As West Ham stare down the barrel of relegation from the Premier League, the finance department at the London Stadium will be preparing for every scenario.
Only three points against Leeds United and a Tottenham defeat will do for Nuno Espirito Santo on the final day of the season if the Irons are to survive going into a 15th consecutive Premier League season.
But whether the Irons are in the top flight or the Championship next season, they will be subject to a new set of financial rules which are replacing Profit and Sustainability Rules (PSR).
Under PSR, Premier League clubs could lose a maximum of £105m over a rolling three-year period, with allowances for things like infrastructure, academy and women’s team spending. In the Championship, the PSR limit was set at £39m.
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But from 2025-26, both leagues will introduce a Squad Cost Ratio (SCR) system.
Under SCR, top-flight clubs can spend a maximum of 85 per cent of turnover on first-team wages, amortised transfers and agents’ fees, with some flexibility to exceed that threshold if clubs can make up for it in subsequent seasons. In the Championship, the limit is also 85 per cent but with owners allowed to increase that cap by up to £33m over three years, with a maximum of £15m per season.
On top of that, both systems allow player sale transfer profits to increase the limit.
West Ham’s wage bill in 2024-25, the last full financial year on record, was £176m, of which around 75 per cent is likely attributable to first-team players and the manager. Add in transfer amortisation, which stood at £99m at the last count, and West Ham’s Squad Cost exceeds revenue, or thereabouts.
If in the Premier League, they will have the flexibility to exceed the Squad Cost cap, but the system works differently in the EFL and the Championship, where revenue and wages would both plunge but could be topped up by an equity injection, if Daniel Kretinsky or David Sullivan was willing to fund it.
But as explained by University of Liverpool football finance lecturer Kieran Maguire in exclusive conversation with Hammers News, West Ham will also have to reckon with the fact that the Championship system assesses transfers on a cash in, cash out basis rather than the amortisation-based system in the Premier League.
West Ham’s accounts show that at least £85m of transfer instalments were due after 2025-26, the bulk of which will be next season.
“While West Ham are a mess and the Declan Rice sale papered over the cracks in the Premier League from a PSR point of view, SCR is going to be a challenge for them,” says Maguire, explaining why the mechanics of the Championship’s SCR system may mean the Irons have to accept smaller fees for players in exchange for a bigger cut up front.
“What they will have in their favour if they go down is player sales. My understanding is that player sale purchases and profits are going to be assessed on a cash basis, rather than a bottom line basis.
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“That means that their legacy costs of transfer debt will be excluded. Some of those payments will be due, but I think about 50 per cent of their last transfer debt figure was due for repayment within 12 months of the end of last season, so they will have some flexibility.
“Bowen, Summerville and Fernandes would be the three most desirable deals. If they can get, say, 50 per cent up front, that can make a big difference. So it might be that some of the sales they make will be at a discount in exchange for getting a bigger upfront payment.
“Had West Ham been in the Championship when the vote took place, I think they’d have been fairly agnostic because they will hope they are getting out of the division in 12 months anyway.”
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