It has often been claimed West Ham have turned into a shit version of Bolton on the pitch since Sam Allardyce’s arrival as manager. Whether you agree with that sentiment or not the question now needs to be asked whether we are turning into a version of Bolton off the pitch in financial terms? Earlier this month Bolton Wanderers have admitted their debts have grown to a staggering £163.8m, with £50.7m haemorrhaging during the 12 months to June 2013. There are fears that the club may follow Leeds United and Portsmouth into financial armageddon.
In a statement Bolton’s chairman Phil Gartside, said…
“This year’s results show the difficulties faced in the football business when a club has enjoyed a sustained and successful period in the Premier League – in our case 11 years – then suffers relegation to the Football League Championship. The ever-widening gap between the two leagues makes the transition extremely difficult, even with the benefit of parachute payments.”
The club’s financial position underlines the dangers of overspending and dropping out of the Premier League as Wanderers did in May 2012. Bolton is dependent on a single benefactor, the owner Eddie Davies. Yet as £151.3m of the debt is owed to Davies through his company, Moonlight Investment Ltd. Gartside conceded the club’s future hinges on Davies’ continuing goodwill while admitting that financial fair play rules mean he can no longer support the club as before.
“However, [owners’] financial support is no longer possible in this league without severe penalty. We are responding to a changing environment … “ said Gartside.
Owner Davies’s decision to charge interest on loans to the club has been questioned. Although he ended the policy in July, Mohamed Al Fayed, for example, never charged interest on loans that left Fulham £193m in debt. Fayed sold Fulham to Shahid Khan last summer.
When West ham got relegated Sullivan & Gold injected £32.5m into the club as we made a loss of £25.5m during our season in the championship. They charge interest on their loans to the club.
David Sullivan was recently quoted as saying “If we go down we cannot afford to subsidise the club any longer”
Since our last relegation Financial Fair Play rules have been implemented in the Championship which change the landscape. Championship clubs are allowed to lose up to £3 million a season, which will incur no sanction or punishment. If a club loses between £3-8 million that season, then the owner of the club is required to cover the loss, which if done, then there are no further sanctions. If the owner cannot or will not cover the loss, then a transfer embargo is placed on the club until they can demonstrate an acceptable financial situation.
If the club loses over £8 million for that season, then the punishment depends on whether they were promoted or not. If promoted, the club will pay a Fair Play Tax out of the revenue produced from competing in the Premier League, with the proceeds going to charity. The Fair Play Tax was controversially applied to FFP in the Championship, with many clubs wanting the Fair Play Tax proceeds going back to the clubs that abide by the rules. Nevertheless, if a club has not been promoted, then the transfer embargo will be placed upon that club until they can demonstrate an acceptable financial situation.
Relegation for West Ham this season could cause our own financial armageddon without the ability to buy ourselves out of the championship like we did last time.