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In April this year before the season had finished Sam Allardyce was briefing the press how new financial fair play rules in the premier league could wreck West Ham’s chances of signing Andy Carroll in the summer transfer window.
I never worked this one out as we were already paying the majority of his wages on loan from Liverpool last season so what was the difference?
This started a media campaign by West ham to mention Financial Fair Play in almost every interview since then. Gold & Sullivan got in on the act explaining how they had one arm tied behind their back because of the new financial fair play rules bought in by the premier league which they voted for.
What has frustrated and puzzled many West ham fans is why no other premier league clubs bothered giving FFP a mention. What makes West ham so special with regards to FFP?
In a recent interview Sullivan was quoted as saying the cost of players wages including national insurance was £847,000 per week. A quick calculation brings the annual total to just over £44M pounds per year way below the £52M limit allowed.
In a West ham statement on WHUFC.com on 26th August they stated that new rules state that “whatever a Club spent on wages last season, they are allowed to do so again, with an allowance for an extra £4m on top. If they did not spend £48m on wages last year, as was the case with West Ham United, they are allowed to go up to a new £52m limit.”
The suggestion from that statement was we spent under £48M last season but we are now very close to £52 million this season.
The last published accounts for WH Holding Ltd year ending 31st May 2012 show a total wage bill of £44.6M which includes non playing staff and was our season in the Championship.
The previous year ending 31st May 2011 we spent £55.7M on wages, the year we got relegated from the Premier league.
In the middle of the Icelandic ownership in the 2007/2008 season our annual wage bill soared to £63.6M from £42.4M the previous 2006/2007 season and just £20.2M in the 2004/2005 season.
At the end of last season:
We released Carlton Cole believed to have been on £30K per week and Gary O’Neil believed to have been on £25K per week.
The loans of Chamakh, Pogatetz and Paulista all ended releasing an estimated extra £1.5M from the wage bill.
If these estimates are correct we managed to trim £4.36M off the players wage bill at the end of the season.
In the summer transfer window we added Andy Carroll permanently to the club on a weekly wage believed to be £80k per week but I understand we were paying him at least £75k per week to loan him from Liverpool so maybe a net increase of £5k per week. Stewart Downing is said to have joined on £60K per week, Razvan Rat is said to be on £25k per week and Adrian is said to be on £17K per week. That makes the total increase just over £100k per week or £5.3M per year.
I know these are just estimates but I only see an overall net increase of just over £1 million to the wage bill.
Personally it does not add up to me. The WHUFC.com statement said under £48 million so the gap could be even larger.
I remain open minded but I also find it amazing our wage bill was under £48 million last season in our first year back in the Premier League. I guess it is all just speculation until the financial accounts are released next year for the year ending 31st May 2013.
Even when the financial accounts are released we will only know the total wage bill of all employees. In the financial year ending 2012 West Ham employed 802 people. The senior players will be the minority of these employee numbers but make up the vast majority of the wage bill. They will be some exceptions such as the manager who is believed to earn between £2M & £3M per year including bonuses and the highest paid director believed to be Karren Brady who was paid £427,000 in the year ending 2012. These salaries will not need to be included in our FFP declaration to the Premier league.
Moving on to Financial Fair Play in general
The words ‘Financial Fair Play’ is a term never used by the Premier league. The premier league handbook which was published last month introduces a couple of new important rules.The Premier league have published a new form that premier league clubs will need to declare the total cost of players wages including any bonuses, image rights, additional payments, employer national insurance contributions and any pension payments.
In published 2012 financial accounts other Premier league wage bills included Man City £202M Chelsea £173M Manchester United £163M Arsenal £143M Liverpool £119M & Spurs £90M. These clubs could also easily generate extra income from sponsorship or commercial activities to get around these restrictions on top of their already massive wage bills. As an example earlier this year AON sponsored Manchester United training ground at a cost of £160m over eight years giving them £20M per year of extra income which could be spent on wages. The chances of West Ham getting a sponsor for Chadwell Heath seems somewhat unlikely although I guess they there is nothing to stop one of chairman’s companies from sponsoring the training ground. The Ann Summers training ground at Chadwell Heath perhaps?
Perhaps the reason the Premier league doesn’t use the term financial fair play because it is not fair. The richest clubs stay rich while keeping the poorer clubs in their place. It means it would be difficult for other premier league clubs to match the wage bills without significant commercial income to make up the difference.
The other rule is about losses over 3 years starting this season.
The maximum permitted loss over 3 seasons starting this season is £105M, However the maximum loss if an owner does not inject equity is just £15M over 3 years so just £5M per year.
Sullivan & Gold have injected equity in the form of £35M of loans in 2011 & 2012 and Sullivan purchased a further 25% in a debt restructuring exercise last month.
West Ham’s loss in 2012 was revealed at £25.4M when revaluation of property is excluded, In 2011 the loss stood at £18.5M and in 2010 £20.6M, so as a comparison the total loss was £64.5M over the last 3 years and well within the £105M limit if we continue or better that trend, However the owners will have to continue to inject equity each year at these levels.
A good explanation about Premier League Cost Control and Sustainability Provisions can be found from Daniel Geey at his website
David Gold on Sky Sports Transfer Centre before the window ended speaking about FFP