Liverpool risk damaging their long-term transfer policy if they offer Mohamed Salah a bumper new contract.

That is according to former Reds goalkeeper David James, who also told Stats Perform that the frustration of missing out on the World Cup is having a detrimental effect on Salah.

Salah is into the final 16 months of his existing deal at Anfield and is reportedly holding out for fresh terms that could make him the highest-paid player in the Premier League.

The 29-year-old has 28 goals in all competitions this season, a tally bettered only by Real Madrid's Karim Benzema (37) and Bayern Munich's Robert Lewandowski (45) from Europe's top five leagues.

However, while Salah has once again proved his worth to Liverpool this campaign, James does not believe the club should bow to the Egypt forward's alleged wage demands.

"Quite simply, Liverpool won't offer him a contract that is wrong for them. As they say, no one is bigger than the club," James said.

"If he feels he could get more [money] elsewhere, and that's what he wants, then he'll have to go somewhere else.

"That would be the best business Liverpool can do with regards to sticking to whatever their policy is, rather than changing it to cater for an individual and upsetting the model."

Amid the ongoing questions over his future, Salah's form has dropped in recent weeks, the former Chelsea attacker having scored in just one of his last seven club games.

That coincides with double heartbreak at international level for Salah, with Egypt losing to Senegal in the Africa Cup of Nations final and last month's World Cup play-off.

Indeed, since returning from AFCON duty in February, Salah has averaged fewer goals (0.66 compared to 0.81) and fewer assists (0.16 compared to 0.45) per 90 minutes.

He is also creating fewer chances (1.97 compared to 2.07), all of which James puts down to Egypt's recent woes.

"There's been frustration because he's trying to score goals, rather than trying harder for the team," James added. "What I'd seen this season up to AFCON was Mo helping out.

"It was perfect harmony. But all of a sudden it was almost like 'I'm going away for a month, let me try and get my goals now because I can't score them when I'm away'.

"That sort of frustration is more detrimental to his performance. With the negative experiences of the AFCON and World Cup, you start asking 'Where's the desperation?'

"Is there a desperation to his performances to try to make up for those other losses?"

Salah's struggles in front of goal over the past month have coincided with Luis Diaz's instant impact since arriving from Porto in the January transfer window.

Diaz has three goals and one assist in 13 appearances, providing Jurgen Klopp with even more depth in the final third of the field, where they also have Sadio Mane, Roberto Firmino and Diogo Jota.

But James says that should come as no surprise given the impressive work of Liverpool's scouting department in recent times.

"I have to say, I didn't know a lot about him until he was rumoured to be going to Tottenham, so I did my homework on him," James said of Diaz.

"I was amazed at what a player he was. I'd like to think any Premier League club who plays against Diaz will know exactly what they are coming up against.

"But we shouldn't be surprised. One of the most impressive things about Liverpool is that Diaz isn't an exception – there's also Diogo Jota, Thiago [Alcantara], and so on.

"Players come into the team and look as though they have been there for years. That's all part of the system and environment. When players get an opportunity they just fit in.

"That is credit to Liverpool, who have allowed Diaz to fit in and feel part of the team in a short period of time. It's like he's been there all season."