The long and painful slow motion car crash which heralded West Ham’s inevitable relegation finally reached its climax at the weekend. A late show of industry but no last minute dramatic escape. Now they are over the edge how far will they fall? A safe landing? Or crashing and burning into the abyss below?
Media coverage of West Ham’s plight has seen assorted journos belatedly understand what fans have known for years. That the fault of the Hammer’s demise lies fairly and squarely in the boardroom. A club run for the self-aggrandisement and vanity of incompetent owners who had always considered themselves as benevolent saviours. Forget the broken promises and the ten-point pledges that were not worth the paper they were written. It was only ever about their own egos – amateur interference and arrogant meddling in a sport that ought to be run by professionals.
Perhaps you could get away with running a club as a hobby in the past when promoted clubs regularly struggled to make the step up to the Premier League. But that has all changed. The game has changed. Data analytics, extensive scouting netwroks, player trading strategies, organisation, planning and a reliance on pace and athleticism on the pitch have been universally embraced – except at West Ham who have plodded along from one short-sighted season to the next.
Post relegation media reports have also homed in on the Hammer’s decline since the 2023 European Conference success, but the rot had set in well before then. Instead, the high-water mark was the surprise sixth-place finish in 2020/21, and it was the failure to refresh and build on that success which started the fire. The departure of Declan Rice and wasting the proceeds on a string of erratic recruits was the accelerant.
West Ham are now on their fourth manager in a little over three years. I was expecting it to be five, but it seems the Czech Sphinx has pulled rank to provide Nuno with a stay of execution. Nuno’s haul of 36 points from 33 games is hardly impressive while strange selections and tactics, multiple points lost from winning positions, and puzzling game management strategies have frequently left us scratching our heads. Still, compared to the other names being bandied about (Parker, Bilic, Dyche) sticking with the devil you know might not be such a bad idea. Only time will tell.
It has not been sacking managers that is the root of the club’s problem but making poor hiring decisions in the first place. The sole criteria for appointment being out of work and available. In the absence of any footballing expertise or competent direction from the boardroom this approach has proven a recipe for chaos. A squad assembled by a succession of drive-by managers, a lame-duck technical director and a meddling know-it-all Chairman. Who could have thought such lack of cohesion and continuity would end in disaster?
Now we are being led to believe the same fools who got us into this mess are the ones capable of getting us out of it again. If the player exodus is anywhere near as extensive as predicted, how on earth does a club with such an abysmal transfer record put together a squad capable of promotion over the long and arduous season ahead.
Understandably, a lot of focus in the wake of relegation has turned to the fragile state of West Ham’s finances. But we should remember that there are two separate views of finance in football. The club’s ability to comply with prevailing league rules such as PSR and SCR is one. The club’s debt and cash flow position is the other. A cynic might say that club owners conveniently conflate the two as a means of hoodwinking fans.
It will come as no surprise that the West Ham board have made a right pig’s ear of both. When it comes to cash flow, the club has extensive transfer debt, expensive financial debt and has factored future transfers receivable at a discount to pay yesterday’s bills. Attempting to address these through revenues and transfers looks like a distressing prospect. The hope is that the owners will break the habit of a lifetime and inject further capital to stabilise the debt burden.
West Ham’s financial year closes on 31 May and plans must now be put in place to comply with the Championship’s 85% Squad Cost Ratio rules based on much reduced revenues for the coming year. My rough back of a beer mat calculations predicts a loss of around £60 million in the current year on revenues of £225 million plus a raft of transfers out. This should be well within the retiring PSR limits thanks largely to the continuing impact of the Rice sale in 2023.
For 2026/27 revenues will probably fall to around £125 million. Squad costs (salaries and player amortisation) are currently circa £245 million but may reduce by £50 or £60 millions depending on how widespread relegation clauses are applied in existing contracts. But this still exceeds SCR limits and player sales are going to be necessary. This is where things become interesting as individual sales have varying impacts in three separate areas: a saving in wages, a reduction in amortisation, and profit or loss on player trading depending on whether a player is sold above or below book value. Profits from player trading are added to revenues for the purposes of SCR. Claims that West Ham must make £150 million in player sales might be valid as a cash flow mitigation but for SCR no two transfers are alike.
As the following table illustrates, this produces many possible permutations. For example, selling Bowen for £50 million would generate a significant wage saving, have little or no amortisation impact but the whole fee can be booked as player trading profit. In contrast, selling Fernandes for £50 million provides a lower wage savings, a significant amortisation reduction, but only £20 million of player sale profit.
At the other end of the scale, it might prove impossible to offload players such as Kilman and Fullkrug without taking an unwanted hit on player sales. I don’t see anyway it makes sense to cancel player contracts early.
The Championship moving from PSR to SCR does seem to offer a glimmer of hope. But that still requires the owners to do the decent thing and inject much needed capital into the club. The club also need to hold their nerve and not sell players on the cheap just to get funds through the door. We will watch this space. COYI!
Under The Hammers 