The first step to solving a problem is admitting that you have a problem

Manchester United attempts to spend their way out of financial problems only dug a deeper hole for themselves. The road to recovery is going to be long

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Did you ever watch the television show The OC? If you’re around my age and you grew up in either the United States or the UK odds are you at least know what it is. If you never saw it, I’m actually jealous of you. You can still watch it for the first time.

For those of you that haven’t seen it here’s a quick primer. A troubled teen (Ryan) is taken in by his rich Orange County defense lawyer (Sandy Cohen) to live with Sandy and his his family. The kid comes from the rough streets of Chino and is now getting used to the life of glitz and glamour of the upper class - but this isn’t the important part.

Ryan’s new house is right next door to Marissa Cooper, the hot girl next door who just happens to be his age. Funny how that happens - but still not the important part here.

The Coopers embody every stereotype of the rich upper class. Marissa is the most popular girl at her fancy private school. Her younger sister goes to an expensive boarding school and takes horseback riding lessons. Her mother, Julie, is just a housewife. She spends her days doing yoga classes, going to the spa, having long expensive lunches with her other housewife friends, and generally whatever else rich housewives do.

Very early on in the series we find out that underneath the surface things aren’t so great for the Cooper family. Marissa’s father, Jimmy, has made some bad business deals and owes a lot of people a lot of money. He keeps borrowing money to try and get his feet back on the ground only for things to keep going further south. After a few episodes we find out that Jimmy is completely broke.

Jimmy has been hiding all this from his family. Most of his borrowing has gone to simply maintaining the lifestyle that his wife and daughters are used to. When Julie catches wind of their financial situation, her friend immediately tells her to “divorce his ass.” After-all, Julie can’t be seen with this broke boi; she’s got status in the community that she has to maintain!

Jimmy’s storyline wasn’t a hard one to write because it’s unfortunately all too common. There are many stories of families who have houses in the Hamptons, private yachts, attend the most exclusive parties, who have their lives rocked when one day the police come to seize all their assets because it turns out they’re actually broke. Business took a turn for the worse and rather than be honest with his family, the husband tends to keep borrowing money to try and maintain this lifestyle. Just a little more money, he says, the next business deal will get us back on our feet. It never does. These stories always end in divorce or even more unfortunately, suicide.

Enter Manchester United.

Last week The Athletic released an article on United’s current cash flow problems. These articles get released every so often, and they’re always grim reading, but this years was grimmer than ever before.

Finances have been at the forefront of every Manchester United conversation for a long time but especially in the past year. Since INEOS took over in December 2023 they’ve been trying to get the club’s finances in order, which has included very unpopular decisions like laying off hundreds of backroom staff, cutting holiday parties, and raising ticket prices. These moves may save some money here and there but none of them really make a dent in where the biggest issue lies, the club has wasted billions of pounds either on signing bad players, or signing really bad deals for decent players.

That’s lead to the club needing to make drastic moves to try and become solvent. The club ruffled a lot of feathers earlier this month when they announced no one was off limits for a sale including academy players such as Kobbie Mainoo or Alejandro Garnacho. Things are coming to the forefront now as rumors continue to circulate about the club selling Garnacho, with Napoli and Chelsea reportedly showing interest. The number swirling around could be as high as £60 million.

Whether or not United should sell Garnacho for footballing reasons doesn’t really matter. The story here is the fact that a club as big as Manchester United may not even have a choice as to whether or not they want to sell one of their bright academy players. They may simply have to do it because, well, they need the money.

Football finances expert, and author of The Price of Football, Kieran Maguire, sums it up best in that Athletic article.

“They’re living a Champions League lifestyle on Europa League income.”

That cannot go on forever because underneath the hood, once you compare the cash the club is actually bringing in against how much it is paying out, you can see why United need to balance the books.

- Mark Critchley, The Athletic

Manchester United are the husband who is borrowing more and more money to maintain the lavish lifestyle that his wife and family are accustomed to. They always believe the next deal will bail them out, but when that doesn’t work, it only digs a deeper hole.

United aren’t at the point where they’ve hit rock bottom and their wife finds everything out because they’re get evicted from their fancy summer house, but they’re getting close. They need to change their behavior.

The first step in getting help is admitting there’s a problem.

You can argue United are doing this. United responded to a letter by the fan group 1958 and admitted financial losses put the club at risk of PSR breaches. Saying it publicly is a good first step, but that doesn’t shake the feeling that we’ve seen the club do this before only to then not follow through on the actions required to fix it.

The club has spoken about needing to get costs under control before, only to then react to something in the short term and ultimately make things worse.

As Maguire highlights in The Price of Football, following the 2018 season United saw that their wage bill and transfer costs were rising faster than their income. The result was the club had the disappointing transfer window in 2019 where they only brought in Fred, Diogo Dalot, and Lee Grant. They needed to take a summer off.

The following season United once again kept their spending in check, operating on a very low net spend. They were on the right track but then the COVID pandemic happened. COVID didn’t just affect United in the transfer market, it also severely depleted their cash reserves as they continued paying matchday staff despite no matchday income¹.

When United came out of the pandemic they also threw away all the long term planning they were doing and decided to spend money they didn’t have on Cristiano Ronaldo. Their belief was they’d make so much money from marketing him and his presence that in the end they’d come out on top.

They didn’t. And the fact that the move didn’t work on the pitch either only made things worse.

Again that summer United spoke a big game. This was the first year for new manager Erik Ten Hag and expectations were going to be relaxed because United needed to keep their spending in check and this was going to be a long term project.

When the season began United had spent just £62 million on Tyrell Malacia, Lisandro Martinez, and signing 30 year old Christian Eriksen on a “free.” But after losing their first two matches of the season United borrowed money from future transfer spending to spend an additional £142 million on Antony and the 30 year old Casemiro.

The latter deal was particularly bad because for as good as Casemiro was in his first season, you knew in two or three years you were going to have to replace him. Even the best case scenario of this deal would still mean that you’d have to pay big money for a replacement before you’re even done paying for Casemiro! There was no outcome that wouldn’t make your financial situation worse.

In September 2022 United stated in a call to their investors that they went over budget a bit and we shouldn’t expect similar spending the following summer. They talked the right game but when summer time came around, they still had a net spend of around £120 million. When INEOS took over they too spoke of needing to get spending in order. Their net spend in their first summer was £95 million, while extending themselves on even more credit.

That’s the crux of everything. To find the cash for these deals - and to just pay their regular bills - United have a revolving credit facility of around £300 million from various banks - of which they’ve currently used £200 million. That money needs to be paid back, with interest. On top of that they also owe £319 million to other clubs for their installments of transfer fees. That’s money to Ajax for the likes of Lisandro Martinez or Antony, Real Madrid for Casemiro, Atalanta for Rasmus Hojlund and so on. According to The Athletic, £154 million of that is due to be paid this year.

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It should be noted, this would be much less of an issue if Antony was a player who could get you 16-18 goal involvements every season. Or if Erik Ten Hag didn’t fall out with Jadon Sancho and he was still in the team getting the ball into the box and creating chances² for United, or if Rasmus Hojlund was on pace to score 15 or more goals in the Premier League this season.

United’s financial situation would still be bad and deals for Raphael Varane, Christian Eriksen, and Casemiro would still have been extremely short sighted, but if those players were producing, United would likely be in the top half of the table competing for European spots. Hell, they probably would have even qualified for the Champions League last season.

Instead, United are a calamity on the pitch. They need upgrades at several different positions and by the time those areas are addressed, several others will be too old to be relied on every day and will need upgrades too.

Those upgrades cost money and United need to find places to get that money from. TV revenues have flattened and additional Champions League revenues aren’t coming to Old Trafford any time soon. The only place where you can get substantial figures of revenue is by selling your players.

In a perfect world United would just offload players they don’t want. But it doesn’t work like that. In order to get actual substantial sums you need to sell players who have value. Value is entirely determined by what the market is willing to pay for someone, which is going to be the players who you think are good.

At some point United are going to have to take a hit on a player they feel has a very strong future. Right now that looks like Alejandro Garnacho.

The reality is that United need too many pieces that even if Garnacho becomes a superstar, they won’t have the money to surround him with top end talent where it would actually make a difference for the team. It’s unlikely you’ll win anything with him so the money you can make from a sale will likely go further for rebuilding the team.

The duality of United’s problem is they don’t just need money to rebuild the team. They need money to pay off their debts of building this bad team.

There are some fans whose hesitancy around wanting to sell Garnacho revolves around who could we bring in that’s better? Or that you can only sell him if you’re reinvesting the money right back into the squad.

Both are entirely reasonable stances to take. However, United may not be in a position to do either. At a certain point they need to stop taking the money made from transfer sales and maxing out the amortization credit that comes with sales to make new signings. All that’s going to do is continue to dig you into this financial hole - especially if just one of those new signings doesn’t work out.

Now more than ever United need to let their books rest. This process is going to take a few years. It’s going to be infuriating to watch but it’s a process that needs to be done. The signings have to be few and smart. Once you get the wage bill back in order, the transfer debt down, and your credit and cashflow back, United will be able to be aggressive again. But if you do it too quickly, you’re going to end up right back where you started.

The night is darkest right before the dawn. Unfortunately for United, dawn isn’t about to break. It’s probably still going to get a bit darker.

The first step is admitting that this is our situation. We’re not a Champions League club anymore and we can’t continue to act like one. It’s not going to be easy. Every time you lose you’ll still have Roy Keane on Sky Sports saying things like “this is Man United were talking about,” but the reality is the that exists Man United right now is a different level of club than the Man United Roy Keane played for.

Only when Manchester United can be honest about having a problem and understanding what they are will they be able take the steps forward and fix things.

1. Funny how you get punished for doing the right thing by your employees

2. Since the start of the 2021-22 season, only Bruno Fernandes and Diogo Dalot have created more chances for United in the Premier League than Jadon Sancho. Sancho played less than 41 games for United.