For all Rafa's moaning about money, only a new stadium will allow Liverpool to win the title

With Rafael Benitez's pronouncement last week that he needed to see significant investment in his team if he is to ignore Juventus's overtures this summer, then you could be forgiven for assuming Liverpool are a club in financial meltdown.

Is that really the case though, or is there any glimmer of hope for the long suffering fans who have become bewildered and ultimately bemused at the events of the past week, and indeed, at the whole circus since the American owners took control at Anfield?

In spending terms, Benitez is third highest of all Premier League managers during his six year reign at Anfield - with a NET (ie loss) spend of £122million, or £20million loss a year - behind only Chelsea and Manchester City. But that hardly paints the true picture, given where he started in comparison with the likes of Manchester United and Arsenal.

That though, is not the most important financial factor in football. The true gauge of a manager and club's performance is their position in relation to spending on wages. In the book Soccernomics, by Simon Kuper and Stefan Szymanski, it is proven beyond doubt that players’ salaries alone almost entirely determine football results and by extension league position.

In their study, the pair found that spending on players’ salaries explained 92 per cent of the variation in their average league position over the period. To put it simply, the club that spends most on wages finishes first, the club that spends least on wages finishes last, and this happens 92 per cent of the time.

Indeed, there have been only two notable exceptions in the top flight in English football over the past decade - Everton have performed well above their level of wage spending, Newcastle well below. If you're still following, then it means that managers don't really make a difference, big salaries for players do.

And where do Liverpool stand in wage spending? Currently, they are fourth, with an annual spend of just over £110million on wages. Arsenal are third at around £130million, Manchester United second with £160million annual wage spend, and Chelsea top with a spend of £180million, give or take the odd two bob.

So all things being equal, Liverpool SHOULD finish fourth in the league. And guess what...they have slipped from second last season to be challenging around the fourth place position this time around. Uncanny isn't it.

But what of the future we are meant to be examining? Is Benitez's dire implication of financial trouble caused by a lack of spending an accurate assessment of things to come at Anfield?

Well, it is true that Manchester City are fast catching every other Premier League team in terms of wage spending. They are currently below the top four with £82million, but by the end of the current campaign, when they have had an entire financial year on the books, then they will be rivaling United and possibly even Chelsea by the start of next season.

In the short term then, it is bad news for Liverpool, because they will be fifth in the wage spending league, and can therefore expect to finish...yes you're getting it...fifth next season, outside the Champions' League places.

But two factors must be taken into consideration. First, Liverpool are in a healthier position than the likes of Chelsea, City and even Arsenal, in that their wage bill is currently pegged at the magical (in business terms) level of no more than 50 per cent of turnover. 

That means for all the dire financial warnings, Liverpool are not allowing their spending to get out of control, nor their debts, which are still manageable even given the £20-£30million annual interest they must pay in servicing the loans the Americans have taken out on the club.

Second is that should they finish fourth as their wage spending currently dictates, then Liverpool's turnover will increase significantly next season, given new sponsorship deals which will be in place by the summer, that are significantly above the current levels. Their new shirt deal, for instance, will be £20millon a year, up from £8million.

That means - yes, you're catching on - spending can increase on wages to take them up to and beyond Arsenal's current level of spending, and back into fourth.

In the short term that will see the likes of Pepe Reina and possibly Jamie Carragher given new deals to keep them at Anfield, just as Steven Gerrard and Fernando Torres were given massive pay rises last summer. 

It also means they can pay the wages to attract expensive new talent like Marouane Chamakh, who will be on a free so can demand big money in his wage packet, again, just as they did last summer in putting Glen Johnson and Alberto Aquilani on superstar wages.

And what of the longer term future? It is clear that if Liverpool are to maintain their current position in the top four big spending clubs in the Premier League, then they will have to continue to increase revenue.

That's where the new stadium comes in, and explains why the club's senior financial men have been banging on so much about why getting the stadium built is so important.

If - and it's still a fairly big IF - they can move to a new stadium, then revenue will increase to the extent that their turnover with match or even exceed Manchester United, allowing them to spend more on wages than any of the other big four, given that Chelsea are now trying to trim their wage bill to a more sensible level.

The news coming out of Anfield is still positive on that front. New investment will arrive by the summer of at least £100million, which will be used to cut the £200million debt the Americans have on the club. 

And when the debt is cut, then the banks have agreed to finance the build of the new stadium, which could get underway by the end of the year, if there is a strong tailwind. 

So it all depends on that investment, which - we are told - is getting closer, even if the identity of the likely new stakeholders is still shrouded in mystery. If it DOES arrive, then Liverpool will be in a position to move to the top of the wage spending league, and - the statistics tell us - to the top of the Premier League.

Whatever happens, it will be at least three years before the stadium is built, so in that time Liverpool will require a manager who can outperform his wage bill by at least one place, given City's current rate of spending.

Benitez has done that in the past of course, finishing second last season when fourth in the wage table, but this season the trend is currently in the other direction, which must worry the manager a little, hence his apparent stance in keeping the door open for Juve. 

Just one final point about the premise at the outset of this column. Benitez at the end of last week seemed to hint rather strongly at massive frustration at a lack of financial backing and by extension, at financial problems at Anfield. 

But all the above premise is based on new investment being forthcoming, and plainly the best way to attract that is to paint a relatively healthy financial picture. It would seem therefore, that if he wants long term backing in the transfer market, then it would probably be politic of any Reds manager to promote a rather more positive message.

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williamhill.com

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