With Liverpool sitting three points clear at the summit of the Premier League at present, the opening of the January transfer window has seen focus placed on what their rivals might do.
The Reds, currently facing some squad challenges owing to the absence of Mohamed Salah and Wataru Endo at AFCON and the Asian Cup, as well as injuries to the likes of Trent Alexander-Arnold, Dominik Szoboszlai, Kostas Tsimikas and Andrew Robertson, aren’t expected to engage in the transfer market in January.
With players to return in the next two, three and four weeks, by early February it could be that boss Jurgen Klopp has a near full strength side to call upon once more, although the argument has been made, and not for the first time in a January transfer window, that Liverpool should be adding while in a position of strength.
Deals for the likes of Luis Diaz and Cody Gakpo have been rubber stamped in the January window in more recent years, although both of those were signed and sealed for what was perceived as good value and where Liverpool had leverage. In the case of Diaz it was that his former club, Porto, had needed an immediate sum of cash to meet debt obligations. Liverpool provided what was needed.
But January isn’t usually a window for adding top quality, long-term solutions given that the season is at the halfway point and clubs don’t want to use their key assets, and if they are forced into doing so then they want compensation to the very highest level they can possibly manage.
As some of their Premier League counterparts, the likes of Arsenal, Chelsea and Newcastle United, are having to watch their position when it comes to the Premier League’s Profit and Sustainability Regulations (PSR), Liverpool don’t have such concerns, and any reluctance to add in the window boils down to whether the players available fit the bill, if it provides value for money, and if it fits within the self sustaining business model that has long been the way under the ownership of Fenway Sports Group.
Liverpool have not yet published their accounts for the period covering 2022/23, those are understood to be due at the end of February. But the figures from the 2021/22 accounts can give some indication as to the PSR position of the club, and how much they would be afforded in allowable losses before having to be concerned.
PSR monitors losses for Premier League clubs over a three year period. For the forthcoming set of accounts, for 2022/23, the 2019/20 and 2020/21 accounts are merged as an average owing to the economic impact of COVID-19, with 2021/22 and 2022/23 assessed individually.
Clubs are allowed losses of a combined £105m over that three year period, although that sum is only allowed to be as high provided that there is a commitment from ownership to provide the funding to underwrite those losses.
Losses that are incurred through investment into such things as infrastructure, the academy and the women’s teams are ‘allowable deductions’ that do not count towards the £105m figure.
In Liverpool’s case, according to figures presented by football finance expert Swiss Ramble, only £15m of losses would be permitted. The reason for that is that the only clubs able to lose up to £105m are those where owners have made a capital commitment directly or by turning debt into equity. With Liverpool attempting to operate in the black, and having posted a £24m profit when the three periods were assessed, one of only four Premier League clubs to be in the black over the period up to and including 2021/22 (the others being Brentford, Burnley and Wolverhampton Wanderers) there has been little need for FSG to fund losses to aid the clubs position.
The ownership group did recently sell a small equity stake in the club to New York-based firm Dynasty Equity for around £150m, a move that was made with the goal of paying down the bank debt that had been accrued through investment into infrastructure, and allowable deduction under PSR rules. That move, indirectly, improves Liverpool’s manoeuvrability in the market due to improving cash flow.
If an irrevocable commitment to fund losses was made then Liverpool would be permitted to post losses of up to £105m. Swiss Ramble’s analysis for that period points to the £24m profit over the three-year period, allied with £73m in allowable losses and a sum of £45m attributable to the impact of COVID, another allowable deduction.
That places, for the 2021/22 accounting period, the Reds as having allowable losses of £156m, the second highest figure in the Premier League for the period, behind only Tottenham Hotspur (£276m), although the construction of the North London side’s new stadium allowed for them to place £211m as allowable deductions.
Liverpool have no problem, either with PSR or UEFA’s Financial Fair Play regulations. Any lack of action in the transfer market is not a result of pressures being placed upon the club by tight restrictions, more in keeping with the model that has allowed the Reds to have such a strong balance sheet and sustainable model amid a sea of clubs haemorrhaging cash.
Whether or not that is a popular play depends on the viewpoint of fans, but Liverpool do sit at the summit of the Premier League and not having had to post heavy losses to do so, or look over its shoulder when it comes to whether or not they have breached regulations.
