Why Manchester City and Newcastle are the present and future of Premier League

The Premier League has an international fixture. In fact it is a derby: Saudi Arabia against neighbours Abu Dhabi. Newcastle, owned since last year by Saudi Arabia's Public Investment Fund, will play on Sunday against Manchester City, owned since 2008 by the rulers of Abu Dhabi.

The first should soon be competing for trophies with the second. And the build-up to a meeting between them seems like the right time to examine the relationship in the Premier League between pay and performance. State-owned clubs can have access to huge funds.

I studied the last 20 Premier League seasons for which clubs have published accounts, 2001-02 to 2021-22. Variations in the wages paid by clubs explained 80 per cent of the variations in points accumulated by clubs. This still left 20 per cent to be explained by differences in skill and luck – skill and luck in choosing who those wages should be paid to.

For this reason the club with the highest payroll did not always finish top, and the club with the lowest payroll did not always finish bottom. In fact the average finishing position of clubs with the highest payroll was third and the average finishing position of clubs with the lowest payroll was 17th, which is fourth from bottom and above the relegation line.

However, Premier League winners tended to be clubs with one of the higher payrolls, and relegation tended to befall clubs with one of the lower payrolls.

Nineteen times out of 20 the champions were a team with one of the three biggest wage bills. The exception were Leicester, who ranked 15th for wages in 2015-16.

At the other end of the table, 23 of the 60 teams relegated from the Premier League ranked in the bottom two for wages. Forty-five ranked in the bottom six and 56 ranked in the bottom ten. The smaller a club’s wage bill the more likely they were to be relegated.

The highest-paying club to go down were Newcastle, who ranked sixth for wages in 2008-09. After a season away they came back, and over their next ten seasons in the Premier League they averaged 13th for wages and 12th for finishing position. Over time, like so many other clubs, they got more or less what they were paying for. Now they will pay more.

In 2007-08, the season before they were bought by the Abu Dhabi United Group, Manchester City ranked seventh for wages and finished ninth. The next season they ranked fifth for wages. Then there were ten seasons in which on average they ranked second for wages – and second for finishing position.

The more a club pay in wages the better their players should be and the higher they should finish. And vice versa.

From 2001-02 to 2016-17 Liverpool averaged fourth for wages and fifth for finishing position. Then from 2017-18 to 2020-21 they averaged 2.5 for wages and 2.5 for finishing position.

Between 2001-02 and 2007-08 Arsenal averaged third for wages and second for finishing position. Between 2008-09 and 2014-15 they dropped to fourth for wages and also fourth for finishing position. Between 2015-16 and 2020-21 they fell again, always fifth for wages and averaging sixth for finishing position.

From 2001-02 to 2009-10 Tottenham averaged eighth for wages and eighth for finishing position. Then from 2010-11 to 2020-21 they were always sixth for wages and averaged fifth for finishing position.

I said earlier that when a club over- or underperform relative to their budget it can be down to skill or luck – or, I should have added, a mixture of both. We tend to attribute every exceptional performance, good or bad, to skill, good or bad. We should not ignore the role that can be played by luck.

After Leicester won the Premier League talent-finder Steve Walsh was headhunted by Everton, where he did not reproduce his success and was sacked. I suspect that Walsh is a good recruiter who was rather lucky in the end at Leicester and rather unlucky in the beginning, which was all the time he got, at Everton.

Manchester United are said to have made bad recruitment decisions for years. Yet every United manager appointed since Sir Alex Ferguson retired was greeted with approval at the time by pundits and fans. And so were many of the players who are now dismissed as useless.

Early last season pundits said United had the players to challenge for honours and if they did not the manager would have failed. Well, United did not challenge for honours and the manager was sacked, but results did not improve. Now pundits say the players were never good enough. If United’s recruiters were wrong about players they are not the only ones.

How often across the whole Premier League is the player hailed at the end of a season as the best signing not the player who was thus hailed at the beginning of the season?

Scouts, managers, pundits and fans are usually right about which players are worth more than others, but they are not always right. That is why clubs that spend more usually get better players, but not always.

Businesses publish accounts when an accounting period has finished. So we will not know how much Premier League clubs are paying this season until it is over.

In terms of this season’s payroll rankings, I predict City will again be first and Newcastle around ninth.

Of the 20 Premier League clubs I have most doubt over Newcastle – they are likely to be the biggest movers, and if I am wrong about them I suspect it will be because I have not lifted them far enough.

Within a few seasons they should be paying comparable wages, and therefore getting comparable results, to Manchester City.

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