What does Mohamed Salah’s contract situation mean for Liverpool and PSR?

Liverpool are yet to agree a new contract with their talismanic forward Mohamed Salah.

Liverpool owners Fenway Sports Group face a major contractual dilemma until the end of the season. Mohamed Salah’s comments on Sunday night that he was “disappointed” that he had not yet been offered a deal did little to ease the pressure.

Salah, like other key players Virgil van Dijk and Trent Alexander-Arnold, is out of contract at the end of this season and FSG risk facing the wrath of Reds fans if they do not find a satisfactory result in the match. situation, and for fans this means that all three players will represent the club after the end of this season.

While Salah’s announcement of no offer may seem alarming, there is little doubt about the future of one of the club’s most legendary players, its current richest player and the man considered valuable enough to turn down an offer from Saudi Arabia for huge sums of money. Money last summer will not be discussed behind the scenes in great detail.

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While for some clubs the decision on new contracts, which almost always involve committing even more money to players, may revolve around aspects of retention within financial controls, be it the Premier League’s profit and sustainability rules or UEFA’s spending on squad squads. ratio rule, this will not be the Reds’ main concern.

Liverpool’s wage bill stood at £372.9m, up £6.8m on the 2021/22 financial year, according to the latest published financials for the 2022/23 season, which included the first year of Salah’s extension.

Liverpool’s wages rose by £165m (79%) in the five years to 2023, representing the highest rise among the so-called ‘big six’. Three other clubs also made more than £100m: Manchester City £159m, Chelsea £140m and Tottenham Hotspur £126m. Liverpool had the second-highest wage bill in the Premier League in 2023.

In terms of wage-to-income ratio, the Reds’ figure was 63%, well below the UEFA-recommended ceiling of 70%. But dealing with this given fluctuating incomes, especially when you factor in things like missing out on the Champions League, can be a challenge.

In the 2023/24 period, according to data provided by football finance expert Swiss Ramble, Liverpool had the third highest PSR (£173m), behind only Manchester City and Brighton & Hove Albion, the club whose finances have received a major boost thanks to huge markups on sales from the likes of Moises Caicedo, worth £115 million.

PSR, or any other UEFA option, is not really a major issue for the Reds and they have the financial ability to offer a contract extension. The big question will be the return on investment over the life of the next deal, and whether multiple deals worth between £400,000 and £500,000 a week will be good for the balance sheet and further the club’s competitive and financial goals.

Salah continues to perform at an elite level, as does Van Dijk, despite advancing in years when they would normally only rely on lesser terms. Alexander-Arnold is a player in his prime, meaning there will be a premium to be paid to keep him.

Salah knows his worth and his footballing CV and achievements for Liverpool speak for themselves. He is a club legend in every sense of the word. But he will want to be paid in line with what a player of his caliber is getting in the market, and with the potential for much more money in the real Saudi Arabia, he has leverage. He knows the potential reaction that could occur if FSG allows him to leave.

FSG has long sought to incentivize contracting as wage increases align with revenue growth associated with competitive success. This is likely to remain the case, and the focus is likely to be on finding a way to match output with wages. But for Salah and his representatives this puts him at risk, not the club, and this may not be acceptable given what he has, but can still be achieved for the club, especially since he plays such an important role in the revival of Arne Slot, which is early.

Financial constraints from a regulatory perspective are not a factor that will stop these deals from going overboard; it will all depend on business decisions about risk and reward. The only plausible way to solve this problem is if the risk is placed more heavily on the side of the club than on the players.