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Real Madrid given green light for big money signings

Madrid's careful financial management during the past few years has given them margin to make at least one major signing. Wage cuts and selling players has been key.

Real Madrid given green light for big money signings

Real Madrid's prudent economic management during the past few years is paying off. The club is in a strong position following the publication of the squad's salary cap for this season - it means that they have 739.1 million euros to spend on the sports section, a new club record and all down to an aggressive, cost-cutting policy. Selling players such as Cristiano, Achraf Hakimi, Raphaël Varane and Martin Ødegaard, has liberated the club from paying top wages  (Sergio Ramos, who left on a free transfer, can be included in that bracket too) and that has had a notable effect on the club's coffers. Money has also been saved by loaning players out over the past few seasons. On top of that, the club was forced to cut back to ride out the financial crisis provoked by the pandemic and like many clubs, players' salaries were slashed to offset the loss of income from other areas. Thanks to the support from the players, Madrid is now in an enviable situation compared to other clubs in Spain and around Europe.

Real Madrid have more to spend on new signings

The 739.1 million euros which Madrid have to spend is 270.6 million more than the figure they had last season, when their budget was 468.5 million. "Real Madrid's economic management during the coronavirus pandemic was excellent. Adding that to the results from 2019-20 and 2020-21, the overall profit stands at around one million euros. They have managed to balance expenditure and revenue to ensure that they didn't suffer losses," explained LaLiga's Corporate Director, Juan Guerra. Boosting the coffers through sales has also enabled Madrid to not go over the salary cap during the past few seasons, so every year they have been able to save - something which other clubs haven't done. The annual reports presented to club members and other organisations have been encouraging to say the least. There was an example last season when Madrid had planned their budget based on the prediction that they would reach the Last 16 stage of the Champions League. As it turned out, they made it as far as the semi-finals and brought in more prize money than they had bargained for.

A fund for new signings

"Madrid have enough money to sign Mbappé and Haaland," LaLiga president Javier Tebas said a few days ago. During the last transfer window, the cub adjusted their salary cap to perfection in order to be to able to register new signing Eduardo Camavinga without any issues. The limit stood at 418 million euros in June, but after series of measures implemented by the board it rose to 292 million (through shareholders' funds) and balance the numbers to  cater for transfer fees, wages and bonuses. Clubs can have a salary cap which is is lower than their own estimate if their economic forecast is pessimistic (which was Madrid's case with the Champions League), and they can also increase it if they present shareholder funding during the season.

Included within the 739.1 million euro salary cap are all of the expenses which are allocated to the sporting section. It includes gross salaries and debts to expenditure within the youth teams. This year, the only additional expenses are for what they owe for Camavinga (7 million euros) plus his salary, but they have saved elsewhere by selling Ødegaard and Varane, plus both of those players' salaries and Sergio Ramos' salary; then there are the savings made by loaning out Kubo, Brahim and Odriozola. In the 2019-2020 season, when coronavirus hit, Madrid had outgoings of 524 million euros. For that season, the salary cap was 641 million. While the figures for this season have not yet been released, the club has been working to lower that amount, so the margin could end up being even greater, and can be used to buy players in next summer's transfer window.

As Tebas noted, Madrid have enough spending power to make one or two big signings next year. And not forgetting that the salary cap will be given a further boost at the end of the season when Madrid will be relieved of paying Bale's wages (30 million euros gross), as well as Marcelo's (16 million) and Isco's (14 million), as all three will be out of contract at the end of June and there are no plans to offer them new deals.

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Mbappé and Haaland

If Madrid sign Mbappé on a free transfer, there will be no transfer fee to affect the salary cap, although they will have to take into account the signing-on fee and the player's wages. As for Haaland, Madrid would need to pay a high transfer fee which would put them close to the limit but they would have enough margin to make a big money signing if they decide to.


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