Down on the pitch, up in the boardroom, village life doesn't agree with Chelsea FC

The big-spending west London club staked its future on the development of an ambitious leisure complex. But the gamble isn't paying off, says Sonia Purnell

Still struggling to navigate the double entendres littering the English language, Chelsea's Italian manager Claudio Ranieri recently gave his club's financial game away in delightfully comic style.

When forced by his new chief executive, the number-crunching hard man Trevor Birch, to pull out of an apparently done deal to buy two foreign players from Real Madrid, the humiliated Ranieri complained: "Chelsea can't afford to spend a penny at the moment."

But the west London side's many thousands of fans failed to see the funny side of Ranieri's ill-advised choice of phrase. The embarrassing debacle – barely picked up by the media in the middle of the World Cup – was yet another in a series of worrying episodes this summer that have intensified their fears about the very survival of Chelsea Village plc, the AIM-listed owner of their beloved Blues.

So bad is its financial condition that there is ever-increasing talk of the club having to sell off its two goal-scoring stars, Jimmy Floyd Hasselbaink and Eidur Gudjohnsen, to pay off some of its £97m debt mountain. (Chelsea has now overtaken long-time rivals Leeds United for the unenviable title of having the highest net debt figure in the Premiership.)

Yet it was largely this pairing that saved Chelsea from disappearing even further down the Premiership league table, where it ended last season an undistinguished sixth.

With less than a week to go before the start of the new Premiership season, the tensions between Chelsea as a club and as a stock-market quoted leisure operator are near breaking point. The accountants want to sell players and stop purchases to pay back the banks; the team's management fears it cannot compete at the top level without strengthening the squad. It is a catch-22 situation: without silverware, the club's revenues will wither as interest from TV, sponsors and fans declines.

Failure to qualify for the Uefa Champions League, for instance, can cost a team up to £30m in lost revenues. With the largest player wage bill in the Premiership – higher even than Manchester United's and accounting for 75 per cent of total club revenues (according to recent analysis by the accountants Deloitte & Touche) – Chelsea desperately needed this extra money. Seven of its players, of whom five rarely turn out for the first team, earn nearly £2m a year. But this immensely overpaid squad has failed for two seasons on the trot to deliver either at home or in Europe. Such profligacy and failure was never going to be sustainable.

Ken Bates, Chelsea's 69-year-old chairman and architect of its ambitious strategy to form both a top-flight European team and a "Covent Garden of west London" leisure complex, is now under intense pressure to deliver on these twin promises – or even one of them.

The hotels, bars, restaurants, healthclub, nightclubs and "visitor attractions" he built on Chelsea's 12-acre prime west London site are an architectural dog's dinner. The pity is that far from supporting the Blues financially, as intended, these £150m follies are only pulling them further into the red.

The ever-ebullient Bates, fresh from his ignominious exit from the new Wembley stadium fiasco, may well reject concerns about Chelsea's losses, huge debts and lack of silverware as "lurid nonsense". But the four-star hotels were only two-thirds full before 11 September, and have been even emptier since. The restaurants, saddled with such toe-curling names as Fishnets, have had to be revamped by bringing in new chefs and new managers.

Visitor numbers to the Chelsea World of Sport are down on forecasts; the health and fitness club opened late and has struggled to attract the punters quickly; and there are rumours about the long-term viability of the Bluebells nightclub. It is all a far cry from the confident claims made two years ago by Chelsea's commercial director, Tim O'Neill, that 200,000 non-football fans would be visiting Chelsea Village every year by 2002.

That target has now been abandoned. O'Neill has long since departed and, after an 18-month gap, has only just been replaced by Lorraine O'Brien from Littlewoods. He is not the only director to have made a swift exit from an increasingly denuded board.

Michael Russell was finance director two years ago, became chief executive in October 2000 and left abruptly in March when Chelsea Village published its interim results showing yet another pre-tax loss, this time of £4m. (It lost £11.1m last year, and £3.5m the year before that.) Russell had replaced Peter Bewsey, who was brought in to strengthen the management squad but then suddenly decided to pursue business interests on the other side of the Atlantic.

Most famously of all, Colin Hutchinson resigned as chief executive of the club last year. He had already stood down as managing director of Chelsea Village because of the potential conflicts of interest between the two jobs. Sadly, his successors have not been as wise.

Hutchinson's replacement, Trevor Birch, a former insolvency practitioner and professional football player, took the helm as overall chief executive of both the club and Chelsea Village earlier this year. However good he is at keeping the ball in play, he has an unenviable task.

The Bates vision relied heavily on selling 17 so-called Millennium suites – for a cool £10m each – to pay its way. Those wealthy enough to stump up the cash would enjoy sole use of a large room high in the Stamford Bridge stands with panoramic views of the pitch, its own kitchen and 27 private seats outside. All very nice, but £1m a year rent for a room off the Fulham Road is pretty toppish in anyone's money.

Not surprisingly, only four out of 17 have been sold. One of these was bought by BSkyB, which currently owns a 9.9 per cent stake in Chelsea Village. While Chelsea Village's company secretary, Alan Shaw, refuses to identify the other three occupants, there are unconfirmed reports that they are similarly "insiders".

The remaining 13 suites sit gathering dust and failing to contribute any significant revenues to the bottom line. While Chelsea languish outside the top five Premier League teams it is unclear where more potential buyers could be found. There is little point in paying over the odds to see the Blues lose 1-0 at home to the likes of Charlton, even if you did get silver service at the pre-match lunch. Meanwhile, Chelsea's once-innovative £75m bond falls due for repayment in five years' time.

With television revenues increasingly uncertain and a full-scale football recession starting to bite, Blues fans can be forgiven for feeling depressed. Bates believed he could create a European football powerhouse and the "ultimate sports and leisure complex" by investing a great deal of money.

Sadly, it may increasingly be the case that in striving to do both he will almost certainly fail to deliver either.