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£105m cut-off no issue for Liverpool and Arsenal as FSG and KSE set budgets ahead of deadline day

Adam Williams

Wed 29 January 2025 13:45, UK

As a market, the Premier League is a basket case. Despite spending a combined total of over £850m on their squads in the last financial year, Liverpool and Arsenal are among the only clubs acting sanely.

In financial terms Stan Kroenke and Fenway Sports Group (FSG) are getting good ROI from that figure, which is derived from the amortisation and player wage sections of their official accounts.

Yes, Arsenal and Liverpool have a grand total of one Premier League title between them in the last 20 years. However, their respective enterprise values have exploded in the same period.

FSG paid £300m to buy Liverpool in 2010 and almost immediately wrote off around £200m worth of debt inherited from Tom Hicks and George Gillett, meaning their enterprise value stood at around £500m.

Kroenke Sports & Entertainment (KSE) meanwhile paid ITV £65m for an initial 9.9 per cent stage in 2008, giving the Gunners an enterprise value of about £650m.

These are imperfect calculations, of course, and a club’s value is inherently tied to the market, but even the most conservative of estimates shows an astonishing level of capital growth.

Speaking to TBR Football last year, Liverpool University football finance lecturer and industry insider Kieran Maguire called FSG’s takeover the “bargain of the century.”

Forbes estimate that the Boston-headquartered owners’ investment at Anfield is currently worth approximately £4.3bn in today’s market while Arsenal are appraised at £2.5bn.

Clearly, both owners feel there is far more upside to be achieved.

That is why FSG opted to sell only a minority stake to the private equity firm Dynasty Equity last year, as opposed to a full sale which was at one point on the cards.

In doing so, they are believed to have recouped around £150m for just 3-4 per cent of the business, while relinquishing almost no operational control.

On the pitch, Arne Slot is proving an inspired hire. Former sporting director Michael Edwards’ return as CEO and a raft of other back-of-house changes have also made smoothed the post-Klopp transition.

Arsenal were a fading force at the start of the Kroenke era but have invested heavily in recent years and, although the coveted Premier League title still alludes Mikel Arteta’s side, their bar has risen significantly.

That investment – which has seen Declan Rice and Nicolas Pepe become the two most expensive players in Arsenal history, with mixed results – has eaten into their profits. They have lost £311m since 2019.

When TBR speaks to industry sources, the mood music is that, now the Gunners are Champions League regulars again, KSE will likely taper their spending and return to profitability.

This article has been rosy reading for Liverpool and Arsenal fans so far, but the business models of Stan and Josh Kroenke, Tom Werner and John Henry don’t placate supporters pining for blockbuster signings.

When there is a market opportunity, they will strike. But their emphasis on the laser-focus on sustainability means that Galactico signings aren’t de rigueur.

In recent years, a convenient excuse has fallen into FSG and KSE’s laps. But there is just one problem…

• READ MORE: Arsenal have just poached key behind-the-scenes figure from Liverpool after £118m triumph

The PSR myth about Liverpool and Arsenal circulating this January

January transfer windows have become much quieter affairs in recent years.

Last January, Premier League clubs collectively spent less than £90m. This time around, spending is around the £250m mark, but Man City are accountable for around half of that.

In seasons gone by, English clubs had flirted with the £1bn mark.

The drop-off over the last two winters has been attributed to Profit and Sustainability Rules (PSR) reigning in clubs’ spending. That is true – although, only to an extent.

Several recent op-eds and transfer reports have suggested that clubs like Arsenal and Liverpool are unable or unwilling to sign readymade superstars like Alexander Isak because of PSR.

Whether that information is coming in media briefings from the clubs or ham-fisted attempts to read the accounts, it isn’t true.

TBR Football is aware that certain Premier League clubs without PSR issues are actively parroting this narrative, presumably to quell fan expectations that mega-money signings are inbound.

Liverpool have more PSR headroom than almost any other team in Europe under both the Premier League’s £105m loss limit and UEFA’s squad cost control rules.

Arsenal have slightly less flexibility but are still more than comfortable because of various PSR-allowable add-backs, as are all of the so-called Big Six with the exception of Man United.

But even in United’s case, there are a dozen levers that they could theoretically pull to create more breathing space and it is highly unlikely they will actually breach PSR.

Cash flow, business strategy and a lack of market opportunities are different matters altogether.

But the reason the bigger clubs aren’t pushing the boat out while simultaneously hiking ticket prices and removing concessionary discounts for bedrock fans has virtually nothing to do with PSR.

• READ MORE: Liverpool owners FSG primed for £260m cash bonanza that easily smashes Mohamed Salah’s Saudi contract offer

New FFP system next season: How will Liverpool and Arsenal fare?

As of the start of 2025, UEFA have finished phasing in their squad cost control rule which limits clubs competing in Europe to spending 70 per cent of revenue on wages, transfers and agent fees.

That limit, which includes profit on player sales as well as clubs’ headline turnover figures’, is expected to be replicated in the Premier League from next season, albeit at a more lenient 85 per cent cap.

As regulars in European competition, Arsenal and Liverpool are already well-versed in navigating UEFA’s system, which has been being phased in for the last two calendar years.

As the loss limits and the squad cost cap in Europe are righter, the new Premier League system should not be an issue for either Arsenal or Liverpool based on their present levels of expenditure.