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Football, Finance and the Future: A Bubble About to Burst?

Spending on non-Premiership players - too much money chasing too few footballers?

The cost of buying a Nationwide League player has risen dramatically over recent years, with million pound - plus fees being the norm, rather than the exception. Analysts believe that Premiership clubs have been prepared to spend more on the 'right' Nationwide League player as a result of their increased incomes.

These increases in transfer fees have come about because of excess demand for players. If this pattern of demand was repeated at a macro-economic level for all goods and services, then it would be a significant contributory factor to inflation. Excess demand is seen as being a major cause of inflation. This mechanism is shown on the following graph:

On the diagram, the increase in demand from AD1 to AD2 has caused the price level to rise. If this continues, then demand-pull inflation is the result. Generally in an economy, the rise in demand comes from a variety of sources: a decrease in taxation, an increase in government expenditure or an increase in consumer expenditure.

In the case of the market for Nationwide League players, it is thought that the boost to demand has come about through increased Premiership revenues. The alternative (or perhaps complementary) reason may be that the supply of quality players in the Nationwide League has decreased. Either way, price inflation is the result, whether caused by demand-pull or cost-push reasons.

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