Long post (sorry).
@tombrown - it depends.
We've been pretty good, historically, at managing within FFP and similar limits. The reality is that these new rules aren't the best for us as we've tended to pay good wages, but not splash out massively on transfer fees.
For context, some quick analysis of the 2023 accounts will give an idea of scale.
Squad costs (ie accumulated transfer fees and levies for all squad players) for the big 6 are:
City £1,117m
Chelsea £1,070m (NB this is only part-way through their spending spree)
United £924m
LFC £787m
Arsenal £772m
Spurs £579m
So we're basically on a par with Arsenal but significantly below the others. Spurs are an outlier.
Turning to wages, these are full-fat and include non-football staff (in City's case I've added back in the costs they artificially took out)
City £438m
Chelsea £373m
LFC £373m
United £331m
Spurs £251m
Arsenal £225m
FWIW, I think Arsenal's figure looks iffy, so they may be accounting for agents or image rights costs differently to the other clubs. But this underlines that we are paying wages similar to Chelsea's to a smaller, less-expensively assembled squad.
You can then create a hybrid wage and amortisation figure - basically this assumes squad costs written off over 5 years + wages. This will overstate the figures (staff wages are excluded from the UEFA ratio, and amortisation is likely to be lower than 20% of total cost) but it gives a steer on trend, relative to other clubs.
City £662m
Chelsea £587m
LFC £530m
United £516m
Arsenal £379m
Spurs £367m
What this shows is that due to our wages, we have harder revenue targets to hit, relatively speaking, than other teams who have spent more heavily on players. However, these numbers are from 2023, and will include Thiago, Milner, Henderson, Fabinho, Ox, Keita, Bobby. I'm not convinced the guys who've taken their places, to the extent they were replaced, will be earning the same sort of money.
Against that, you have the renewals currently underway, possible bump for Diaz, extra £5m a year in employer taxes (NIC). All of which says we don't have a great deal of capacity to push our spending unless we have increased our revenue.
Enter the new Anfield Road stand, not in the 2023 figures. New partnerships, strong performance in the Champions League in the first half of the year. They will add to the revenue figures for the current assessment period (to 31/12/2024), but there was never any risk there anyway as the current target is 80%.
Going into next year, I've said before that I believe we have money to spend (based on profitability and available cash). The new FCR could constrain that spending. So in terms of parameters:
1. Spending on transfer fees is less drastic as it will be spread over 5 years - so if we bring in a new player for a fee on lower wages than the guy he replaces then it could be a wash.
2. Wages need to be covered every year.
3. The choice between replacing or renewing a player will depend on a few factors:
i. Can we make a decent profit on the sale (NB only 1/3 counts in the year of sale)
ii. Is the wage saving sufficient to sell rather than renew (i.e. does it substantially cover the amortisation increase)?
iii. Can we downgrade cover for the position by using a youth team player to cover?
And in reality, clubs will need to adopt a balanced approach. So if we take the out-of-contract three:
VIRGIL
World's best
No re-sale value
Youth cover (Quansah) shows potential but has struggled
Replacement cost would be astronomical and still not at the same level
Getting on, but still in good physical condition
Everything says renew.
MO
In the discussion for World's best
No re-sale value
Youth cover (Doak) untested at top level and has some injury history, existing senior players would be a drop-off in quality
Getting on but still in peak condition
Huge commercial value
On balance, strong case to renew
TRENT
Elite attacking, not so much defensively
No re-sale value unless we sell now
Youth cover (Conor) looks good enough, but injury history
Entering his peak years
Local player
Will want massive hike in wages
On balance, if Madrid came in with a proper offer this month, on a financial level I would sell, as it doesn't look like he's going to renew and we will need cash to replace him. I wouldn't be against keeping him on balance, to avoid disruption, but in a pure financial sense we should sell.
There'll be similar assessments throughout the squad.
But I would be inclined to keep an eye on what UEFA does with punishments for this year. There will be a lot of teams in breach, even with the more relaxed targets, with Villa and Chelsea really exposed. They won't be able to sell a few car parks to get around these rules. Ultimately, if loads of clubs put pressure on UEFA, I think they will go easy on dishing out the fines, or even relax the targets. Fundamentally, the purpose of financial controls should be to prevent clubs spending money they don't have. In our case, the risk is that they prevent us from spending money that we DO have.
Failing any relaxation, we need to boost our revenues, and that means ticket prices going up, official incontinence pants of LFC etc. And a regular conveyor of players sales. Anyone with 2 years left who isn't showing signs of signing needs to be moved on, whoever they are. More youth, smaller squads. Because one thing is for sure, transfer fees and wage rates aren't going down any time soon.
