Brexit and how the pound's value drop could affect Premier League transfers

As the dust settles on Britain's vote to leave the EU, Gab Marcotti assesses how the decision could affect football in Europe. 

Opinion is still divided on the impact of Britain's exit from the European Union in the next six months to two years. In the narrower scope of football, there has been much fretting and hand-wringing over the impact the Brexit vote will have on the Premier League and the fact that foreign players would require work permits, though a closer look reveals those fears are overstated.

In the short-term, though, one effect we're already seeing is that the pound has crashed against the dollar and the Euro: by as much as 10 percent in the opening 24 hours.

This is important, because Premier League income comes in pounds and a fair chunk of their expenses, especially when it comes to transfers, go out in Euros and dollars.

To put it very bluntly, a player who cost €40 million on Thursday would have cost £31 million. By Friday, that same player would have set the buying club back £34 million. Equally, if you wanted to sign a player from abroad and he had agreed a salary of €2 million a year -- because, say, he's French and thinks in Euros -- you'd need to pay him £1.7 million instead of £1.55 million.

The question then becomes whether the pound will recover and when. I'm not an expert in foreign exchange rates, but most agree that markets above all hate uncertainty. So with Brexit being an unexpected result (with uncertain after-effects) investors sold pounds and bought other currencies. But as the effects become clearer, odds are they'll come back and the pound will strengthen. Foreign exchange prices are impacted by many different factors, but sharp drops like the one seen during the Brexit referendum are down to uncertainty, not underlying fundamentals.

Sure, if the underlying fundamentals deteriorate badly as a result of Brexit -- and some predict they will, others are less certain -- then the pound may well slide. But that is an effect we'll see over time.

The curious thing is that we've been here before. In October 2008, the one pound bought you €1.28. By December, the pound was at €1.06. That's a drop of 17 percent. In December 2015, the pound at €1.22. By March, it stood at €1.40, again, a shift of around 15 percent.

Those didn't quite get as much attention because they were gradual, whereas this last one was sudden. Then again, this last one was motivated by panic, the others more by underlying fundamentals.

Bottom line?

Expect Premier League clubs to wait, perhaps a month, to get a better sense of where the exchange rate is heading before doing business.

CREDIT TO:http://www.espnfc.co.uk/blog/marcotti-musings/62/post/2901054/brexit-and-how-the-pound-value-drop-could-affect-premier-league-transfers