Richard Hughes' MASSIVE £75m headache

After a frugal couple of years, Liverpool are looking set for an extraordinarily busy summer.

Prior to the signing of Jeremie Frimpong, the Reds had spent £41.5m across the last three transfer windows, opting instead to use the players they had which led to them winning the Premier League.

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Given the club's limited spending, you would expect them to be primed for a transfer window where they can spend as much as necessary to make sure the team is prepared for next season.

However, the club is in a sub-optimal place regarding the profit and sustainability rules (PSR) as a result of their overall financial situation which is far more complex than just looking at transfers.

Liverpool can have a £75m pre-tax loss before PSR is a concern

Earlier this week, The Athletic took a deep dive into the Premier League clubs' financials ahead of this summer and the results were polarising to say the least. Liverpool have problems to address.

Their projected estimates suggest that Liverpool are in a far less comfortable position that they would have liked to be, with just a £75m pre-tax loss allowance before a PSR breach is a concern.

Each season, can only lose a certain amount of money if they are to meet the regulations.

In the 2023-24 campaign, Liverpool were competing in the Europa League instead of the Champions League because of a fifth place Premier League finish during the 2022-23 season. As such, the disparity in prize money and television rights would have been significant.

Furthermore, Liverpool have one of the highest wage bills in Europe and so any wavering from the expected financial revenue is likely to high significant consequences on the balance sheet.

In the report, Chris Weatherspoon wrote: "Despite breaking even since Fenway Sports Group bought the club in October 2010, Liverpool's pre-tax result for 2023-24 was their worst ever - £57.1m was shipped, which on top of a £9m deficit a year earlier put the club's combined loss at £66.1m for the first two years of the current PSR cycle.

"Liverpool haven't been funded by equity recently, so their losses are limited to £15m over three seasons. They do, however, have chunky allowable costs. The club's infrastructure accounts for around £16m annual depreciation charges, while they also run one of the most expensive youth setups in England.

"We estimate Liverpool could have lost £75m in their 2024-25 accounting period (which ended on Saturday) and still have been compliant with Premier League rules. In reality, with booming revenues and player sale profits of £41.9m (around double the size of 2023-24), Liverpool were considerably more likely to have been profitable last season than to have strayed anywhere close to their loss limit."

As such, we can all take a sigh of relief. No points deductions are heading to the Red half of Merseyside anytime soon and the club's financial management looks to be in good shape.

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However, the overall PSR situation may still give Richard Hughes and Michael Edwards headaches this summer, because spending is set to be significant. Qualifying for the Champions League again and winning the Premier League will help, but it's still something to keep an eye on moving forward.

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