GBP/EUR Exchange rate affecting British Clubs

Discussion in 'The Hornets' Nest - Watford Chat' started by Hornet4ever, Aug 18, 2017.

  1. Hornet4ever

    Hornet4ever WFC Forums Last Man Standing Winner 2018/2019

    Interesting article how the falling Pound is affecting British clubs.

    http://www.skysports.com/football/n...ue-paying-price-of-falling-pound-on-transfers

    Would not be surprised if this is the real reason we have bought in a glut of English players this summer? Makes sense on quite a few levels as British players are now 20% odd cheaper in real terms v European players for English based clubs.

    We also have the benefit that Gino holds £M's in Euro's at Udinese, so we can still buy in Euro's if we want & loan back etc.

    GP gets better & better + if you look closely he looks like Gene Wilder, one of my favourite actors.
     
  2. Beekayess

    Beekayess Reservist

    The clue is the Silver Streak .........
     
  3. hornmeister

    hornmeister Tired

    Not sure if it makes a huge difference.

    Any company or club dealing with foreign investment will have a Euro & a dollar bank account in addition to Sterling at the very least. They will mitigate against f/x loss. There was a story a few years back that UK based foreign players were being paid in Euros specifically to take f/x out of the equation.
    Most Prem clubs are foreign owned and fortunes backing them banked offshore anyway. Most players are brought in from overseas in euros, they'll be paid for in euros from a euro bank account. Otherwise exchange fees would be exorbitant.

    Likewise UK based players being sold abroad bring in more Sterling or most likely the same amount of Euros

    The reason we have more UK players is because last year we were screwed over by injuries and not fielding a complete squad due to quotas.
     
    Last edited: Aug 18, 2017
  4. Hornet4ever

    Hornet4ever WFC Forums Last Man Standing Winner 2018/2019

    Yes to all that & if you buy British that's coming out of the WFC's UK bank account, so no FX loss/fees apply & paying players in GBP which is currently the weaker of the two currency pairs. By far.

    Don't know why but Watford don't bank with HSBC anymore. I saw Gino coming out of Burger King & then watched as he popped into the Barclays over the road.
     
    hornmeister likes this.
  5. hornmeister

    hornmeister Tired

    As long as you didn't see him fighting outside the chip shop that's OK.
     
  6. Godfather

    Godfather bricklayer extraordinaire

    The good news for GB is that the ECB have put a dampener on the Euro as it is too strong against world currencies. The bad news is Stirling will still hit parity early next year (probably as the festive figures are released)
     
    Hornet4ever likes this.
  7. Hornet4ever

    Hornet4ever WFC Forums Last Man Standing Winner 2018/2019

    Yup, been trading Euribor for over a decade & agree 100%
     
  8. Oscar calling

    Oscar calling Squad Player

    We could always trade in the Venezuelan bolivar.
     
  9. ITK platypus

    ITK platypus Squad Player

    Those Euros will be running out I imagine, since most our turnover will be GBP denominated, TV deals, ticket revenue etc. We will have borrowed lots of Euros sure, but I'd be surprised if we hedged further than 12 months out. Those costs will surely be hitting us now.
     
  10. Luther Bassett

    Luther Bassett Reservist

    Or buying petrol in Leicester
     
  11. Luther Bassett

    Luther Bassett Reservist

    The only sensible question to the first part is "why?"
     
  12. Hornet4ever

    Hornet4ever WFC Forums Last Man Standing Winner 2018/2019

    GP has not only got FX Pro to help the club mitigate currency risk, he's also extracted millions from them for being our shirt sponsor. Bloody genius.

    Think I might be gay.
     
  13. a19tgg

    a19tgg First Team

    I'm a currency broker and deal with large corporate clients, having multiple currency accounts is only going to help if the clubs have got funds in them. Some will some won't. Those that do will have a natural currency hedge and their net currency requirement will be much smaller than their total outlay in Euros. Some may have sold players in Euros and held the funds in Euros but if they're purely uk based and the owners are UK based that holding the Euros carries a currency risk in itself (things like the referendum and snap election result are impossible to second guess) so they may have got the Euros back into pounds to eliminate currency risk in the other direction. Business's tend to know their exposure over a year and hedge forward on a percentage of their exposure to protect against exactly what is happening now and their bottom line being completely destroyed due to a fall in the value of the pound, I'd imagine it's nearly impossible for most clubs to do this because they may not know what players they will want to buy in a year and in what currency. I'd imagine out of all the clubs we would be one of the least affected, the Pozzos will have large Euro reserves and I'd imagine where possible they'd pay for a player in Euros at this moment in time. obviously in a year or two if we get another Euro debt crisis and the rate rockets to 1.45 they will use GBP instead. The clubs that will be most affected will be the clubs owned by UK based owners and who have received no Euro income from player sales (or if they have they've no desire to have any currency risk so have brought it straight back into GBP) unless their bank had advised them to hedge and buy Euros over a year ago (which they might, but it's doubtful) then players priced in Euros will be about 20% more expensive than before the referendum.
     
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  14. a19tgg

    a19tgg First Team

    Having a strong currency is generally a lot worse than having a weak one. All your goods are more expensive to buy which pisses off your industries, manafacturers etc and ultimately could harm your economy. All central banks will have sweet spot for where they would want their currency to trade and if it gets too strong they'll interveen, mostly by saying something really negative or telling us they won't be putting interests rates up etc.
     
  15. Godfather

    Godfather bricklayer extraordinaire

    QE programme coming to an end and Germany running a surplus will have much to do with it .... the Eurozone's deficit/ GDP is half ours and debt per capita an eighth of ours.

    In short they are healthy and we are farked

    or did you mean why's it good news? ... because it buys a little time for May and co.
     
    Last edited: Aug 18, 2017
  16. Hornet4ever

    Hornet4ever WFC Forums Last Man Standing Winner 2018/2019

    What firm are you at? In short you are saying if you are a UK based club buy your Euro league players in Euro's & your English league players in GBP, if I have understood your post correctly?

    Doubt that since Brexit UK football clubs receiving funds in their Euro a/c for players sold overseas would ever convert back to GBP, unless they had a transfer policy to only buy British. Then again I guess there is no rules to stop two UK clubs dealing in Eur/Eur for a purchase/sale if they both have loads of money in their Euro a/c sloshing about, will also make that transaction cheaper for them both depending on when & where their funding came from & assuming they have hedged.

    Surprising that more English players have not gone to the European leagues this window, as the EUR/GBP reverse trade means notoriously expensive UK league players will be 20% cheaper for the European clubs.
     
  17. CYHSYF

    CYHSYF Academy Graduate

    Stirling Albion my hometown team have been the typical yoyo team for farkin ages, I would see it as very good news if the Binos hit parity for a while. Sterling stuff... :)
     
  18. a19tgg

    a19tgg First Team

    Well it all depends and it's a complex issue, all clubs will probably deal with things slightly differently. If you've got Euros in a Euro account that will be a figure on your balance sheet that will change in value constantly. Obviously the pound has tumbled in value since Brexit and a Euro buys a lot more than it did before, so any club holding Euros in a Euro account will have seen the value of those Euros go up (in GBP terms and if you're a UK company this is how you will report your profits) but that's now and it's not something that is always guaranteed to be the case or will continue indefinitely, if a club sold a player in Euros holding those Euros carries a risk that any profit they made on the deal is eroded by the Euro falling in value so some clubs may bring all funds back into GBP immediately to crystallise the profit (or even loss) or they may wait until a certain point within their financial year to bring them back before reporting their profits etc. If you're a UK company and you export to Europe and make 10% profit on the goods you sell, if you keep those funds in Euros and the Euro falls in value by 15% you've lost money, so a lot of companies won't tolerate this risk and won't hold the funds in Euros for any length of time, there will be some PL clubs that take this view. Others will just hold the Euros and not care about the fluctuation either way. Others will deliberately hold some or all of them so as to create a natural currency hedge, so they have a net exposure of Euros much smaller than their actuall outlay in Euros.

    Let's say you're a UK wine importer who imports wine from Europe, you have to pay for the Wine in Euros but get paid in GBP for what you import, the fall in the value of the pound will have hit you massively because the price will have stayed the same in Euros but it will have just cost you more every month in GBP to buy the wine, they don't get any Euros because they sell into the UK so unless they bought Euros forward a year ago they will either have to pay more or charge more.There will be clubs just like this, not all clubs will have sold players to European clubs or have any Euro income, unless they actually bought Euros forward in anticipation that they would need Euros, and were worried about the fall in the value of the pound, they will have to buy the Euros with their GBP and in real terms a €10m player will have got more and more expensive for them over the last year.

    Most business's with an FX exposure of £10m+ will have an FX policy of sorts, so they'll hedge a certain percentage of their exposure to mitigate big moves in the currency market but most companies can forecast their net exposure, it's very difficult for a football club to do that which makes them unique, one year they may need €50m for player purchases the next year they may have a €50m surplus from player sales.

    So it's complex and every club will be different and run in a different way with a different (or none at all) FX policy. For some the fall in value of the pound will be a direct increase in costs of about 20% in real terms to buy Euro players, for others it will not make a difference.

    Having said all that it's all largely ******** anyway, the transfer market is bonkers and prices have been going up way more than the GBP/EUR rate has fluctuated. Pogba was the record last year and it's more than doubled with Neymar this year, that's an extreme example, but it's not like players values are staying the same and they are just 20% more because the Pound is 20% weaker, they're going up by more than that anyway. Obviously it will make a difference, but the would've cost more anyway. Also I'm looking at it from the point of view of a business who has potentially slim profit margins and small fx move could wipe out those margins. Clubs don't make their income from player trading, they make it from other sources.
     
    Last edited: Aug 19, 2017
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