West Ham's accounts show spending 'unsustainable'

Spending on players, notably expensive flops Kieron Dyer and Freddie Ljungberg, the collapse of former sponsors XL Leisure and legal actions all contributed to pre-tax losses of £16.2million.

While the figures are better than the previous year's losses of £37.4million, the club is still in deep financial trouble. Secretary Nick Igoe said in the report the return on investment was unacceptable, particularly with the Irons having the sixth biggest wage bill in the Premier League.

He said: "It is a truism that a club's playing success is largely dependent on how wisely it invests its available resources. It has to be concluded that many of the group's investment decisons in the last two to three seasons have been ill-judged.

"In the last two seasons wages have averaged almost 80 per cent of turnover against a Premier League average of 62-63 per cent. This is unsustainable and the investment in the playing squad has not generated an appropriate return financially or in performance."

Igoe singled out the acquisition of Nigel Quashie and Calum Davenport in January 2007 and Dyer and Ljungberg the following summer, all on lucrative long-term deals, as an example of the reckless spending under the regime headed by Eggert Magnusson and Bjorgulfor Gudmundsson.

He said: "Two players signed in the January 2007 transfer window have started a combined total of 15 games in three years for the club and will have cost the group £12milion over the term of their contracts.

"A further two players signed in the summer 2007 transfer window, one of whom has since left the club, have started a combined total of 32 games and will have cost the group £34million over the terms of their contracts.

"No football club can sustain this level of expenditure on underperforming members of its squad."

Igoe also pointed out the Irons have faced an "unprecedented" level of costs of £47million in recent seasons, mainly because of legal actions against the club, principally the compensation claim from Sheffield United following their relegation in 2007.

There was also £5.8million paid to Dean Ashton after the striker was forced to retire through injury earlier this season, 18 months into a five year contract, although Igoe was confident much of that could be recouped from insurers.

There is no doubt the club's finances are in a mess, a fact acknowledged by Sullivan when he and David Gold took control of the Hammers in January.

While players - including goalkeeper Robert Green - are likely to leave in the summer to ease the financial pressure, the club have recently appointed Shore Capital and Corporate to find up to £40million of fresh investment.