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Manchester City will have to reconsider their options after Liverpool rejected an improved offer for Raheem Sterling.

The Blues came back with a bid of £35m plus a potential £5m in add-ons, £10m more than the original offer.

But Liverpool have knocked it back, PA report; they value the player at at least £10m more than City have so far offered.

City are the only club to formalise their interest in the 20-year-old and so the ball remains in their court and much will depend on how far they are prepared to increase the number of home-grown qualified players in their squad.

Liverpool have always maintained they do not want to sell Sterling, who has two years remaining on his contract, but there is no doubt the situation has deteriorated since the youngster turned down a new £100,000-a-week deal in January.

Agent Aidy Ward's subsequent claim his client would not even sign for "£900,000-a-week" prompted Liverpool to cancel a scheduled meeting to reopen talks in May.

But last month manager Brendan Rodgers said he expected Sterling to remain at the club and, at that point, they were still planning talks before the end of the season to try to extend his stay - even after Ward's comments.

Sterling has maintained throughout negotiations that his issue is not about money, stating in an April interview not sanctioned by the club, that he did not want to be viewed as a "money-grabbing 20-year-old".

Liverpool's sixth-placed finish means they cannot offer him Champions League football next season and a disjointed campaign on the pitch personally has not helped.

The forward enjoyed his best form as a left-sided attacker alongside Luis Suarez and Daniel Sturridge the season before last in the Merseysiders' title near-miss but in the last 12 months he has found himself shunted between right wing-back, right wing, a number 10 and a central striker.