This won't surprise Baggies fans, but it's still unacceptable

West Bromwich Albion’s managing director, Mark Miles, recently confirmed what every Baggies’ fan knew, namely that the club continued to face financial challenges.   West Brom’s auditors had already rung an alarm bell when they cast doubt on the club’s ability to continue as a going concern without making player sale.

Another indication of Albion’s financial issues came when they took out a £20m 4-year loan with MSD Holding UK Ltd in December 2022 “to finance the general business operations of the club”, secured on the club’s assets including the stadium.  Moreover, this loan is high interest, currently charging nearly 15% (9.75% plus SONIA 4.93%), which means that Albion have to stump up around £3m a year.

Given the supporters’ understandable scepticism about the club’s management, they felt obliged to add, “for the avoidance of doubt, the loan will only be spent on the purposes of the football club”, though they did not define exactly what was meant by “purposes”.

The loan itself can be seen as an indictment of how the club has been run, given that Albion had benefited from Premier League money for many years, either directly or in the form of parachute payments.

Albion have effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake.

There have been reports that Egyptian businessman Mohamed Elkashashy and sports lawyer Chris Farnell have been in talks about making an investment. However, this might not be a dream ticket, given that Farnell was briefly disqualified from being a director of football after trying to takeover Charlton Athletic, while doubts have been raised over whether Elkashashy has the necessary funds.

Despite relegation to the Championship, West Brom’s pre-tax profit actually increased from £0.1m to £5.4m, mainly thanks to profit from player sales rising £13m from £4m to £17m. Revenue dropped £42m (39%) from £107m to £65m, but this was largely offset by cutting costs £34m (31%) from £111m to £77m.

Traditionally West Brom have been quite prudent financially, making money every season in the eight years between 2010 and 2017. However, they then posted losses three years in a row, including a hefty £23m in 2019/20, before returning to profitability.

Like many other clubs, West Brom have become increasingly reliant on player sales with £80m profit in the last six years. During this period, they have made more than £10m on four occasions, including £29m in 2019/20, mainly thanks to the sales of Salomon Rondon to Chinese club Dalian and Jay Rodriguez to Burnley.

WBA revenue has more than halved since the Premier League high of £138m in 2017, falling £73m, largely due to much smaller central TV distributions, though there were also reductions in commercial and gate receipts.

Despite the decrease, Albion’s £65m revenue was the third highest in the Championship, only behind Fulham £72m and Sheffield United £67m. The three clubs relegated from the Premier League the previous season therefore had by far the highest revenue in the division.

Whatever the rights and wrongs of parachute payments, there is no doubt that they make it difficult for other clubs to compete, so Albion have effectively wasted this big advantage.

Even after a steep decrease, Albion’s £42m wage bill was still fourth highest in the Championship. They were only below the three promoted clubs (Fulham £90m, Bournemouth £61m and Nottingham Forest £59m), whose wages were inflated by hefty promotion bonuses.

West Brom’s gross debt was really not that high for the Championship, far below the likes of Bournemouth £184m, Blackburn Rovers £163m, Middlesbrough £148m and Birmingham City £135m.  Only £17m owner funding* has been provided to West Brom in the last 10 years, because Lai and his colleagues are either unwilling or unable to provide any money. In fact, in the last five years there was actually an outflow of £5m.  Many clubs’ owners have provided substantially more funding than Albion, albeit with varying degrees of success, as the Championship is a division that has an endless appetite for owner support.

*Owner loans only, but in some clubs these are effectively donations and may be converted into equity.