Barcelona’s Financial Crisis Explained

Posted on July 26, 2021 by Matthew T

There have been many reports emerging over recent months of the crisis facing Spanish giants Barcelona this summer. Here, we attempt to summarize the situation and briefly explain what happens next for the 26-time La Liga champions.

What is their Financial Situation?

After racking up approximately £381 million in operating losses over the past three years, the COVID-19 crisis cannot be blamed entirely for the current situation. It would be a poor excuse. In June, the club admitted to owing a staggering £1.1 billion in liabilities. The result? La Liga have placed a salary cost limit of around £138 million on Barcelona for the forthcoming season. The salary cost limit is Spain’s version of Financial Fair Play (FFP), which they calculate based on a club’s financial health. For context, Barcelona’s limit for the 2019-20 season was around £579 million.

How has this happened?

There would be a lot of finger pointing at many varying reasons and excuses – but quite simply, financial mismanagement at the very top. The returning club president Joan Laporta, who certainly contributed to the crisis during his previous tenure, has stated recently “the club is in a worse state than I expected. We’ve encountered a squad with old-fashioned contracts and we will have to work out what to do”. He added, “there are drastic measures that we hope we don’t have to adopt.”

Despite the hits to commercial and matchday incomes during the COVID-19 crisis, Barcelona still raked in around £627 million in 2020, the highest revenue stream in the sport around the world. But while revenues have grown over recent years, the exponential increases in wages and transfer fees have far exceeded these. And when you consider where these astronomical fees have been spent, it becomes more clear why they are in trouble. A total of around £443 million has been spent in transfer fees on these ‘top’ signings over the past few years – Griezmann, de Jong, Malcom, Coutinho and Dembele. Out of those, arguably only de Jong would be considered a success. This is without mentioning the staggering wages paid to these players too.

And then there’s the debate surrounding Lionel Messi’s wages and bonuses etc. The huge outlays put aside each year to keep the Argentinian at the club still divides opinion. There are those who argue that Messi has been selfish in his demands that have certainly contributed to his boyhood club’s crisis.

Summer Transfer Window

The situation is so desperate at Barcelona that La Liga have prevented the club from registering any new players until they make drastic cuts to their costs – most notably the wage bill. The club has already announced the agreements of free transfers for Eric Garcia of Manchester City, Memphis Depay of Lyon and Sergio Aguero of Manchester City too. These are certainly fantastic deals that make economic sense for any club, not just Barcelona in their situation. But currently, the deals are pointless as La Liga will not allow them to be registered at this present time.

The most significant impact of the cost cutting currently though is the future of Lionel Messi. The superstar has effectively been a free-agent since the expiry of his previous Barcelona deal at the end of June. But despite agreeing a significant pay-cut on a new 5-year-deal, he also is not allowed to be registered just yet.

Therefore, the focus of Barcelona’s summer transfer window is on clearing fringe players off the wage bill and wiping the huge transfers fees off the books. Junior Firpo, Jean-Clair Todibo, Konrad de la Fuente, Carles Alena and Francisco Trincao are the notable departures on permanent transfers and loans so far. But this does not even scratch the surface of the adjustment required. Samuel Umtiti and Miralem Pjanic have been told they can leave on free transfers, and the likes of Riqui Puig, Neto, Clement Lenglet and Martin Braithwaite are being pushed out of the door with the hope of receiving some kind of transfer fees. However, the most significant sales Barcelona are hoping for is the attacking trio of Griezmann, Coutinho and Dembele. The combined cost in transfer fees for these three alone totals around £334 million. Finding clubs willing to pay significant fees and staggering wages for three under-performing players will be near-on impossible though. Not to mention the fact that Coutinho and Dembele are both currently injured and have a poor injury record overall too.

Conclusion

So this summer proves to be possibly the most significant in Barcelona’s recent history. It could quite well be the end of the Barcelona we know if La Liga continue to stand their ground with the financial limits imposed. It could also be the kind of kick that the club needed to wake them up and come to the realization of how NOT to run a club, or any business as a matter of fact. But it will be a situation that rival clubs around Spain, and around Europe, will not take their eyes off, as the nature of this sport means that top clubs will be coming to Barcelona to take advantage, rather than assist.