Does Money Buy Happiness in the English Premier League?

AuthorEnzo Profili (McCormick ’21)

Over the last years, the Premier League has seen an unbelievable increase in spending on transfers and wages. Transfer expenditure in the summer window has risen almost sevenfold, from £215m to £1.4b, in a matter of 13 years; maybe the best example of that is Crystal Palace, a middling club in the division who just splashed £26 million on Mamadou Sakho (who is nowhere near a world class defender).

In this same period, “new” footballing giants such as Chelsea and Manchester City have emerged in the league, sponsored by wealthy owners of the likes of Roman Abramovich, Russian oil magnate. These clubs have spent billions of pounds to modernize themselves, with new state-of-the-art stadiums and training centres, and compete with established powerhouses that have been dominating English football for the last decades, like Liverpool, Manchester United and Arsenal.

Per The Daily Mail, Chelsea spent £806m on transfers and £2.4b on wages since Mr. Abramovich took over in 2003; Manchester City has been even more aggressive, spending £1.011b only on transfers since Sheik Mansour, City’s sugar daddy, took over in 2008.

So, I wanted to examine if all this spending on stars in this new era of football actually yields to better results and ultimately titles in a season, or if a low-profile club in the transfer market with a consistent starting XI (looking at you, Arsène Wenger’s Arsenal) is actually the best way to go. To do that, we’ll examine the relationship between league position and wage and transfer expenditure, respectively, for the last seven seasons.

I started my analysis by comparing wage expenditure and league position in a season (the data was taken from The Guardian). First, I normalized the wage expenditure in relation to the average spending in a season (wage expenditure/average) to account for player wages’ inflation in the period (this figure has risen from £78.5m in the 2010/11 season to £112.35m in the 2015/16 season). This means that if the average spending was £100m and a club spent £200m, it spent two times the average.

 Figure 1. Blue block regards middling clubs; orange block regards top clubs

Figure 1. Blue block regards middling clubs; orange block regards top clubs

 Figure 2. Color/club key for Figure 1

Figure 2. Color/club key for Figure 1

By analyzing the plot in figure 1 we can draw a series of conclusions. First of all, if you run a linear regression (with the logarithm of the variables) you find an R-squared of 0.57, which shows a moderate correlation between the variables. However, it can be seen that there is mostly no difference in spending between 20th and 7th (the blue block in figure 1), where clubs spend from 0.3 to 0.7 times the average for the season. The exceptions are odd seasons from one of the giants (mostly Liverpool doing badly, represented by the three light blue circles just above the orange block). So, wage spending is not really determinant within this range of final positions. If you want an example from this season, Burnley surely spends less than West Ham and yet are well above in the league standings, both in the “blue block” range.

The remaining block is from 6th to 1st (the orange block). This block shows us that there is a very little range of spending for the Premier League champion: it always spends at least 1.9 times the league average (except for the Leicester’s miracle), which can be seen in the last “line” of the graph in figure 1. Also, a 1.5 time the average spending almost ensures qualification for the European competitions.

It is nice to analyze Arsenal in this context. The club usually spends 1.7 or 1.8 times the average, a bit lower than the “necessary” amount to be champion. In the 2016/17 season, however, it spent 2 times the league average, and didn’t qualify for the Champions League for the 1st time since the 1995/96 season, before Wenger’s arrival. Liverpool has a similar story, spending from 1.5 to 1.7 times the league average, and has been disappointing in these last years. Finally, it is good to note how remarkably well Tottenham has been faring considering its low investment (from 0.9 to 1.3 times the league average). Therefore, even amongst the top clubs wage expenditure is not entirely trustworthy as an indicator of final league position (except for the champion).

 Figure 3. Plot comparing transfer spending with league position in the Premier League

Figure 3. Plot comparing transfer spending with league position in the Premier League

 Figure 4. Key for Figure 3

Figure 4. Key for Figure 3

The analysis of the plot in figure 3 is also very interesting. We can promptly see that net transfer spending is not very determinant in the final league position. In fact, if you run a linear regression within this plot you find an R-squared of only 0.07, which means the correlation is very weak.

There are some examples of this. Leicester’s expenditure in the 2015/16 season (1.2 times the average) was six times higher than Mourinho Chelsea’s in the 2014/15 season (0.2 times the average), yet both teams were champions of their respective seasons; Actually, Newcastle’s spending in the 2015/16 season was fifteen times higher (three times the average spending) than this Chelsea’s squad, and Newcastle was still relegated.

Additionally, Tottenham’s performance is also remarkable in this aspect. The club had negative transfer spending from the 2011/12 to the 2015/16 season and still scored 86 points in the 2016/17 season (which would usually be enough to be champion if it weren’t for Antonio Conte’s Chelsea). Arsenal has not been spending much also, except for the 2016/17 season where it spent 2.75 times the average, and has qualified for European Competitions every season but the last.

On the other hand, throughout the last seasons a story of failure has been Manchester United. Last December, Jose Mourinho, United’s manager, complained that he could not spend as much as his rivals. However, the club spent 3, 4.7, 1.1 and 3.3 times the average in transfers from the 2013/14 season up until last season, respectively, being outspent only by Manchester City in the period. Yet, the club has been through an unsuccessful spell, where United has not been in the top three since Ferguson’s last season, 2012/13. As we can see, this situation unfolded not because of lack of transfer spending.

So, with all this analysis, we can conclude that higher spending in wages might yield better league positions (considering the money is well spent, of course), especially if you want to be champion- except if you are Leicester or Tottenham, who are clear overperformers. As for transfer spending, there is no correlation at all between transfer spending and final league position; one might go the Spurs/Wenger or the Manchester City way and still come out as Premier League champions.

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