The implication is that Sunderland have put their long-term financial health at risk in previous seasons by spending substantial sums in January in a last-ditch effort to retain their EPL status. While they have indeed survived their recent flirtations with relegation, is there any compelling evidence that winter spending actually improves results in the second half of the season? By out-spending their rivals, are troubled teams boosting their chances of staying up, or are they just using up previous financial resource that could be invested more carefully in their future? In this blog I’ll try to investigate these questions.

### January spending and results improvement.

The goal is to establish whether there is any relationship between January transfer spending and an improvement in results in the latter half of the season. For each of the last six seasons, I calculated the gross January expenditure of every EPL team using data taken from transferleague.co.uk

^{[1]}. To measure the improvement in results for each team, I calculated the average number of points per game they collected in matches played either before or after January 1st in each season and took the difference (second half of the season minus the first).

**Figure 1**below plots the change in points-per-game versus gross January expenditure for all EPL teams in each of the 2010/11 to the 2015/16 seasons (each point represents a team in one of those six seasons). On average, just under two thirds of EPL teams spent more than £1m in (disclosed) transfer fees in any given January window, with just over a third spending more than £5m and a fifth spending more than £10m. There are four clubs that spent more than £30m in January: Chelsea in 2010/11 and 2013/14, Liverpool in 2010/11 and Man United in 2013/14. The average change in points/game between the two halves of the season is close to zero

^{[2]}and there is no significant correlation with the level of spending.

Figure 1: Change in the average points-per-game measured before and after 1st January against total spending in the January transfer window for all EPL teams in each of the last six seasons. |

Not all teams will be looking for an immediate return on their investment in January. Some will be buying back-up to their first team or young players for the future. The teams that will certainly be looking for an immediate impact are those embroiled in the fight to remain in the EPL. In

**Figure 2**I’ve highlighted the relegation-threatened teams in each season. Specifically, this includes all teams that were in the bottom 6 positions in the table on January 1st, plus those that went on to be relegated at the end of the season (as you’d expect, most relegated teams were also in the bottom 6 in January)[3]. Teams that were relegated are coloured red; those that survived are blue.
There are a couple of interesting things about this plot. First -- the majority of relegation-threatened teams see an improvement in their results in the second half of the season. I think this is just mean reversion: teams that underperform in the first half of the season are likely to do better in the second half. For example, over the last six seasons, teams in the bottom half of the table collected an average of 0.2 points/game more in the second half of the season than the first. The opposite is true of teams in the top half of the table: they tended to be an average of 0.2 points/game worse-off in the second half of the season.

Second -- there is no significant correlation between spending and improvement in results for relegation-threatened teams. If we split them into two groups, those that spent greater than £5m in January and those that spent less, we find that 38% (6/16) of the high spenders and 55% (12/22) of the low spenders were relegated. This difference is probably not big enough to be significant. Raising the stakes higher – of the four relegation-threatened teams that spent more than £20m in January, three were relegated: Newcastle & Norwich last year, and QPR in 2012/13.

It seems reasonable to conclude that teams should resist the temptation to try to spend their way out of trouble: there is little evidence that it will pay off. It looks like Bain is being prudent in tightening the purse strings.

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[1] Note that for some teams it will be an underestimate as the transfer fee was never disclosed.

[2] This doesn’t have to be the case. For instance, there could be more draws in the first or second half of the season.

[3] The results don't change significantly if we selected relegation-threatened teams as being those within a fixed number of points from the relegation zone.

[3] The results don't change significantly if we selected relegation-threatened teams as being those within a fixed number of points from the relegation zone.