Manchester United are at risk of triggering a financial penalty in their £750m kit deal with Adidas should they fail to qualify for this season’s Champions League.

United will suffer a 30 per cent cut to their annual £75m payment from the German sportswear giant if they finish outside of the top four. This means the club will lose more than £20m in sponsorship income.

However, it’s believed the total £22.5m deduction would be spread over the full 10 years of the current contract.

United would therefore pay a catch-up penalty fee of £4.5m for the first two years of the agreement and then suffer a deduction of £2.25m from the annual £75m payment for the remainder of the contract.

Adidas is in the second season of its 10-year, £750m deal with United.

Executive vice-chairman Ed Woodward confirmed the details of the looming financial penalty to club investors on Thursday.

Despite spending close to £150m to bring in the likes of Paul Pogba, Zlatan Ibrahimovic, Henrikh Mkhitaryan, United currently sit sixth in the league – six points off fourth place and eight points behind table toppers Liverpool.

The side face Arsenal at Old Trafford on Saturday with the opportunity to reduce the gap between themselves and the Gunners to three points.

Woodward remains optimistic that the club can turnaround their disappointing start to the season having only won five of their opening 11 Premier League fixtures.

"On the pitch, it is still early in the season," he said. "We have 27 more Premier League games to play and have advanced to the quarterfinals of the EFL Cup."

United's failure to qualify for this season's Champions League has already had an impact on their 2016-17 finances.

First-quarter revenue - to 30 September - was down £3.4m (2.8 per cent) to £120.2m, with matchday income down 32.3% to £16.8m.

Mourinho and Wenger's rivalry: in quotes Show all 11 1 /11 Mourinho and Wenger's rivalry: in quotes Mourinho and Wenger's rivalry: in quotes Arsène Wenger, February 2005 After being probed about the number of foreign players in his Arsenal side, Wenger flipped the question onto Chelsea's lack of homegrown talent. Mourinho and Wenger's rivalry: in quotes Jose Mourinho, October 2005 Mourinho did not initially bite back, but after Wenger criticised his team further, he infamously labelled the Frenchman a 'voyeur'. Mourinho and Wenger's rivalry: in quotes Arsène Wenger, November 2005 Wenger did not react well and accused Mourinho of being "disconnected with reality and disrespectful". Mourinho and Wenger's rivalry: in quotes Jose Mourinho, April 2008 Their rivalry calmed after Mourinho's exit from Chelsea in 2007, but the Portuguese could not help but prod Wenger again during his time at Internazionale. Mourinho and Wenger's rivalry: in quotes Arsène Wenger, April 2013 After Sergio Ramos and Xabi Alonso appeared to purposely earn yellow cards in a Champions League tie for Mourinho's Real Madrid side, Wenger admonised their actions in the press. Mourinho and Wenger's rivalry: in quotes Jose Mourinho, April 2013 Wenger's comments provoked a spiky reaction from Mourinho, who attacked his rival's reputation as a manager who develops young talent. Mourinho and Wenger's rivalry: in quotes Arsène Wenger, January 2014 Mourinho, back at Chelsea, sold Juan Mata to Manchester United shortly after the two sides had played their final league fixture against each other for the season. Mourinho and Wenger's rivalry: in quotes Jose Mourinho, January 2014 Wenger's reaction did not surprise Mourinho, who cried foul himself with a complaint about Arsenal's fixture list. Mourinho and Wenger's rivalry: in quotes Jose Mourinho, February 2014 After Wenger suggested his rival may suffer from a 'fear of failure', Mourinho infamously retorted by calling Wenger a 'specialist in failure'. Mourinho and Wenger's rivalry: in quotes Arsène Wenger, October 2014 The pair finally came to physical blows on the touchline during Chelsea's 2-0 win over Arsenal at Stamford Bridge in October 2014. Mourinho and Wenger's rivalry: in quotes Jose Mourinho, October 2015 A year later, with his title-winning side falling apart at the seams, Mourinho claimed that Wenger was the only manager in the league who could criticise referees and get away with it.

The reduction in income is largely down to United playing three fewer home games than in the same period in 2015.

Debt has risen 18 per cent to £337.7m, due to the fall in the pound against the dollar since the Brexit vote.