Arsenal’s £200m War Chest – The Truth

So Arsenal director Lord Harris of Peckham has announced to the world that “there’s over £200million in the bank.” As expected, this has led to the usual Twitter brains demanding we “spend some F’ing money” and the usual lazy journalists leading with headlines such as The Expresses  “Arsenal’s £200m War Chest.”

The fact is, Arsenal having £200m available for transfers is a big myth. We do not.

Yes, it is correct that we have £200m in the bank, but this is not unusual for this time of year. Season ticket money has just been paid, alongside lump sums of sponsorships and other incomes. I bet if you look at every club throughout the Premier League, they are all cash rich at the moment – bar Liverpool who have spent everything.

Now every adult will know, having money in the bank is very different to having money to spend.

For those who get paid monthly, you will be aware of this scenario.

You get paid on the 31st of the month, it so happens to be a Friday. You have £2,000 sitting in your bank account. Your bills go out on the 1st of the month – your mortgage, your car lease, your TV licence, your Sky Subscription, your utilities, your monthly travel card, etc. As the 1st is a Saturday, these bills will not come out of your bank until the Monday. These expenses come to £1,500.

So what do you do? Go out with the work mates on Friday? Sit in the sun drinking all evening, before heading to Rainbow’s Sports Bar on Shoreditch High Street. Wake up Saturday morning, round of golf with the lads, before an all day session leading to you ending up buying Champagne for everyone in a bar in Islington, getting home 5am Sunday morning. Sleeping off the booze, having KFC for lunch and a Chinese for dinner.

Throw in a few taxi’s and that new driver you bought playing golf, you have had a turn out, of a weekend, a stag do of a weekend even.

You check your bank balance on Monday morning. Your bills have gone out, and then it hits you, you spent a little too much over the weekend. Your bank balance currently sits at -£245. And it is another 27 days until pay day, and you have not bought any food yet.

Looks like you will be leaving off rice and ketchup for the month and not going out again.

The fact is, despite their being money in the bank, this does not mean you have all the money to spend. You have outgoings as well as incomings. You need to budget for those outgoings. Whether it is short term like your phone bill, or long term like saving for Thailand next year. And this is the same with business.

Lord Harris sells carpets for a living. When he sells a rug, does he go off and buy cocaine and champagne to celebrate? No. Because he knows he needs that money as he has a bill to pay to his rug suppliers for the latest delivery. The £199 he got for that gastly Persian rug is already earmarked for other things.

And football is also the same.

Arsenal might have £200m in the bank at this moment in time, but from that money, they need to budget, not just for the month, but for the year.

In the 2013/14 accounts, Arsenal’s operating expenses were £250m. This included £166m in staff costs. Also known as wages.

So Arsenal are sitting there, with £200m in the bank, but know they have to pay out £166m in wages over the next year. And in other costs associated with running the club, such as ground maintenance, policing costs, and buying the tea for the tea lady to serve, that £200m soon disappears.

Obviously Arsenal still have more money to come in, mainly from sponsorship and TV – the turnover (ie money in) during 2013/14 was £300m, This will cover further costs and leave money left over for transfers.

Arsenal know what they have to spend in their bank on transfer. They are not stupid businessmen. They run FTSE 250 companies, they have been Director’s of the Bank of England, they are self-made billionaires, they are Oxford educated. They know what they are doing.

I am sure they know a darn site more than an unemployed benefit claimant on twitter shouting ‘Spend some F’ing money’ who is probably up to his eyeballs in debt due to over spending and not having a clue about budgeting. Or the fan who lives his life online, bought Karim Benzema for Arsenal from Lyon on Football Manager 10 years ago and does not understand why Arsenal do not simply offer £100m for a player, and when it comes to negotiating the contract, click the players name, change the big to £0, click back and offer the player the contract. Messi on a free, it’s easy on a computer game (is this glitch still on the game?)

Arsenal have £200m in the bank, that is correct. But they do not have £200m to spend. The figure, according to the Arsenal Supporters Trust,  is closer to £60m. Yes, we could debate why that money has not yet been spent, but that is another blog for another time.

In summary, ignore the sensationalist headlines, we do not have a £200m war chest, and if you think we do, enjoy eating rice and ketchup every month.

Keenos

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3 thoughts on “Arsenal’s £200m War Chest – The Truth

  1. Paul

    ASt says we will have £70m but i thought there was a fund as well so i would say somewhere between £70 and £125 mill +what we raise on player sales

    Reply
  2. Mark

    Sorry but you need to do a simple GCSE business course. The £200m are cash reserves. We will have operating incoming, you know things like the newTV money, matchday revenue etc. That will pay off the operating costs. Money sitting in the bank is the last a business should do on 0% interest rates.

    Reply

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