The Reds are known to want to get their transfer business done early in the forthcoming window as manager Brendan Rodgers aims to turn around the club's fortunes in the Premier League, with a deal for Chelsea striker Daniel Sturridge all but sewn up already, according to the Daily Mail.
One-time England goalkeeper Butland appears to be the next potential arrival after Birmingham's chairman Peter Pannu confirmed that the club has opened talks with the Reds for the deal, as per ESPN.
Butland has fewer than 50 league games under his belt so far, split between a League Two loan spell with Cheltenham and this season as Birmingham's first choice stopper in the Championship.
However he has, at 19 years of age, already established himself in the full England squad as one of the three stoppers and made his debut—the youngest ever England goalkeeper—against Italy earlier this year, as well as being the reserve 'keeper for the squad at Euro 2012.
The Brum keeper has interested the likes of Southampton and Everton already as well as the Reds but perhaps due to somewhat uncertain form from Pepe Reina, the present No. 1, Liverpool look set to make their move for Butland.
Birmingham are struggling financially and Pannu has admitted that the club might be forced to sell to continue this season:
If I allow this club to go into administration, I think I will never [be able to] step foot in Birmingham [again]. Never. And I am not going to allow that to happen. If I do annoy the fans and I do dispose of players, it will be to keep the club afloat.
What I can say is that - and I might be blasted for this by the fans - but no one is for sale and everyone is available. As in any club. Give me a £15 million offer for Jack Butland, can I say no? I have rejected £6 million from Southampton [in the summer] but I rejected it when our finances were OK. As the time is ticking, I might not be able to reject it if I get something similar.
No actual fee has been released as what Liverpool might be offering, but if Birmingham's finances are indeed so dire then it may be that the Reds can pick Butland up for an even lower fee. More from Pannu:
I understand there are talks with Liverpool, I understand that Everton might be interested, Southampton gave me an offer in the past, I know not whether they want him. His is a phenomenal player and let's move this from another angle.
For example, if Liverpool come in for Butland, do you not think Butland wouldn't want to go there? Even if Liverpool came to me with £4 million, I'm sure if his agent is doing a proper job he will blow my door down and say he wants the Liverpool opportunity.
With Brad Jones having been handed a new contract very recently and Alexander Doni still contracted to the club, though continually not involved with the first team, there are two obvious ways of looking at a possible Butland signing.
Firstly, that he is being "hoarded" and will be sent out on loan next season to gain further experience until he is ready to be a first team challenger.
Secondly, the possibility is there that he has been identified as a real prospect for the first team in the immediate future, leading in turn to speculation that Pepe Reina's days at the club might be coming to an end. It seems unlikely that Reina will be in any hurry to leave the club and he will surely get until the end of the season to regain his best form.
But with a genuine challenger to his place from the summer onwards he will need to have shown by then that he can find his top level again or else face losing his spot that he has held since 2005.
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