Liverpool suffered a huge blow to their Premier League title ambitions this season as they lost 3-0 to Manchester City at the Etihad Stadium on Sunday.
Erling Haaland missed an early penalty but the Norwegian made up for his mistake by heading home a delightful cross from Matheus Nunes in the 29th minute.
City doubled their lead in first-half stoppage time when Nico Gonzalez’s effort took a deflection off Virgil van Dijk to beat Giorgi Mamardashvili in goal.
Jeremy Doku put the game beyond the visitors just after the hour mark, as he scored with a stunning strike from outside the penalty area.
The result leaves Liverpool eight points behind Arsenal and four behind City in the Premier League table.
Football pundit Neville believes the Gunners are still the better side but insists the Citizens and Liverpool remain serious contenders for the title.
Speaking in his Sky Sports podcast, he said: “Pep has giving them a bit of belief going into the international break. They’re four points off Arsenal, they’ve got experience.
“They have got players who have been around the block and know how to win titles. He will just want to hang on Mikel Arteta’s shoulder by March because he’s the one you don’t want near you.
“I thought the biggest challenger [to Arsenal] would be Liverpool, I thought Man City were too inconsistent, but it looks like I was badly wrong.
“They’ve still got to convince me that they’re going to win the title – Arsenal are the better team – but they’re the one team and the one manager you wouldn’t want on your shoulder going down the home straight.”
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On being asked whether Arne Slot’s men could still be contenders after falling eight points behind Arsenal, Neville added: “I’m going to say yes. ‘If it clicked something could happen. They’ve got firecrackers and world-class players in that dressing room.”
Liverpool looked to have turned a corner when they ended their dismal run with two superb wins against Aston Villa and Real Madrid.
They were particularly impressive in Tuesday’s 1-0 success against Madrid. The margin of victory would have been greater without some stunning saves from goalkeeper Thibaut Courtois.
However, the two victories look to have taken their toll on Liverpool as the players appeared tired and exhausted against City.
The Etihad defeat was a big blow for the Reds, but they will aim to bounce back after the international break when they welcome Nottingham Forest to Anfield.