The Reds have been aggressive in the transfer market this summer with three major additions
Florian Wirtz signs for Liverpool
Liverpool can continue to spend big after navigating PSR rules.(Image: Liverpool FC via Getty Images)
Liverpool have been the big movers in the transfer market this summer. The Premier League champions have been flexing their muscles financially.
The British record signing of 22-year-old German ace Florian Wirtz from Bayer Leverkusen for a £116m sum, the signing of another Leverkusen player in right back Jeremie Frimpong for £29.6m, and the soon-to-be new left back of Milos Kerkez from Bournemouth for £40m means the club’s outlay so far this summer stands at £185.6m.
The Reds are likely not done in this window, especially given the impending exit of Jarell Quansah and potential departure of Darwin Nunez, but they still have plenty of financial flexibility to work with if they do choose to enter into the market again before the start of next season.
Liverpool’s aggressive spending so far in the window has see some questions raised around just how the Reds are able to afford all of this, especially if they follow up on interest in the likes of Marc Guehi and Alexander Isak.
The reason is very simple. Liverpool can do more because they earn more, and they have managed their finances better than most in recent years in terms of giving themselves the financial wherewithal to be impactful with their business.
Liverpool’s financial year came to an end on May 31 for the 2024/25 period. It was a season when they only added Federico Chiesa from Juventus for a £10m guaranteed fee, his contract being over four years, meaning £2.5m per annum in amortisation costs. Liverpool’s amortisation stood at £114.5m, but even with the added Chiesa impact, the sales of players who held book value, and the annual decline in book value on some squad members, means that the actual cost will likely have fallen for the last financial year.
It was a financial year when the Reds were back in the Champions League, banking more than £85m for their trip to the last 16 thanks to a superb league phase, greater broadcast sums and attributed matchday revenue, with five home games. Add into that the fact they won the Premier League, delivering merit payments, equal share payments and facilities fees from both domestic and international markets that will be around the £185m mark and you can see the financial confidence.
The wage bill will be going up due to new deals and bonus payments for Premier League success, and that could soon breach the £400m mark. But Liverpool have managed their affairs. They haven’t been active participants in each and every window, and that has allowed them to what some of their rivals have not been able to do.
Only Manchester City and Arsenal could have made a Wirtz deal work this summer when it comes to the Premier League, taking into account PSR positions and transfer debt that already needs to be serviced.
Premier League clubs can lose £105m over a three-year period, with allowable deductions for investment in infrastructure, the academy, the womens team and community initiatives.
The period from 2021/22 to 2023/24 saw the Reds post a profit of £7m, a loss of £9m and a loss of £57m for the last three years. In terms of allowable deductions over that period the club had £33m, £35m and £39m, according to figures presented by football finance expert Swiss Ramble. That means that the club had a positive PSR position of £48m, which when added to the allowed £105m means they had headroom of £153m. They had absolutely no worries.
The 2024/25 period is likely to see Liverpool swing back to profit with revenues almost certain to be above £700m. The club’s profit could reach £50m according to some estimates. Factoring such a profit into the three-year cycle from 2022/23 to 2024/25, assuming similar allowable deductions, would see that net positive PSR position grow even further, up to some £100m before taking into account the £105m figure that is permitted.
Amortising the £185.6m over five years will add £37.1m to their amortisation costs, but those costs will have decreased anyway.
The signing of Giorgi Mamardashvili last summer, which counts for this year, of £25m, will add another £5m in amortisation costs.
The club are making the moves to solidify their position coming off their title win, looking to ensure that they follow up success and don’t miss out on Champions League football for the years to come, something which was chiefly responsible for the losses seen in 2023/24 when the club spent a campaign in the Europa League.
Liverpool’s amortisation costs are more than £90m lower than Chelsea’s. Liverpool could spend another £200m in the market this summer and still be PSR compliant. But the game isn’t to see how much they can spend, the thesis remains that spending money wisely is the most important thing.
Then there is the sales to be factored in. The £18m for Caoimhin Kelleher, the soon-to-be confirmed £30m for Quansah, that is pure profit for the books, so £48m to be accounted for, which wipes out the cost of one year’s amortisation for the new additions. Then factor in Nunez and a potential exit, which would likely net the club a small profit but remove the £10.6m per year he counts as on the books, which has two years to run. Liverpool need to clear £21.2m in terms of a fee for Nunez before booking profits. They will do that, and that will mean that they are already clawing back money they’ve spent.
The Reds have the ability to meet the actual payments of these deals too. They have a revolving credit facility which was renegotiated last year of up to £300m, but the bulk of cash going out will be paid for by the cash coming in.
Liverpool are in a position of tremendous financial strength still. They will be after this window closes. Comparing their spending limit to the likes of Chelsea and Manchester United is utterly pointless, they operate on different plains in terms of what is comfortably affordable.
It is a long term plan from Fenway Sports Group that is now bearing fruit. Liverpool can now spend big without feeling the pinch they once may have done.