Luke Shaw has become the fourth most expensive defender in world football after Manchester United continued their summer rebuild by signing the teenager for an initial £27m from Southampton.

United completed their second big-money transfer inside 24 hours on Friday when the 18-year-old England international signed a four-year contract with the option of a fifth at Old Trafford.

The fee for Shaw will eventually rise to £31m, based on appearances, and Southampton have insisted the proceeds will be reinvested in Ronald Koeman’s squad as they attempt to ease fears over the summer clear-out at St Mary’s.

Shaw joins the manager Mauricio Pochettino and the striker Rickie Lambert in leaving Southampton since the end of last season with the captain, Adam Lallana, poised to join the exodus by moving to Liverpool for £25m.

Liverpool are also among several clubs keen on the Croatia international defender Dejan Lovren, and the French midfielder Morgan Schneiderlin’s future on the south coast is also in doubt.

Southampton’s executive director, Les Reed, who recently expressed the hope that Koeman’s arrival as the manager would prompt a rethink among the club’s coveted players, said: “While we are sad to see Luke depart the club, we fought to ensure that we got the right deal for a player in whom we have invested a great deal of work over the past decade. This deal is a good one for Southampton Football Club and hopefully sends a clear message to other clubs wishing to bid for our players. Luke’s transfer fee will be reinvested into the team as our new manager, Ronald Koeman, builds for the new season and for years to come.”

United made their first signing of the Louis van Gaal era on Thursday when they agreed a £28.85m deal to release Ander Herrera from his contract with Athletic Bilbao.

Despite Shaw’s relative inexperience, and United extending Patrice Evra’s contract for a further 12 months in May, the club paid a record fee for a British teenager to beat off interest from Chelsea and several other suitors. He is now the fourth costliest defender in the game behind the Paris Saint-Germain pair David Luiz and Thiago Silva and former United centre-half Rio Ferdinand.

United’s assistant manager, Ryan Giggs, said: “Luke is a very talented young left-back with great potential. He has developed immensely during his time at Southampton and has all the attributes to become a top player.

“I am delighted he has joined Manchester United as I believe this is the right club for him to continue his development as a young player and eventually fulfil that promise.”