Why Liverpool are desperate for a Man City victory

By Tony Attwood

Why more Liverpool?

Well, because they came five points ahead of us in the league, because we knocked them out of the cup, and perhaps most because the media is saying some very strange things about Liverpool that need to be examined.

As we saw in Walter’s last article, Liverpool have been going on a bit of a binge in buying players and hanging on to them.  Part of this “hanging on” process included their owner openly boasting that he lied over the story of their centre forward not having a £40m buy out clause.  Directors of football clubs lie.  But they don’t ususally boast about it afterwards.

Quite what sort of impact that will have on Liverpool’s ability to buy and sell in the future remains to be seen, but one thing is certain, Rodgers wants to buy buy buy and so far the owner has been with him all the way.

On 19 March 2014 Sky Sports ran the story that Rodgers had the “thumbs up to spend”.  And just three days ago the Independent newspaper was so certain that Rodgers was going down the spending road that the debate was not whether he would buy big, but rather about the “impact players” he would buy.

So is the money available?   Well, not as far as any accounts show.  Yes, as Walter showed, they have been buying.  And they have run up losses.  Indeed their losses have been so large that if they had had to qualify for FFP this year, they wouldn’t have, and would have had the same sort of penalty as Man C. 

Fortunately for them the rules say that they don’t have to qualify through FFP until next year – if they get another top four finish that is.  Like Hull City they can enter Europe unmolested, and will only be assessed for FFP in May 2015. 

But the May 2015 test will be tougher.  The first monitoring period that we have just been going through is set at 45m euros loss over two years.  Not too tough – as Chelsea showed by making a profit in the second year. Next summer’s test is for the same permitted deficit but over three seasons (2011/12 to 2013/14).

This second round (next summer) also keeps the wage exclusion clause.  Players signed before 1 June 2010 were excluded from the calculations this time – and next summer – but that exclusion for next summer is going to be less helpful as the number of players in the Premier League who were with their clubs before 1 June 2010 and are still there in June 2015 is going to be small.  And after that the clause vanishes

So no problem for Rodgers in 2014.15 but if he goes on spending at the current rate he is really going to come a cropper.

True Liverpool’s income will rise because they will be in the Champions League next season.  They will get better commercial deals, and better media deals, but their match day income will remain stable, save for the extra five matches or so in the Champs, because there will be no new seats to sell, and the local economy means that it will be hard to have a huge price hike. 

Thus Liverpool’s match day income, which currently resides at under half of that of Arsenal, is fairly crucial because player salaries and transfer fees rise all the time.  Although commercial revenue rose a lot between 2011/12 and 2012/13 it is unlikely to rise again.  The deals have been done – there are no more to come.

Worse, when the bills come in for the stadium development they have started (with all those compulsory house purchases around Anfield) they will do what Arsenal did and get money up front from naming rights etc, in order to reduce the loan on the stadium.  Stadium development doesn’t affect FFP but it does require bank loans, and given that Liverpool were owned by the now bankrupt Royal Bank of Scotland for a long time, the interest rates that they have to pay are higher than institutions like Arsenal that have never been bankrupted in the last 100 years.

Liverpool made a pre-tax loss of £90.3m across the first two seasons they will be examined over.  Which means that they must, must, must make a profit in the 2013/14 season to bring the accumulated loss over three seasons down to accepted level.  They then have to show that allowable expenses like “Youth and Community” can be legitimately deducted and they can use the loop hole to avoid including wages paid to players signed in or before the 2011/12 season during that season.

Now Liverpool might just use this to scrape through in the 2014/15 champions league if they qualify.  But only just – and only providing that Rodgers’ demand for more top players is rejected.

And simultaneously they have to satisfy the banks that they can meet the bank loans on the new stadium at the same time.  And it is always possible that their bank manager might actually read about Rodgers’ spend spend spend plans.    

So to be clear, stadium costs won’t affect FFP, but they will affect the readiness of the banks to loan more if at the same time money is being spent on ever more expensive players.  I reckon the owners need to throw another £40m to £50m at the club by the end of this year, not as a loan but as a gift (eg as shares) to keep it going.

Now there are of course many that say this is all ok, because TV revenue is rising and Liverpool is in the Champs League so the money is rolling in.  But all the time wages and transfer fees are rising and as long as Man City are allowed to rampage free, salaries and fees will grow and grow and grow.   So all that extra TV money isn’t there to make Liverpool break even – it is going to be soaked up by the rebuilt stadium project (the banks having been brought to their knees by Liverpool FC last time around will absolutely not loan money for the development of New Anfield without seeing where the money is coming from).

In simple terms, if Liverpool stop buying they are fine – they will just about get through FFP next time, as the new TV money etc will wipe out their excessive losses from the last two years.  What’s more, such financial caution will impress the banks and so money will be forthcoming for the stadium, providing the extra revenue from the stadium and marketing is used to pay off part of the stadium debt early – as Arsenal had to do.

But… the other top clubs will not stop buying.  Well, Chelsea will have to, because they need to make a profit again to stay within FFP, but Arsenal don’t have to, and nor to Man U who will be desperate to claw their way back with a new squad.   And those clubs in Germany have no problem at all with their money, and they will be in the market.

What’s more if Barce are allowed to buy again they will, whether they have cash or no – as will Real Mad until the European Commission reaches a conclusion on their illicit support by the state.  So player prices will rise again and again.

But there is still more.  Because Liverpool did not qualify in the last two seasons they have not had to hand in any accounts to Uefa.  But they will have to supply their 2011/12 and 2012/13 accounts in July and their 2013/14 accounts thereafter.  Liverpool will then be assessed over 2011/12, 2012/13 and 2013/14 and if they have over spent during that 3 year period they will be liable for punishment.

Monaco are in the same boat incidentally, and they have just ignored FFP totally.  So both Monaco and Liverpool will supply their accounts in October.  They won’t suddenly be thrown out for overspending, but Uefa can withhold the payments clubs get from Champions League appearances, and they have done this before.  Liverpool really do have to make a massive profit this season to get through next summer’s test ok, and if Rodgers buys, they ain’t gonna do it.

Worse they have to do it all again by the next season, and we have to remember that by 2015/16 there is no exclusion of players signed before June 2010, and the deficit is reduced to 30m euros over three (not two) seasons.  Here again that Rodgers approach just won’t cut it.

Which is why Liverpool are so desperate for Man City to get away with their approach of ignoring FFP.  If Man City get away with it, the Rodgers system is safe.  If not, then “whooops” might be an appropriate word to use.

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13 Replies to “Why Liverpool are desperate for a Man City victory”

  1. And then there is spuds who have just said ‘Good bye’ to Sherwood.

    How many spuds managers equal one Arsenal manager?

  2. The only way Liverpool can remain competitive in this context is by selling Suarez for about 60 million and using part of that money to fund a couple of decent signings.

  3. Guess who made Eurosport team of the week?
    Carl Jenkinson, because he scored.
    No sign of Aaron Ramsey, though?!

  4. A well constructed article. I look forward to the further unfolding of the Oilers v FFP thread.

  5. Tony, Great article again.

    A few thoughts here.

    It is actually quite important for Liverpool to get EPL. That can provide them more TV and price money and they can negotiate better deals. They failed to do that so it will be something that haunt those guys in the future.

    Even if Man City fend off the FFP issue by Uefa, Liverpool are still in a difficult situation.

    Think about the time when Arsenal get on with the relocation. The team were at the high point. There was only one team who seek to outspend everyone. The German league was not so powerful back then. MORE IMPORTANTLY the economy was doing very well. Banks got loads of money to lend.

    Now, the banks are busted. Economy just hit the bottom. There are two buying clubs in EPL now and the Germans are attracting fans all over the world.

    And Liverpool are not at the heights. They were doing very badly in EPL since 2009 although they got cups.

    Their balance sheet and income statements look far worse than Arsenal’s at any point of the last 10 years.

    Even if Uefa don’t go after them, they are not in the shape to build a stadium.

    There are problems about Wenger and the board. There are plenty of things we might not like; however, until another team stay afloat in CL while they build a big stadium without having it as a gift from some rich person one must believe that Wenger and the board had done something quite amazing.

    Jambug : may be… if they sell him for 70 or 80 million… they
    will have the $$$

  6. The only logical conclusion to made from this is Suarez being sold for a tidy sum.

  7. Agree

    Didn’t really think about it until his outburst after the Palace Match which was a bit OTT.

    I know it would of been hard to swallow, but he seemed to take it far worse than anyone else, including Gerrard, who I would of thought had more reason than most to be down.

    I reckon during all the shenanigans last Summer they asked him to give them one more season and see. So to keep him happy they upped and extended his contract, but I guarantee there’s another ‘buy-out’ clause in it, but revised to say, £60 million, and I wouldn’t mind betting he has to go abroad as well.

    Why wouldn’t he stay?

    Well, for Liverpool, last year was a perfect storm. Fewer matches than main rivals. Fewer injuries, and an element of surprise.

    It will not happen again. At least not to anywhere near the same level.

    If what has been said here about Liverpools finances has any credibility, which I would guess it has, Suarez will know it as well, so he’ll therefore know there limitations in the transfer market.

    He knows Liverpools moment has passed.

    Yep. He’s off.

  8. I think Liverpool will have to sell Suarez. They have probably already realised this.
    Hope all Arsenal supporters are clear what we have built, a solid foundation, through all obstacles, and still mixed it with the top 4 for 17 years.
    Now imagine what the future is holding for Arsenal.
    I sense invincibles II (or close to) around the corner.
    Forward on Arsenal.

  9. Tony,
    In your usual erudite post, you touched on an important issue often affecting the “man in the street” and which is often overlooked.
    When big business (formerly football clubs of yesteryear) needs to expand its real property i.e.the stadium, it needs to purchase adjoining property.
    In the case of Liverpool the owners of Anfield would have had to convince the local authority that where necessary, compulsory purchase of properties where the owners refused to sell was legally justified.
    Normally, umpires are appointed to ensure an equitable price is awarded to the property owners, but the purchase is still against their will.
    I mention the issue of compulsory purchase purely not to forget the background to sporting expansion which can affect so many little people.

  10. Nicky, would you have stayed in a house near Anfield, or Goodison Park?

    Both areas are deprived areas. Brussels will be only too keen to give a massive loan, to improve the infrastructure.

    Manchester City, on the other hand, have found a wealthy Arab(s).

    Far removed from the street arabs!

    Excellent article, Tony.

  11. @Notoverthehill,
    I take your point but don’t forget that whenever compulsory purchase is invoked, the owner refused to sell in the first instance 😉

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