A discussion with some over the Christmas period about just how far behind Arsenal are from Manchester City exposed just how much investment we need in our squad to compete.

The discussion started when Liverpool splashed £75m on Virgil van Dijk. A huge amount on a player who, all of us agreed, was fairly average and we would only consider at half that amount. But what it showed was the Liverpool had money, and were willing to spend it.

But is an overpriced central defender enough to make up the gap between Liverpool and Manchester City? The answer was emphatic. NO. And then the discussion turned to Arsenal.

We all to a man agreed that Manchester City’s squad is awesome, and that Arsenal’s has some talent, but is very average in places. The key difference is what both clubs have invested into their squads, in terms of both transfer fees and wages.

An interesting side note here, the cost of Manchester City’s current squad (£774.8m), is over £100m more than Arsenal have spent in the Premier League era (£639.5m).

We all agree that Arsenal are probably 6 – 7 top players short when compared to Manchester City’s squad. And our squad has cost £397m less than Manchester City. If you are looking at 5 quality players at £40m, and two world class players at £60m, that equates to £320m spent.

If we all agree that we are 6/7 players short, than it is logical that we all agree that we need to find at least £300m in transfer fees. And this figure grows even more when you consider we will need to replace a Alexis Sanchez and Mesut Ozil in the summer.

And this £300m deficit does not even take into account salaries.

At the minute Arsenal’s yearly wage bill is about £40m below both Manchester City’s and Manchester United. Now some of this will be saved as players come in at the top end of the squad and as a consequence leave at the bottom end of the squad.

By the time you add the transfer fees required to buy the players we need, and the increase in salary to pay these top players, we are looking at needing to invest around £350m in the current playing squad to take it from where it is now, to where it needs to be.

£350m is a lot of money to try and find.

Some fans think we have £100s of millions sitting in the bank that we are not spending. This is just untrue. They look at turning a profit on transfers as a stick to beat the club with, and it is partially correct.

But what is more important than how much you have made (or spent) on transfers in a summer is the profit / loss your accounts show. IE if you end up £100m in profit on transfers, this does not mean you have £100m to spend on transfers.

If you only make a £45m profit as a business operation over a year, this is much closer to your surplus, and the reality is that the £100m on transfers you have bought in, over 50% of it has been eaten up by operating costs.

Arsenal Group Profit Before Tax

2016/17 – £44.6m
2015/16 – £2.9m
2014/15 – £18.2m
2013/14 – £4.7m
2012/13 – £6.7m

You can see that over the last 5 years, Arsenal have not exactly made massive profits – £77.1m in total before tax.

Over the above 5 year period, Arsenal have spent £351m on players. In the same time, Manchester City have spent £777.8m. That is an incredible deficit of £426.8m. And yet we only generated £77.1m in profit in that period.

In the two seasons Pep Guardiola has been at Manchester City, he has spent £380m. In the same time, Arsene Wenger has spent just £144m. A difference of £236m over an 18 month period.

The harsh reality is, we simply do not have the money to compete in the transfer market with Manchester City – or Manchester United.

Now this is where you all moan that we were miss-sold a dream. That we moved to compete with the best in the world. You are right to moan, but the truth is that the landscape has changed. We can compete if football stood still. But since the new ground begun getting built, we have seen the rise of billionaire owners.

If we did not move, gate receipts would be ~£50m less. The Emirates Stadium generated around £50m more than Highbury did. So if we stayed at Highbury, we would be even further behind, and either making huge losses, or curtailing our spending further.

I saw on Twitter who do we compete with these days? And the answer is clear. Liverpool.

When you look at the squad values above, Manchester City and Manchester United are out there on their own. Chelsea are in the middle, then Liverpool, Arsenal and Spurs bring up the rear.

At the moment Spurs are doing brilliantly without the income of Liverpool or Arsenal. This is mainly due to bringing through the likes of Harry Kane from the youth system and signing the likes of and Dele Alli for not very much. They also pay wages vastly inferior to what the players could get elsewhere- Toby Alderwield, for example, is reportedly on £50k a week. Virgil van Dijk is reportedly signing a £200k a week contract.

The Spurs model will collapse within the next 24 months, as they can not afford to play the likes of Kane, Alderwield, Alli, Erickson, Rose, etc the money they can command elsewhere. These players will leave and they will be unable to sign similar quality on the same low wages – A player like Jesse Lingard, for example, is paid more than any Spurs player.

So back to the comparison to Liverpool. When you look at the revenue of both clubs, what they bring in from gate receipts, TV money, commercial deals, etc, there is not much in it.

There big difference between the two is gate receipts, but this has closed further this year with the Anfield expansion.

In terms of revenue, Manchester City and Chelsea are a long way behind Manchester United, but they both have the financers using their own cash to service huge debt levels.

So Manchester United self generate their huge revenue through commercial deals. Manchester City and Chelsea have “sugar daddies” financing them.

So where do Arsenal find that £350m investment that we all agree we require?

• Increase commercial revenue – Arsenal generate £168m a year less than Manchester United when it comes to commercial deals (shirt sponsors, etc) – and Man U have not even exploited the lucrative naming rights of Old Trafford yet. £168m a year is a big difference. That is two £70m players a year on £250k a week.
• Become a rich mans play thing – Stan Kroenke will not put his hand in his own pocket – nor should he be forced too – so if you want to take a shortcut to financing the squad, you then want Alisher Usmanov (or someone else) to come in and put in £350m of their own money,

Arsenal and Liverpool have similar American owners who do not put any of their own cash in. At the minute both are trying to grow by increasing commercial revenue. In my opinion, Arsenal’s commercial department is underperforming massively. Ivan Gazidis needs to take the blame for this.

On the second point, do you really want Arsenal to become a rich mans play thing?

• Do you want to be owned by an Arab sheikh who pays for his own banner in Arabic positioned front and centre in the ground, thanking him for his investment?
• Do you want to be owned by shady Russian “businessmen” who made their billions in mysterious ways upon the fall of the Soviet Union?

Personally, I do not want to be owned by a Sheikh or Russian oligarch. It does not sit well with my own values and morals.

The reality is, in our current financial model, we are competing with Liverpool. They spent £75m on Virgil van Dijk, we have about tat much still to spend.

Now you can raise the valid point – and it is valid – that Arsenal had this money to spend in the summer, and that it is a disgrace that Arsenal are not using their resources to the full.

Arsene Wenger needs to take the blame for that, as he always seems reluctant to spend. Hopefully the new Director of football and Head Scout will see a change in direction on this matter.

Taking into account the contract situations of Mesut Ozil and Alexis Sanchez, we do have to be careful .That £75m should be earmarked to be spent on replacing one of then, rather than an error prone centre-back.

We finished a point behind Liverpool last season, and there is not too much between them. We need to sort out our commercial deals to bring us closer to Manchester United.

I would rather not compete for the league, then sell out to someone who I do not want anywhere near my club, being in debt with them.

What is for certain, to compete, Arsenal need to find a £350m investment.

Keenos

Follow @KeenosAFC

Note: there is always an exception to the rule. Leicester City won the league in 2015/16. It is a once in 50 years thing. A similar feet has probably not happened since Derby County in 1972, and will probably not happen again in another 40-50 years.