Debts pushing game towards cliff-edge

THE measure of how much rugby union in England depends on the international game was laid bare this week. It arrived in the form of an independent report – not under the aegis of either the RFU or Premiership Rugby – which confirmed that seven of the remaining 10 Premiership clubs have insolvent balance sheets.

Put simply, it means that those clubs do not have enough assets to pay all their debts due to their negative net worth.

This situation is no revelation, because before the collapse of three Premiership clubs in late 2022 – Wasps, Worcester and London Irish – there were reports that the combined total of the debt mountain racked up by top tier clubs was just over £500 million.

Following those bankruptcies the 10 surviving clubs are now £311 million in debt according to the report commissioned by Leonard Curtis, a corporate recovery firm, and published in The Guardian.

This leaves English professional club rugby in a perilous position, with the Premiership being propped up by a combination of the RFU’s recent signing off of a £264m eight-year PGP funding deal, and the financial support of their rich list owners/backers, most of whom are aged 60 to 80.

The PGP decision, endorsed by the RFU board, has been called unaffordable by critics of the current Twickenham administration, and is highly controversial because of its impact on the finances of the governing body of English rugby.

Those figures, because they represent the finances of the national game rather than the elite clubs, were absent from the Leonard Curtis report. However, they are critically important to any future recovery of the English club game as a whole, and it is why there are grave misgivings over the scale of the PGP deal given that the Premiership model appears to be destined for the breakers yard.

“Professional rugby union in England has lived beyond its means for a long time now”

It has pushed the RFU into a position of incurring unparalleled losses, with the RFU forecasts taken from its own annual reports of a huge £50m loss this year, and a further £80m in losses over the following four years (2025 to 2028).

What is difficult to comprehend is that the single biggest contributor to the financial wreckage in the Premiership is the rampant wage inflation which has seen players, coaches, and administrative and support staff, remunerated at levels that outstrip the income generated by the sport many times over.

The Leonard Curtis report suggests that some Premiership clubs have been paying wage bills which swallow up between 80 and 90 per cent of their revenue. It is this lack of wage control, and self-harm through poor regulation, that has left rugby union in England on the cliff-edge – and with scant sympathy from observers either inside or outside the game.

The decision by Premiership clubs and their owners/boards to increase the annual salary cap to £6.4m this season from £5m last season, when most of them are balance sheet insolvent beggars belief.

It also means that there is very little chance of the £100m that the Premiership clubs are said to owe the government in Covid loan repayments will be rescheduled or reduced – especially given the new Labour government’s constant references to its “black hole” financial legacy.

Professional rugby union in England has lived way beyond its means for most of the last two decades, and now the reckoning is here.

The key to any recovery is for the RFU to become an effective, financially prudent, and tough regulatory body, which brings reform in order to fix a broken club game, rather than throwing good money after bad at it.

It also means restoring promotion-relegation, based on merit on the pitch, and scrapping the ring-fenced franchise model that is threatening most of the Premiership clubs with bankruptcy, and could bring the RFU to its knees.

The English elite professional clubs, and the grassroots clubs below them being hit with a shocking drop in participation numbers, are dependent on Twickenham remaining the cash cow which funds the biggest part of rugby union in England.

In the 2022-23 financial year the largest share of the RFU’s income was from Twickenham’s hospitality sector – most of it generated by international match days – at almost £71m, while ticketing was next at £48m, and then broadcast at £41m. This drawing power, and the revenue it generates, is what makes the performance of the England team such a key element in a revival of rugby union as a major national sport.

It is also why we have never needed the England team to be a dynamic driver of interest in the sport by showcasing the 15-a-side code at its best more than we do now.