Thread by @SwedishRumble

(1/16) In this 🧵 we cover how much #LiverpoolFC will be able to spend in the summer window of 2023 under the #FFP regulation if the club finish – outside – the top 4. Could the club still afford to spend £150m on Jude Bellingham? #LFC

(2/16) I mark the quality of my forecast on a scale from 1-10 depending on available information. In this case, the mark is a generous 2, since LFC (Liverpool Football Club and Athletic Grounds Limited) has not published its annual accounts for 21/22 yet.

(3/16) As of 2022, the new Football Sustainability Regulation replaces the Financial Fair Play rules. The main rules #LFC must comply with in the new FSR are the #FootballEarningsRule (“FER”) and the #SquadCostRule (“SCR”). Let’s first look at the FER.

(4/16) The performance under the FER is calculated as follows: Relevant Earnings – Relevant Expenses + Relevant Investments = Football Earnings. Football Earnings cannot be less than minus €70m for LFC.

(5/16) UEFA’s licensing system is backward-looking. Hence, transfers in in the summer of 23’ impacts a club’s ability to obtain a license in 24’ for the 24/25 season. The FER monitor period in 24’ covers the 22/23 season and the 23/24 season.

(6/16) To ensure compliance in 24´, Liverpool must in the summer of 23’ determine its outcome from 22/23 and prepare a budget for 23/24 based on a forecast for its financials from that season. Since we do not have any 22/23 data, we must forecast both 22/23 and 23/24 seasons.

(7/16) The basis for our forecast will besides the 20/21 Annual Report be (a) Deloitte’s data from its Football Money League (in EUR):

(8/m) and (b) OffThePitch’s PL forecast for 21/22 (in Sterling):

(9/16) To these, a great number of adjustments must be made to get projections for 22/23 and 23/24 year-end reports. Given the assumptions made in tweet (1/16), these include adjusting merit and broadcasting income to a non-top 4 finish, and squad changes.

(10/16) With the above assumptions and adjustments, we get the following forecasted performance by #LFC under the #FootballEarningsRule, meaning that the Club theoretically could incur additional costs for the 23/24 season of £174m:

(11/16) So what does the ability of “incurring additional costs of £174m” mean? Can Liverpool sign players for £174m? No. Signing a player results (1) in an amortization cost, totaling the transfer fee divided with the contract term. (2) The players wage.

(12/16) The yearly cost of a “Darwin Nunez” is 80m / 5y + 7.2m = £23.2m. So, under the FER, #LFC could sign 7.5 players with a yearly cost equal to Nunez. But we must also look at the Squad Cost rule.

(13/16) Under the #SquadCostRule, a Club establish its Squad Cost Ratio for the licence season which may not be greater than the defined limit of 70%. The SCR is however implemented in three steps, 31 December 2023 the defined limit is 90%, in 2024 its 80% and in 2025 its 70%.

(14/16) Under the above assumptions and assuming #LFC will sell players for 25m in the summer of 2023, we get the following result under the Squad Cost Rule, i.e. that LFC could incur an additional £46.8m in costs:

(15/16) Is that enough to sign Jude Bellingham for 150m and pay him 200k a week? Yes, the cost for this would be app. £40.4m.

(16/16) What these numbers also indicate is that if LFC continuously miss top 4, they cannot spend more than it is this season. If top 4 continuously is achieved, about a player of Bellingham’s cost level could be added to a normal transfer budget

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