Author: Geoff Hopkins

The once simple beautiful game has mutated into a strange and complicated beast for its followers in recent years. A plague of over analysis, statistical overload, tactical complexities, formation paralysis, and eccentric rule interpretations requires fans to understand double pivots, false 9s, low blocks, high presses, inverted wingers, box-to-box midfields and whether a player was entitled to go down. But making matters even worse is the need to be a financial wizard, understanding concepts such as profit and sustainability rules, associated party transactions, player amortisation, shareholder loans and squad cost ratios.

As we enter the summer madness of the transfer window, we take a look at the current state of West Ham’s finances and how they compare with selected other clubs.

Revenues – Where Does The Money Come From?

Despite being ranked as a top twenty club in the 2024 world football rich list – a status they will struggle to retain in 2025 in the absence of European competition – a massive gulf remains between West Ham’s income and the ‘rich 6’ of English football.  Clubs such as Liverpool and Arsenal are able to generate revenues 2.7 times larger than those currently earned by the Hammers. The gap is impossible to narrow for any club lacking regular Champions League participation; or the financial muscle and ambition to challenge for it.

Broadcasting revenues (the central distribution of funds from the Premier League and UEFA for TV rights and prize money) continue to dominate at West Ham where they account for 60% of all income received. Comparable metrics for Liverpool and Arsenal are 33% and 43% respectively, illustrating how the bigger clubs use their global appeal to drive Matchday and Commercial revenues that dwarf those achieved at the London Stadium.

Although West Ham can boast the second largest matchday attendance in the Premier League, they drop to eighth in terms of matchday revenues, even in a season that saw a creditable Europa League campaign. Average revenue per fan is on a par with Fulham and Brentford, and behind the rich six, Newcastle and Brighton. The move to the London Stadium has not proven to be the money spinner promised and attempts at squeezing more from those attending, removing concessions, or attracting a greater proportion of higher spending casual visitors (tourists) have met with understandable resistance.

Commercial revenues have seen incremental growth through additional or improved sponsorship deals, pre-season tours and retail merchandising, but with a slower rate of growth than broadcasting. However, certain income streams, such as naming rights, food and beverage sales and income from the staging of non-football events, are not available due to the stadium ownership. This is a flip side to Brady’s much heralded ‘deal of the century’ in securing a low rent 99-year lease.

Expenses – Where Is The Money Spent?

The principal, and most high-profile, expenses at a football club are those related to player wages and transfer fees. While wages have increased significantly at West Ham over the years, they rank 9^th in the league overall for staff costs (wages plus player amortisation). Unsurprisingly, these are way below the ‘rich’ clubs but they have also fallen further behind Newcastle and Villa as they pursue their Champions League ambitions. In total staff costs represented 91% of revenues in 2023/24.

To avoid confusion, it is worth taking a moment to consider how transfer fees are accounted for in profit and loss statements. Suppose a player is purchased for £50m on a 5-year contract. The £50m cost will be amortised in the accounts over 5 years at £10m per year, not as a lump sum. This is independent of how the transfer fees is actually paid in practise. For example, the whole fee up front or against a schedule of instalments.

Brighton provides an interesting comparison here. While their wage bill is not far behind those at West Ham, amortisation is significantly lower. A reflection of their strategy of unearthing emerging talent at a lower cost than the lazier West Ham obsession with experience and/ or recruiting players recommended by agents.  

With many of the operating expenses at the London Stadium paid for by the stadium owners, other expenses at West Ham are relatively modest. Not owning the stadium possibly also contributes to the club being in the rare position of having no financial debt. They do, however, owe significant amounts in future transfer instalments which we will return to later.

Transfers and Player Amortisation

If there are limited options for West Ham to achieve a significant increase in matchday and commercial revenues – and become less dependent of broadcasting income – then surely, they must pay more attention to generating player trading profits. For reasons best known to the owners, the club has chosen to ignore the model of buying low and selling high pioneered by the likes of Brighton. The policy of recruiting older, already established players and selling later resulted in an average annual player sale profit of just £15.4m in the nine years from 2014-23. A figure that was below the league median in seven of those nine years.

Indeed, it is rare for clubs to achieve operating profits. Most rely heavily on profits from player sales to comply with the Profitability and Sustainability Rules (PSR). West Ham’s poor record on player sales – the direct result of a transfer policy prioritising experienced, older players – has been a consistent drag on the club’s progress.

The reason the sale of Declan Rice was such a massive bonus for West Ham’s accounts is that, as an academy product, he had no ‘book value’. The entire sale proceeds could be shown as pure profit. Just as Rice’s contribution papered over the cracks on the pitch during his last season, his sale may have done the same for the club’s finances. The record profits in 2023/24 were almost entirely down to the one-off sale of a single player.

The financial implications of selling a player who had previously been purchased is not so clear cut. Consider the following example of a player bought two years ago on a five-year contract for £50m.

After the completion of two years, the player has a book value of £30m. If he has been a success and can be sold for £75m then great, a profit of £45m can be shown in the accounts. Conversely (and the more usual West Ham scenario) if the transfer has not worked out and he is sold for less than book value then the negative difference must be recorded as a loss. Thus, selling Gianluca Scamacca and Nikola Vlasic may have brought in some much-needed cash but did not generate any profit, as their transfer fees were aligned with current book values.

PSR and All That

The Athletic recently published a club-by-club table of Premier League PSR positions over the latest three-year period. Although interesting in that it confirmed West Ham did not have an immediate PSR problem (as many suspected), it was also a largely irrelevant rearview mirror exercise given the club’s financial year had already closed on 31 May. Whatever transactions take place this summer will become part of the 2025/26 accounts and factored into the three-year PSR period 2023/24 to 2025/26.

In calculating PSR limits, certain allowable costs (depreciation, woman’s football, youth and community development) are added back in to the profit and loss totals. For West Ham this is estimated at approximately £14m per year. Thus, for PSR purposes, West Ham’s 2023/24 profit would increase to £71m and allow for equivalent losses of up to £170+m in the two subsequent seasons without falling foul of the rules. Beyond that timeframe (once the Rice transfer drops out of the equation), the PSR outlook (assuming it remains) looks bleak unless the club significantly ramps up revenues or increases profits on player sales on a regular basis.  

The caveat to the above is that clubs can only lose £15m of their own moneyacross a three-year PSR period. Anything above that, and up to the £105m threshold, must be guaranteed by owners providing ‘secure funding’. According to The Athletic report, the most recent capital injection at West Ham has expired for the purpose of PSR calculation. If the Board (combined wealth £8 billion) do not address this, future PSR consequences would look very serious indeed.

Where Has All The Cash Flow  Gone?

When David Sullivan presented the 2023/24 accounts he gushed “It fills me with immense pride, as a steward of this illustrious club, to see West Ham United on solid financial ground, with all profits reinvested into our squad, infrastructure, and local community, providing a strong basis for our ongoing progress and long-term objectives”.

If we are to believe that is true, then why are we now hearing noise about the finances being in a mess? Or that players must be sold before signings can be made? And what exactly are the Board’s long-term objectives?

There is clearly a problem with cash flow that is beyond the hysterical headlines on the usual clickbait sites. There is nothing sinister about the club resorting to receivables finance or revolving credit facilities. They are standard business practices which I’m sure other clubs must also use.

A standout statistic from West Ham finances is that they are among the leaders for transfer fees owed, with a staggering £191m outstanding when the 2023/24 accounts were published. The equivalent figures available for selected other clubs are Brighton £104m, Newcastle £160m, Arsenal £268m and Liverpool £128. In part this will reflect the Hammers activity in the transfer market but may also be the result of holding out for extended payment terms – a kicking the can down the road tactic that anecdotally scuppers many a West Ham deal at the last minute.   

And here lies the conundrum. On the face of it, West Ham accounts have shown strong operating cash flows in recent seasons, and the club have successfully cleared all outstanding debts. In a normal business it would be an enviable position; but football is an abnormal business. Clubs are not owned for annual profits but for reasons of prestige, ego, and asset accumulation. In 2007, Forbes valued West Ham at £195m. Last May that had increased to £882. An increase achieved with limited shareholder funding beyond the issue of £125m in shares in 2022/23, much of which was used to reduce debt.

This has left a net funding/ investment in the past 5 years of just £54m, compared to £496m at Villa and £391m at Newcastle. It feels like an act of self-harm if the owners decline to make further investment now both to ease PSR pressures and to assemble a squad capable of competing at the right end of the table. This brings us back to the question of long-term objectives. Does this go any deeper than preserving Premier League status (and hence asset value) as a plodding mid-table team?

 What is apparent is that caution gets the better of ambition in the West Ham boardroom. No-one wants a reckless club owner, but some risks are worth taking where the rewards are high. Sound financial management is fine, but a clubs ultimate success lives or dies on its player and management recruitment. As the overall steward of West Ham’s recruitment, I’m not sure whether Sullivan should be ashamed or embarrassed by his record – probably both! Is there any chance of it ever changing? COYI!