Ouch. Forest forced to concede that the future is the Derby way

Local rivals meet on Sunday with the Rams' form and finances in far better shape

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The Independent Football

This time last year, on the back of their first "double" over neighbours Derby County in more than two decades, Nottingham Forest were fourth in the Championship, at shorter odds than Norwich and Swansea to begin this season in the Premier League.

Derby, who had been fourth in November, were in the middle of a long slide that would see them finish 19th, their gloom eased only when Forest came a cropper in the play-offs.

Forest return to Pride Park on Sunday in somewhat different shape. Where their fans last year wore T-shirts celebrating a 5-2 romp at the City Ground, they will arrive instead reflecting on one win from 11 matches, in nine of which Forest have failed even to score. They are 23rd, five points from safety. Derby, who had lost only one in eight before Tuesday's slip-up at Barnsley, sit comfortably mid-table.

Winners in Nottingham in August, despite losing their goalkeeper to a second-minute red card, Derby are strong favourites to exact double revenge. Yet this potential embarrassment is the least of Forest's worries.

For the last two years they have been losing £1m per month and their disenchanted former chairman, Nigel Doughty, whose personal fortune kept them afloat for more than a decade, has said he will not fork out beyond existing commitments. Relegation to League One for the second time in seven years might plunge the twice European champions into long-term decline.

"Financially, it would a massive blow," Doughty's successor, the former Forest player and manager, Frank Clark, said. "The owner has been bankrolling a wage bill the club cannot afford and we have to reduce that. But if we are relegated, all our revenues would go down. We are desperate to stay up."

Doughty withdrew his support after his decision to replace the successful but truculent Billy Davies with former England coach Steve McClaren failed miserably. Doughty no longer even attends matches and does not welcome attempts to change his mind. Technically, Forest owe him £75m and while it is a sum he is unlikely to want repaid, at least until the club is sold, the picture is bleak, nonetheless.

Taking a lead from Europe's governing body, Uefa, the Championship is drawing up its own rules for financial fair play (FFP). Clubs will spend only what they can afford, particularly in terms of wages, the consensus being that 60 per cent of turnover is a sensible ceiling. Forest's wage bill for 2010-11 was 109 per cent.

"The game cannot carry on paying the salaries it has been doing, certainly below the Premier League," Clark said. "This will force clubs to address that. And it will force agents and players to become more realistic, to bring some sanity into negotiations."

The irony is that one of the Football League's key FFP strategists is the chief executive of Derby, the American Tom Glick. Under his stewardship on behalf of Derby's transatlantic owners, Derby's debts have fallen from £30m to half that and a wage bill that stood at £16m when Nigel Clough became manager three years ago has been cut by 40 per cent. Of more than 40 players on his original roster, only two remain.

Derby's six major investors – all franchise owners in the profit-making world of American sport – at first saw Derby as a brand with which they could profit from the Premier League's global popularity. Relegation in 2008 with a record low points tally kicked that idea into the long grass but they have stood by the club, funded their shortfalls and Glick has executed their drive towards self-sufficiency so effectively that Derby's operating loss last year was a mere £2.16m.

"We did underestimate how difficult it would be to get back to the Premier League," Glick said. "We thought that with the benefit of parachute payments it would be easier.

"When Nigel arrived it was clear that if we did not go straight back up we would need to cut our cloth accordingly. Now the owners just want a sustainable model they can enjoy. We are all hooked on English football. Nigel has done a fantastic job. We have a similar outlook for creating long-term success. His focus is on more than just this week, this month, this season."

Derby's form under Clough has not always been impressive. Despite his name and heritage, his popularity – and that of the owners – has fluctuated. Speculation over his future gathered pace, in particular, with McClaren's resignation at Forest, when many at the Trent end of the A52 hoped their former striker might restore his old allegiance. Glick admits the football played by Clough's transitional team has been "mediocre" at times. Yet they tied him to a new contract in October, in the same week Forest appointed Steve Cotterill.

"We have had our ups and downs but, luckily, we have held our nerve and made decisions that turned out to be the right ones," Glick said. "We were convinced that Nigel had the attributes to take the club forward and we have been increasingly confident in him even during the tough times."

The idea of looking to Derby's example would stick in the craw for most Forest fans and, sensibly, Glick does not presume to offer advice. "If our model is right for others is for them to judge," he said. "All I can say is it works for us. Financial fair play will lead clubs to change their behaviour. It will place a premium on making good decisions rather than having the biggest wallet, and that is not a bad thing."

But Clark, who says there is "no chance" of Davies returning to the club and that Cotterill has his full confidence, concedes that Forest will have to follow Derby's path.

"We will comply with the fair play rules in the format they are likely to take and the way Nigel Clough has reshaped the Derby squad within financial constraints would be the way we are looking to go," he says. "But we want to do it in the Championship and the players will have to go to Derby believing they can get a result and get from it the momentum to stay in this division."