THE RFU look to be heading for another round of redundancies as world rugby teeters on the brink of bankruptcy.
The international game is heading towards financial meltdown, with swingeing cuts of between 40 and 50 per cent at the New Zealand and Australian national unions.
The Rugby Paper understands that the RFU have advised all staff, including directors, that they could be made redundant as a result of the stringent cash cutting measures required in the wake of the pandemic.
At the same time, there continue to be grave misgivings in some quarters of the English game about the financial and strategic policies being pursued by the RFU.
There is consternation that a £200-250m financial rescue plan drawn up by the former RFU chief executive, Francis Baron, in the form of a 16-team COVID-19 Cup of World Rugby to be held in the UK and Ireland in June/July 2021, has been summarily dismissed by the RFU – and that World Rugby, which initially welcomed the proposal, then followed suit.
It is believed that Baron – whose RFU privileged member status was withdrawn after an earlier report criticising the Union’s financial strategy – did not receive an acknowledgement from his former employers after sending them his new proposal.
This has led to concerns that the other Unions around the world have not had proper consultation regarding the Baron rescue plan, and that its main thrust that Rugby Union has the opportunity, and the duty, to generate additional financial revenue rather than go down the route of borrowing from banks or governments has not been communicated.
Instead, there is a fear that there has been an attempt by Baron’s political opponents within the English governing body to bury his proposal.
In his document, Baron says: “The UK’s Office for Budget Responsibility states that we are facing the worst economic recession since 1709.
“Rugby is facing a potential financial tsunami which if urgent action is not taken could sweep away some of our unions and many of our community clubs.
“The RFU CEO’s best case scenario is for RFU revenue losses of £35m, the mid-case is for a losses of £86m and the worst case is a loss of revenues of £107m.
“New Zealand Rugby expect a revenue loss this year of £49m, South African Rugby has announced swingeing budget cuts of £55m and Rugby Australia have made 40 per cent of the staff redundant and raised emergency loans of $20m (£11m).
The RFU Accounts for 2019 show that the RFU now have no reserves. Bank borrowing facilities were at the maximum £100m allowed under the RFU Rules and with a further large repayment of £96m to Compass Group possibly required in a few years’ time.
“It is now reported that the RFU will be seeking its members approval at the AGM in June to increase borrowing facilities from £100m to £150m plus any additional loans secured from the Government.
“The proposals I am tabling for debate are to raise substantial new cash funds for the major Unions and the provision of significant grant funding to RFU Member clubs.
- The RFU should take a leadership position and propose that a special one off “Coronavirus Cup of World Rugby” be held in the UK & Ireland in June/July 2021 (the existing summer tour window) with ALL profits raised distributed to participating Unions to be used exclusively for financial support of the game with priority given to Community clubs.
- The 2015 World Cup in England generated net profits of around £400m. This proposed special event could generate a net profit of £200m to £250m.
- Postpone the Lions tour by a year. If the Olympics can do it, so can the Lions.
- The tournament should be limited to 16 teams: New Zealand, South Africa, Australia, Argentina, Japan, England, France, Wales, Ireland, Scotland, Italy, Fiji, Samoa, Tonga, USA and Canada. By invitation, no qualification required;
- 16 teams means there would be 31 games over five to six weeks. It would also mean that, compared to 2015, costs should be 25 per cent to 30 per cent lower due to fewer teams to accommodate for fewer matches over a shorter time;
- The estimated net profit of £200m to £250m would be divided between the 16 Unions.
- For those Tier 1 Unions that need immediate financial support in 2020 such support should be forthcoming from an interest free loan from World Rugby. These Unions would then repay those loans from their share of the net profits of the “Coronavirus Cup of World Rugby”;
- All other Unions (other than the participating Unions) should be supported by World Rugby using their reserves under the £80m support package recently announced by World Rugby;
- I believe there may be a good window of opportunity for securing good TV & commercial deals for this competition if we move quickly.
- The RFU should put in place a £15m grant fund for member clubs at Level 3 & below. The intention would be to make available grants of up to £15,000 to clubs in financial difficulty as a result of the virus pandemic. The current proposed £5m repayable loan fund should be withdrawn.
- The RFU should withdraw the recently announced proposal to cut grant funding to Championship Clubs. Now is not the time to make structural changes to the game.
- Drop the announced restriction on clubs coming under RFU Regulation 7 (clubs that pay players) from receiving grant or loan support from the RFU. All clubs from Level 3 down should be allowed to apply for the above proposed grant funding support.
