Neville said the biggest compliment he could give Liverpool was that he left their game against Manchester City a worried man.
He said: "I’ve backed United all season, and I won’t be changing my mind at this stage, but it’s fair to say Liverpool have emerged as much more of a threat than I considered a few weeks ago.
"Liverpool look as well equipped as any side to take that final Champions League spot now. They've stopped conceding goals, have found a system that works for their players and have their high intensity game back."
Since United thrashed Liverpool 3-0 in December, the Reds have managed to close the gap on their fierce rivals from 10 points to two ahead of tonight's Premier League fixtures. United face a trip to Anfield later this month which could prove key to both side's hopes of qualifying for next season's Champions League.
Louis van Gaal's side still holds an advantage but their style of play has come in for a lot of criticism of late, while their away record is also a cause for concern given they have won just three games on the road in the Premier League this season.
There is a lot of momentum with Liverpool at the moment, given they haven't lost a game since the last two sides met, but there is plenty of time for things to change - along with both sides encountering FA Cup quarter-final ties this weekend, with both clubs hoping to put a trophy in the cabinet this season. It will be interesting to see if targeting silverware could be a factor in deciding the remaining Champions League places that are up for grabs.
It's also unsurprising that Neville would back his old club, but it's a big acknowledgement of the fight they are in to finish in the Champions League places between now and the end of the season.