloody thing. In every aspect. Football-wise as well.” These were the words of then Cardiff manager Neil Warnock when asked about Britain’s’ upcoming exit from the European Union during a press conference in January 2019.
While Warnock seems steadfast in his belief that Brexit will be nothing but positive for the Premier League, the reality of the situation is more unclear. Much of the impact will be dictated by Boris Jonhson and Parliament's ability to negotiate a deal with the EU come the deadline at the end of the year, as Premier League clubs and stakeholders watch closely to try and plan for a very different post-Brexit future.
This article examines the possible outcomes of this future, including the impact Brexit will have on;
Work permits for European nationals coming to play in England;
The FA’s ‘Homegrown Rule’;
The recruitment of youth players;
And the finances of the league and its clubs.
The 17.4 million people that voted to leave the EU almost certainly did not have professional football at the forefront of their minds, however their votes have opened the door to create a much changed Premier League in the coming years.
What is Brexit?
As most will be aware, Brexit is the name given to describe the UK’s withdrawal from the European Union. The question of EU membership was given to the British public as a referendum in June 2016, with 51.9% voting in favour of leaving the union. When the Brexit process was triggered in March 2017, the aim was for it to be completed by the 29th of the same month, but complications in negotiating the withdrawal agreement led to three requests for delay, dragging out the negotiations until the 31st January 2020 when ‘Brexit Day’ finally came to fruition.
Since then, the UK has been in a so-called ‘transition period’, which will last until the 31st of December. During this time, the UK remains in the EU customs union and single market, and continues to obey EU rules, but is no longer part of the union’s political institutions. Therefore, during the transition period, Brexit has no effect on the Premier League.
However, the 1st of January 2021 brings change not only to football, but to Britain as a whole. This is the deadline for the UK Government to negotiate a deal with the EU. If a deal is successful, the UK will start a new relationship with the EU, but without an agreement, the UK will immediately leave the single market and customs union, with potentially catastrophic effects.
As anyone who plays the football video game ‘Football Manager’ would know, when the transition period ends on every new game, scouting and signing players from nations across Europe becomes exponentially harder. In the Premier League, this will become increasingly difficult due to Brexit’s impact on work permits.
A work permit is an official document from a country's governing body (in relation to the Premier League, the UK Home Office) which grants an individual permission to work in a particular country. Currently, work permits are only required for players from non-EU countries arriving to the Premier League, as European players are protected by the freedom of movement the EU allows for.
In order to gain a work permit, a player has to gain a Governing Body Endorsement (GBE) from the FA, but there are criteria a player has to meet before they can receive one.
When deciding on granting a player a GBE, the FA currently use a point-based system that takes into account the ranking of the national team that the player represents as well as how regularly they do so. For a player whose country ranks from 1-10 in the FIFA World Rankings, they are required to have played in 30% of their recent matches. For those ranked 11-20 the threshold is 45% of matches, for 21-30 it sits at 60%, and for 31-50 it is 75%.
If a player meets these criteria, they are deemed to automatically qualify for a work permit. However, an appeals process does exist for those who do not meet the requirements, or those whose country is ranked lower than 50th in the world rankings.
If a club wishes to appeal, they must do so to the FA Exceptions Panel, where the appeal will be considered under both an ‘Objective’ and ‘Subjective’ Criteria.
Under the Objective Criteria is where the points-based system takes effect, with a player needing to meet a certain amount of points in order for the club to win the appeal. The points are centred around the transfer fee paid for the player as well as their wages, and is split into Part A and Part B. In Part A, for example, if the fee paid is above the 75th percentile of all Premier League transfers in the previous season, 3 points will be awarded. Similarly, for wages, if the player is receiving an amount that is above the 75th percentile of the top 30 earners at each Premier League club in the previous season, 3 points will again be awarded. Participation in continental football is also considered, as well as the level of the league the player is being purchased from.
Part B is a collection of 1-point criteria that includes lower transfer fees and wages as well as exceptions for free transfer based on the virtual market value of the player. 4 or more points from Part A is enough to win the appeal, as well as 5 or more points from Parts A and B combined.
The Subjective Criteria is discretionary, and therefore harder to predict. Under this head, the panel will consider how short the player fell of meeting the automatic criteria, as well as the reasons why they did so.
As mentioned, this currently only affects non-EU players. But in the FA’s annual financial report published in April 2020, it was announced that once the transition period is over this point-based system will also apply to European nationals.
The potential issues this may cause to Premier League clubs is best illustrated by one example; Leicester City. When they extraordinarily won the competition in the 2015/16 season, both N’Golo Kante and Riyad Mahrez were central to this success.
Yet, had this work permit system been in place at the time Leicester signed them, they would never have stepped foot in the Premier League. Both players were relatively unknown and were therefore not regulars in their respective French and Algerian national teams, meaning they would not have qualified automatically for a permit. Any appeal Leicester launched would also have likely been unsuccessful considering how much the players cost; Kante was signed for £5.6 million and Mahrez for £400,000. As Leicester were a newly promoted club at the time, the players wages would also have been low in comparison to the rest of the league.
Without two of their key talismans, Leicester would have never pulled off the miracle that they did, and both players may never have developed into the world-class footballers they are now. Without the influx of these types of players from throughout Europe into the Premier League, the gap between the smaller and larger clubs in England will continue to grow as the financial muscle-power of the ‘Big 6’ becomes even more prevalent. However, one positive that may arise from the situation is how smaller clubs may be forced to rely on, and therefore develop, young British talent.
The Homegrown Rule
The aims of the FA and the Premier League are fundamentally different. The FA sees the league as the perfect opportunity to nurture homegrown players for the national team, whereas the Premier League operates in a solely commercial sphere, trying to get the world’s biggest stars to the league to increase its international popularity, and therefore profit margins.
In order to find a balance between these conflicting aims, there exists a ‘Homegrown Rule’ put forth by the FA for clubs to adhere to as part of the Leagues ‘Elite Player Plan’. Currently, the rule allows for no more than 17 foreign players in any team's 25-man squad, leaving room for 8 homegrown players. For a player to qualify as homegrown, they must have trained in England for three years before the date of their 21st birthday, giving reason for why Manchester City, for example, keep 35 year old former England international Scott Carson on their books, despite there being very little chance of him ever making an appearance.
This rightfully may be seen as ‘cheating’ the system, complaints shared by England manager Gareth Southgate, and has subsequently led to much speculation over recent years regarding alterations to the homegrown rule. A Times report in 2018 revealed that the FA had proposed the limit of overseas players should be reduced to 12, and Brexit could be seen as the catalyst for this change to be made.
This is because the FA will no longer be bound by EU anti-discrimination laws, in which protection for discrimination on the basis of nationality is central and provides a fundamental conflict to the provision of a homegrown rule.
Initially, this can be seen as nothing but a good thing for the league; rarely will you find a fan who does not wish to see more British academy talent rising through the ranks at their club. But one possible side effect of the change might be the ridiculous inflating of young, homegrown stars. With top clubs suddenly needing to fill out the new quota, we could see players as young as 14 being poached from smaller clubs for transfer fees upwards of 10 million as they make a desperate effort to plan for the future.
As academies of clubs such as Chelsea and Manchester United become overridden with these young homegrown players, their development will suffer as a result of lack of game time, meaning the change to the homegrown rule may have the opposite effect to what was intended.
The Recruitment of U’18 Players
Aside from the presence of homegrown players in Premier League academies, a key part of youth football is the recruitment of under-18’s from around Europe.
Article 19.1 of the FIFA regulations states that international transfers of players is only permitted if the player is over 18 years of age. However, Article 19.2(b) provides a key exception to this rule; if the transfer takes place within the territory of the EU, then players as young as 16 can also be transferred.
British clubs have been reassured by FIFA that they will continue to enjoy the benefits of this exception until the end of the transition period, but from the 1st of January 2021, it is highly likely that only players over the age of 18 will be allowed to transfer into the Premier League.
This area of football often goes under the radar, with much of the focus over the transfer windows being on big money moves for already established stars. But its importance cannot be understated. Arsenal have been a club which have particularly benefited from the Article 19.2(b) exception in the past, using it to their advantage to poach club legend Cesc Fabregas from Barcelona when he was just 16, and Nicolas Anelka from PSG when he was 17. In recent years, Liverpool have signed highly rated Dutch youth internationals Sep Van Den Berg and Ki-Jan Hoover and using the exception, the latter of which having recently been transferred for Wolves providing the Reds with a healthy profit.
The effects of losing the EU benefit will not be seen immediately given the ages of the players in question, but 5 years down the line the quality of young, overseas talent coming out of Premier League academies may begin to dwindle. This will put English clubs at a significant disadvantage in comparison to other European leagues, and force them to splash out huge sums of money in the transfer market even more so than they do now.
The money flowing within the Premier League is staggering. Over the 2016/17 season, £3.3 billion was collected in taxes from players and clubs, equating to 0.53% of all tax receipts collected in the country over that time period, an unbelievable amount for a single organisation.
However, despite the league's riches, it would be foolish to suggest that Brexit will not have an impact on its spending power. This is largely down to two factors; a potential decline in foreign broadcasting and the fall of the pound.
46% of the Premier League’s broadcasting revenue is collected from overseas, with rights totalling £4.35 billion in the period ranging from 2019-2022. What attracts these foreign broadcasters to acquiring these rights is the desire of the public of their respective nations to see their homegrown talent develop and flourish in the best league in the world. For example, 2.3 million Colombians watched Everton’s recent 1-0 win against Tottenham (the most watched match in the country over that weekend), not because of a mass support of either clubs in the country, but because 2014 World Cup star James Rodriguez made his debut for the Toffees.
As discussed, Brexit’s effect on work permits and the recruitment of under-18 European players may see a reduction in foreign players in the Premier League, subsequently leading to less interest from overseas broadcasters to purchase the rights to show games. The knock-on effect of this is less revenue for Premier League clubs. Currently each team receives £43.2 million each season from overseas TV rights, but it would not be surprising to see this number fall in the coming years, something that will be especially worrying for clubs given the already crippling financial effect of the coronavirus pandemic.
Since the referendum, the value of the pound saw an initially rapid and now more steady decline. The financial impact this has on football is best illustrated with an example.
On the 30th August 2015 Kevin de Bruyne transferred from Wolfsburg to Manchester City for £55 million/€75m. At this time, the pound was worth €1.36, but at the time of writing, the pound currently sits at €1.1. This means that if City were to make the same €75 million payment for De Bruyne this transfer window, it would instead cost them £68 million, a £13 million increase from when the transfer was actually completed in 2015.
£13 million may not seem a lot of money for a club like Manchester City, but for smaller clubs, especially given the current climate where most are struggling financially, that extra money may make all the difference in their ability to sign a major European talent.
The additional legal opinion for this piece is written by Kayleigh Jenkinson. Kayleigh is entering the final year of her International Politics & Policy and History degree at The University of Liverpool and is also the VP of the UoL Solicitors Society.
Deal/No Deal Exit
As we have stated, a no-deal Brexit will present football with a plethora of issues.
In regard to a no-deal Brexit in a national context, leaving the EU without a deal is likely to cause the pound to drop in value. It has been noted by The Economist that every time Britain has come close to leaving the EU, the pound has fallen against the dollar/euro. This change in value is of significant concern in the transfer market, and is forecasted to take a harder hit on League One & League Two teams, as they do not have the backing of lavish broadcasting revenue that playing in the Premier League brings. However, the EPL’s revenues are heavily funded from overseas at 46%, and with the restrictions on work permits for players, this will likely affect the playing time of overseas players. This ultimately will reduce investment as foreign companies are investing with the idea that they will get to broadcast their nations star players progress.
In regard to what Brexit deal will mean for the Premier League, Dr García from Loughborough University has previously discussed the possibility of a Breakaway European ‘Super League’ in response to a reduced talent pool that Brexit will bring;
“Brexit certainly increases the chance of the creation of a breakaway Super League…we have clubs in the Premier League who will see their income reduce and their value reduce. They will need to make up that loss somehow, so how can they do it?”
It is predicted that signing players from the continent will be an all-round more complex process, due to the work permit that Brexit will require them to possess. With 25% of the Premier League consisting of European Players, the eligibility for obtaining work permits is a point of concern for club managers.
The Premier League is one of the most diverse leagues in the world, with 113 of the world's 195 countries being represented by either players or managers. The win for leave in the 2016 referendum can be argued to thereby be at odds with one of the fundamental values of the competition; an openness to individuals from all walks of life, giving rise to a plethora of global talent.
Not only this, but Brexit’s combined effect on work permits, the recruitment of young players and the financial muscle power of clubs could see an end to the league being widely considered the best in the world. A return to the early 90s may be on the cards when Serie A was the dominant league in world football as players realise that the money lies elsewhere, and others find out that they are not eligible to play in the Premier League at all.
The consequences of Brexit will become clearer in the months and years following the January 1st deadline, but as the political landscape changes in Britain, so too does the future of the Premier League.
This article was written by Co-Founder, Fin Piper