How Arsenal can afford Alexander Isak transfer explained if Liverpool make huge decision

The transfer saga around Newcastle United striker Alexander Isak and his potential move to Liverpool has been the dominant topic of this summer's window.

The 25-year-old wants to exit St James' Park, and a statement released earlier this week from the Swedish international confirmed that fact, saying 'change is in the best interests of everyone, not just myself'.

Newcastle are standing firm, and having rejected Liverpool's offer of around £110 million earlier this month, they are adamant that they want to be compensated to the level they deem appropriate for whoever comes in to try and sign one of the world's best forwards.

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But who can sign Isak aside from the likes of Liverpool? Manchester City aren’t going in for him, Manchester United could not afford to and even for Chelsea it seems a stretch. Real Madrid aren't in the market for a new striker, Barcelona can’t afford one and Isak has already batted away the idea of going to play in the Saudi Pro League, where teams could actually afford his transfer fee and wage demands. Tottenham Hotspur could afford it, but as well as not being a compelling move for Isak, it would break the wage and transfer structure at Spurs significantly.

So who else is there? Well, Arsenal.

The Gunners are understood to have been admirers of Isak and he was a target they would have explored if the circumstances allowed it. Financially, it is something that they could pursue, although it would require some risk taking.

Arsenal approached the summer window safe in the knowledge they they had plenty of headroom when it came to the Premier League's profit and sustainability regulations (PSR).

The club are now into a new financial year, on a new three-year cycle and the £52m loss from 2022/23 will drop off the assessment period. That is impactful for the club, with the 2023/24 loss at £18m and a successful run in the Champions League and further revenue growth likely to see the club in a healthy position. They will be targeting the same again for 2025/26.

The £105m permitted losses over a three year period are one thing. Clubs have what are called allowable losses for such things as depreciation, investment into infrastructure, investment into the women’s team and the academy, and community initiatives. For 2023/24 those allowable losses for the Gunners stood at £55m, meaning that against the £35m permissible loss for the season, and the actual £18m loss, the club were actually net PSR positive to the tune of £38m.

The long and short of it is that Arsenal could have lost almost £200m in 2024/25 and still be PSR compliant. They won’t do that, of course, not even remotely close and that then rolls over meaning that the headroom becomes even greater for 2025/26, likely more than £300m in losses allowed before PSR becomes an issue.

This summer was one where Arsenal needed to spend, though. The soon-to-be confirmed deal for Eberechi Eze from Crystal Palace for £60m plus will take summer spending to around the £250m mark in terms of guaranteed fees, not including add-ons. Those fees are what will be amortised over five year deals for all-but Christian Norgaard, on a two-year deal, meaning the amortisation costs, including Eze on an assumed five-year deal, would be £53.3m per year.

The work that has been done to close the gap with the likes of Liverpool and Manchester City in recent years has been built on successive qualifications for the Champions League after a number of seasons spent away from European club football’s elite competition saw them lose a lot of financial ground.

Getting over the hump to claim the biggest honours and giving themselves the best possible chance of continuing to be a top four-side, at a minimum, in the face of a host of rivals strengthening with the same goal in mind requires investment.

The Gunners' amortisation costs for 2023/24, the most recently published set of accounts, were £171m, among the highest in the Premier League. While adding another £53.3m to that might seem heavy, the club will be seeing a reduction in annual costs for big transfers such as Declan Rice, whose book value will drop by £20m, reducing the amortisation costs by that amount and those of other big ticket players such as Kai Havertz, Jurrien Timber, Riccardo Calafiori and Mikel Merino. The decrease in book value of all those players will likely account for the lion’s share, if not all, of the amortisation costs added.

But the spend will require Arsenal to tap into cash for instalments, and the wage bill will increase. The sale of players at the right price will likely be on the table if it provides a benefit to reducing either amortisation costs or a meaningful impact on the wage bill, but there will be no PSR consideration for doing so. They remain well clear of having any such worries on that front.

The wage bill will increase, though. The wages for the club were £328m for 2023/24 against £613m in revenue. That is a wage to revenue ratio of 53 per cent, a very safe margin. That wage bill will be shown to have risen when the 2024/25 accounts are published, but with new commercial deals, continued strong performances in the Premier League and Champions League, and £78m worth of profit on the sales of players in the 2024/25 financial year, they will have another healthy performance.

Player trading this summer hasn’t been great, with only deals for Nuno Tavares and Marquinhos bringing in a combined £6m or so. That has to improve.

Taking all of this into account, when it is considered that the club still have injury woes in their striking department, with Kai Havertz the latest, they are pretty soon faced with just having Viktor Gyokeres to rely on and it is a long season.

Arsenal could afford Isak comfortably and are probably the most compelling case for him outside of his much-wanted move to Liverpool. If he sits out this season, Newcastle lose huge leverage next summer and at 26 then he will still be an attractive proposition.

Whether Arsenal make such a bold move remains to be seen, although it leans toward the unlikely. Morgan Rogers at Aston Villa is another name mentioned in recent days, but even he won’t be leaving Villa for much less than £100m if any interest materialises.

Arsenal’s Isak interest was murmured earlier in the summer but died away as the Liverpool narrative became stronger. But having already hijacked one deal in swooping to take Eze from under the noses of Spurs, maybe another bold play might be left in the tank for the Gunners to partner Sweden’s two main men. Likely? Maybe not. Financially possible? Absolutely.