By Dan Kennett and Paul Tomkins.
As first introduced as part of Pay As You Play, the Transfer Price Index (TPI) rests upon the basic economic concept of expressing all values in a constant currency no matter the year they took place. This is done by calculating the average transfer fee between two adjacent seasons and using it to either inflate (increase prices) or deflate (decrease) transfer fees from one season to the next.
TPI takes all transfer fees in the Premier League era and converts them to a Current Transfer Purchase Price (CTPP). This allows us to compare the relative costs of players, starting XIs, and squads over time.
Pay As You Play was published in November 2010 and CTPP was 2009/10 prices. This article provides an update on transfer inflation since publication.
In 1992/93 at the start of the Premier League, the average transfer fee was just £594,000
In 2010/11 the average value of a Premier League transfer went up 22.1% to £4.83m on 2009/10, only marginally below 2008-09’s all-time high of £5.06m.
The 2011/12 figures cannot be finalised until after the end of the January 2012 transfer window but the average transfer is currently up another 2.2% to £4.94m
The cumulative Transfer Price Index is running at 730% for the 20 year history of the Premier League compared to a Bank of England cumulative Consumer Price Index of 77.1%. This highlights the massive difference between standard daily life inflation and what we call ‘football inflation’, to show that saying “in today’s money” does not work with the traditional method (which is roughly ten times lower than TPI).
Cumulative TPI is not too dissimilar to the cumulative ticket inflation at top Premier League clubs as revealed by David Conn in The Guardian. This isn’t to say that the average transfer fee increases year on year regardless. Six seasons have seen a fall, most recently a significant post-credit-crunch crash of 22% in 2009/10. But the overall trend is clearly upward.
A simple example of how TPI can be used is to note that between 2002 and 2007 the average price of a transfer was around the £2m mark; so a player who cost £20m was ten times the average paid by clubs. In 2011, ten times the average is almost £50m. So a £20m player five or six years ago is akin to a £50m player today.
Early in the Premier League era, when the British transfer record was £5m (Chris Sutton to Blackburn), the average fee was roughly ten times less that amount. Currently, with the average fee at around £5m, the record is … roughly ten times that amount (Fernando Torres to Chelsea).
If inflation continues at the same rate as it has in the past decade, then in ten years’ time the average fee will be c.£8m per player, and the record fee paid by a British club will be around £80m. However, providing they can work it within the Financial Fair Play Rules, it’s not unthinkable to imagine Manchester City spending that amount on a player well before 2021.