The club, which was relegated from the Premiership last season, but is currently second in the First Division behind Middlesborough, is clocking up huge losses by keeping on expensive players in a make-or-break effort to get back to the top.
In an example of how the influence of the City has pervaded the modern game, Nottingham Forest will have to cut back dramatically on expenses to make up for lost millions of TV revenues if it stays in the lower division.
"As a public limited company, over the long term our cost base has got to be in line with our revenues. We are very conscious of the fact that we cannot keep on losing money," said Philip Soar, Nottingham Forest's chief executive yesterday.
The average Premier League club receives pounds 8m from BSkyB, the satellite broadcaster, to screen live games. However First Division clubs typically get just pounds 800,000. That gap is due to widen even further, with teams in the top flight likely to receive payments well in excess of pounds 10m over the coming few seasons.
Nottingham Forest made a loss of pounds 6.5m in the six months to November. The players and staff bill of pounds 4.7m meant it made a loss of pounds 2.4m at the operating level. It also spent pounds 4m on transfer fees.
A group of financiers, including Philip Soar, Nigel Wray, the property magnate, and Irving Scholar, the former Tottenham chairman, bought the club, famous as 1979 and 1980 European Cup winners, in March for pounds 16m. Since then they have spent pounds 11m on players, and only raised pounds 3.5m from transfers, including the sale of Brian Roy, the Dutch international.
The club raised pounds 2.6m by selling new shares at 70p, in a flotation last October. However the shares fell another 1p to 57.5p yesterday. Mr Soar said the poor performance matched the slump in football sector generally which has proved a turn off for investors over the last 12 months.
Meanwhile Wigan Athletic, another club hoping to break into the big time, announced that it had appointed Alfred McAlpine, the construction group, to build a pounds 24.5m new 25,000 all-seater stadium.
David Whelan, chairman of Wigan Athletic, plans to build a dual purpose stadium on the site of an old athletics ground at Robin Park, which will also house Wigan Warriors, the rugby league team. Mr Whelan raised almost pounds 17m last summer from selling shares in JJB Sports, his sports goods retail chain, to fund the new development.