Board Constraints Could Stop Liverpool Competing

So it seems we’ve been barking up the wrong tree. Liverpool Football Club is still the 9^th richest club in world football, which is some going considering that up until January 23 we were 5^th in the Premiership for attendance with 44,674 (536,089).  Credit where credit is due, John W Henry and co have steered the good ship LFC away from the economic iceberg which countrymen Hicks and Gillet almost dashed our hopes on.

Or has it?  The annual accounts revealed that the club’s debt rose to £87.2 million.  While the annual loss was £40.5million (down £8.8million on the previous year), the loss shows the impact a continuous lack of Champions League football has had, the overall debt has risen by £22million.

That being said, it throws even more light on our transfer policy.  Great play has been made of club policy in acquiring top young talent, but it seems economic prudence is the marker by which the board stipulates is paramount to any transfer.  The board placed a set price on Ince and Coutinho  and refused to go much beyond their valuation. While economically that’s an admiral stance to take, unfortunately making a football club viable and then become a winner to boot just doesn’t cut the mustard, unless as in Germany, every club, in theory, sings from the same hymn sheet.

Man United, League winners by twelve points and ahead of us by a massive 28 points, have arguably the two of the top five players in the league, but it still hasn’t stopped them from splashing out £15million on Wilfried Zaha who many observers believe to be one of the most exciting home grown youngsters in years and on the verge, as I’m writing, of signing the brilliant Barcelona and Spanish under-21 captain Thiago.  By all accounts they were looking at re-signing the mercurial Ronaldo.

Was the price too rich for LFC blood or did Iain Ayre and Brendan Rodgers just not rate the player, so we didn’t even enter the race for Zaha or Paulinho? The club’s stance on Thomas Ince was easy to understand as there’s the embarrassment factor of paying a huge sum for a player who until recently was on the Anfield books and next summer will be available on a free transfer which throws up too many internal questions.

How is Brendan Rodgers supposed to keep pace with Fergusson, Mourinho, Pellegrini and with Wenger seemingly about to let the moths out of the Arsenal wallet,  knowing that he’s not allowed to enter the ball park marked top players or the ball park marked exceptionally talented youngsters?  A tad unfair don’t you think to manage with one hand tied behind his back?  FSG   could justifiably say “once bitten, twice shy” with Allen, Borini, Henderson, Downing and Carroll costing almost £100million and failing to set the world alight.

Are we trying to get back to the top on the cheap or making sure the mistakes of yesteryear do not return to destabilise us? Have we been banished from the top table by the inadequacies of our own board or is this just the culmination of years of miss-management finally catching up with us and we are now as one blog follower Livi said, “feeding off crumbs from the big table”?

The club’s debt rose by £21.8 million to £87.2 million in the 10 months between August 1 2011 to May 31 2012.  Even if the losswas substantially less than the previous year’s £49.3million and that’s taking on board the fact we got to the two domestic finals it’s still a substantial increase.

Managing Director Ian Ayre claims that even £9.5million of “exceptional payments” which included the pay-off to Kenny Dalglish will not hinder the club movements into the transfer market.  The board pumped an interest free inter-company loan into the Liverpool coffers to keep the debt at a manageable level to stave off the threat of another few seasons of not challenging for a Champions League position let alone winning the Premiership.

While I’m not saying that Liverpool Football Club should throw money around like confetti destabilising the club’s future, both Rodgers and the Board are correct in their assertion that the need to re-build the foundation and structure of the club was intrinsic to its future, but the other teams will not stand still.   The board, I believe have missed the boat in their determination to realigned the club using UEFA’s fair play rules as the barometer  because the massive increase in Premiership money will still keep the bigger clubs top of the pile.

On the face of it the Premier Leagues new financial regulations has strengthen Liverpool’s stance with clubs potentially penalised with a points deduction if they make a total loss of more than £105million over the next three seasons, in  addition, player wages will be curtailed from next season.  Incidentally, if these regulations had been in force over the last three seasons preceding the last one, LFC would have been punished with a points deduction  after reporting losses of over £105million (with Chelsea and Manchester City over that period).

The club having rid itself of many of its high wage earners before the 2012-13 season, is preparing for the new guidelines which state clubs whose total wage bill is over £52million will only be allowed to increase their salaries by an accumulative £4million over the next three seasons.

It’s difficult to see how these regulations can be enforced with the spending power of the Manchester clubs and Chelsea where advertising revenue can be raised to levels which will make up for any shortfall which shouldn’t be difficult given the rarefied atmosphere these clubs operate in, particularly taking into account the curb on wages only applies to television revenue.

The club finishing last in 2012-2013 received £60 million (rising from £39 million) which is the same as Man City earned for winning the Premiership in 2012, which means the prized Champions League places will have grown exponentially.  By 2014, depending on the level of overseas television income, the Premier League winners could receive somewhere between £90 and £110 million.

If one takes future Premiership revenue into account, and then looks at our lost revenue on match day compared to Arsenal and Man United and the probable ways of getting round UEFA’s rules like the signing of massive one off contracts under the guise of advertising revenue we still trail along way behind.  As I said, the brilliant work by the board in terms of the club’s off the field activities is keeping Liverpool, although a long way behind, on the same lap as the big boys, but where the Manchester clubs and Chelsea will again have the advantage is their continuation year on year in the Champions League and it’s why we need to breach that gap sooner rather later.

This is why I believe FSG are naïve in their belief that Financial Fair Play will lead to a level playing field.  Ian Ayre stated, “The recent rules that we’ve adopted at the Premier League will expect people to break even and limit their spending and player wages.  We will conform just as everyone else does.

“We’ve been a big advocate in pushing for that so we’re certainly not going to fall foul of it.”  Does Mr Ayre really think because LFC are subscribing to the news rules the imbalance will change?

It will be interesting to see whether the Premier League sanctions points reduction for teams who fail to comply with the new regulations.

Arsenal announced profits of £17 million in the six months leading up to November 2012 which bolstered their cash reserves up to a staggering £120 million.  When you consider that the club invested £40.9 million on four new players and extended players contracts it has to be said that Arsenal are pinning all their hopes on financial fair play.  Chairman, Peter Hill-Wood said ‘These new rules will be good for us, good for the Premier League and good for the game as a whole.

'It is important that we maintain the quality and level of competition if the game is to continue being a compelling spectacle and we believe the introduction of tighter financial regulation will assist all clubs to compete while remaining financially responsible.'

Its admiral thinking, but the lifeblood of any club is its fans and the announcement of stockpiles of cash will only make the losses of Robin van Persie, Samir Nasri and Cesc Fabregas with the replacements of inferior models more painful.  While Arsenal made the Champions League another trophy less season is hard to bare for Gooners fans.

The Arsenal Supporters' Trust (AST) said the figures highlighted the need for the club to spend more money on team strengthening.

An AST spokesman said: 'These figures contain few surprises. They show that Arsenal yet again made a profit from the sale of their best players and that the club has large cash reserves. 'Arsenal fans have contributed to this financial health through paying some of the highest ticket prices in world football. A further improvement in the club's financial strength is expected when new TV monies and commercial deals come on stream in 2013 and 2014.  AST members want to see this money used for more, and better, investment in the team'.

Top players these days want to sign for teams who qualify for the Champions League, while Fabregas may have left Arsenal to ‘go home’, the loss of van Persie is more keenly felt as he left the club to win silverware, and  did so in his first season at Old Trafford, which sends out a massive message.

Moreover, just as Arsenal lost van Persie, there is the huge possibility of us losing Luis Suarez.  I hear the arguments that we replaced Keegan with Dalglish, but the difference was that then we were the premier team in Europe and had the choice of the cream in terms of the top British players of the time.

Suarez is now seen as the replacement for Torres, although he was originally bought to play alongside the Spaniard and Suarez has admitted the thought played a large part in his signature.  With Gerrard now in his 34^th year, Suarez is the world-class light the club needs to pull in other talent and right now we are in the position where we have to push on or languish amongst with the also rans.  If Suarez leaves a player of equal standing must be brought in if we are not to languish among the also-rans.  Paulinho, on the verge of signing for Spurs said recently, "To play in England for a great team like Tottenham is a dream. What I respect about Tottenham is the ambition they have shown.

"This summer there has been interest in their coach and their best player - and they have been clear they are both not going anywhere."

Conversely, FSG are releasing funds, though not at the top end of the market, it’s been enough for Rodgers to buy-in quality like Sturridge and Coutinho who at the moment seem relative bargains and Iago Aspas and Luis Alberto who may well be more of the same.

Borussia Dortmund have a proven track record for building teams over the years without shopping at the top end of the market, by concentrating on quality and with a proven breeding ground for bringing young players through their much vaunted youth set up and pinpointing talented South Americans, rather than stressing the need to spend £30 million on one player is a much better way, for them, to approach the transfer market. Thus it is possible to go against the grain. The difference is that Liverpool are up against three world super powers in their own backyard, hence by the time the youth team becomes the potent force the owners would like it to be, the gap to the top three could turn out to be as wide as the Laurel Canyon.

Bayern Munich’s mantra is to have a good business you need a good team… says it all doesn’t it.

The club needs to make a statement of intent, by buying in a recognise world-class talent, if Suarez is to leave, the talent coming in needs to be more than one of that ilk.  The pressure is now on Brendan Rodgers, having seen the club improve dramatically in the second-half of his first season. 

If Liverpool fail abysmally to get into the top four next season, I’m afraid Rodgers will have to go, because he and the board have maintained their mantra of only buying in a particular type of player with sell on value and as such can only be measured, as they should be, by the results of those players and not by the fact that have not made big money buys. 

 

The transfer market is open and we will see whether we can compete with Arsenal and Tottenham and for that matter the “big three”.

Ayre said recently, “We can still attract top players to Liverpool – I have no doubt about that.”

“I have never been in negotiations with anyone who has said they want to sign for Liverpool, because we are not big or successful enough.

“We’re focused on finding great young talent but we also need experience and leadership. It’s about getting the right balance.” 

 

Let’s see if the club lives up to his words or it proves to be yet another false dawn.