West Ham are facing a staggering £191million issue going into the January transfer window.
Nuno Espirito Santo wants the board to back him as West Ham appear destined for relegation mid-way through December.
They take on Manchester City next at the Etihad Stadium, but after that, have a favourable run of games.
Wow… 😲 How would YOU solve this problem at West Ham?
He could be sacked by February if this does not change…
West Ham will receive at least £120m in parachute payments
Clubs are entitled to parachute payments when they get relegated and with the Hammers being a top-flight side for more than three years, they would be entitled to the maximum parachute payments.
Adam Williams, GRV Media’s Head of Football Finance and Governance Content, claims that this could be up to £140m or 120 per cent of the equal share Premier League sides get from domestic and international rights and the central commercial pot.
Williams told Hammers News: “Because West Ham have been in the Premier League for more than three seasons, they would be entitled to the maximum parachute payment, which is about £120-140m, or 120 per cent of the equal share that Premier League clubs get annually from the domestic TV deal, overseas rights and central commercial pot.
“That is split over three years – 55 per cent in year one, 45 per cent in year two, and 25 per cent in year three. If you’re promoted again in that period, you forfeit the remaining parachute payments, which are redistributed among Premier League shareholders, i.e., the clubs.
“So if West Ham are relegated, the absolute bare minimum they would lose, assuming they are immediately re-promoted, is about £45m in TV money. But you do get about £5.5m in TV money from the EFL, so we can call it £40m if it’s one year in the Championship. So in terms of the revenue that is wiped out overnight, it’s £40m.”
West Ham’s commercial income could drop by up to £20m
Relegation is also going to have a massive toll on the club’s commercial income, which is predicted to be between £15m and £20m.
While they will have four more league games at the London Stadium, there will be fewer sell-outs and that would have an impact on the matchday revenue too.
This would mean another £10m drop-off from the income they would expect in the Premier League.
Williams added: “There are other areas you’re impacted that are less easily calculable. Commercial income, for example, is also going to suffer. The last season West Ham spent outside the top flight, their income from retail and sponsorship only fell by about £2m compared to the previous season. They are more insulated than most teams here because they have strong retail sales and corporate seating at the London Stadium which, although they would take a significant hit in the Championship, does protect them from the fall-off in sponsorship income in a league with far fewer TV viewers.
This is shocking! 😰 Relegation is going to be dire for West Ham…
What would YOU do to avoid this mess?
“They generated £58m in commercial income in the last published financial year, which was 2023-24. I expect that figure to take a bit of a hit once their accounts for 2024-25 are released – we’ll find out soon, as they usually publish their accounts in early January. In the Championship, I think Leeds United and Leicester City are probably quite a good bellwether for what West Ham can expect. Conservatively, I’d say expect to see commercial income fall by £15-20m.
“With matchday income, it will probably be a similar story. They’ll get at least four more matches at the London Stadium in the Championship, but they will get fewer sell-outs and, I hope, the board won’t feel ticket price rises are justifiable. You’re probably talking another £10m drop-off there, at a push. So the total revenue impact in year one is somewhere in the region of £65m. If you took that figure away from their baseline revenue, their turnover in year one in the Championship would probably be about £200m.
Obviously, the lost revenue increases the longer you’re in the Championship.
“But it’s maybe a little bit reductive just to talk about lost revenue. What you’re really looking at is your margin, which means considering what happens to your expenses in the Championship.”
£30m shortfall expected to be made up by the owners
West Ham are expected to have expenses worth £230m over the next year, but only £200m is expected in revenues.
There is also the issue of their transfer debt, which is a staggering £191m, but they are owed only £64m, which is another disparity.
It is understood that this will need to be made up by the owners.
The positive for the club, however, is that they have PSR headroom to spend and strengthen in the January transfer window.
Williams said: “There has been some reporting that the standard wage cut clause at West Ham if they are relegated is about 50 per cent. Based on the most recent figures, that would leave them with a wage bill of about £80m. On top of that, you still have transfer instalments to pay, and I think this is where the real problems would start to arise for West Ham. At the last count, they had £191m in transfer debt. That is probably going to have increased by now too. Against that, they were owed about £64m. So there is a real asymmetry there.
“You’ve still got your overheads to pay too – utilities, administrative expenses and so on. They might decrease a little bit in the Championship. For example, the annual rent for the London Stadium falls by about £2m in the event of relegation. But your remaining expenses are going to probably be about £40m as a minimum.
“So, that’s £40m in overheads, £80m in wages, maybe £100m in net transfer instalments over a year, plus perhaps £5-10m in finance costs. That’s £230m in expenses versus £200m in revenue, so there’s a £30m shortfall that the owners need to make up through share issues, personal loans, external debt or – and this is what would almost certainly actually happen – player sales.
“West Ham have the core revenues to give them a very good chance of getting promoted again relatively soon. But for owners who promised their fans the world with the move to the London Stadium, it would be a disaster on a qualitative level.
“I think they simply have to spend in January, especially when you look at the teams around them are planning. In terms of PSR, they have the headroom. Yes, they are going to post a chunky loss in 2024-25, but the potential sale of part of the women’s team plus the fact that any signings registered in January aren’t going to have a big amortisation impact means that they don’t have an excuse, in my view. The net transfer debt is going to be more of an issue to navigate and risk-assess.“
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