Rugby left on ‘life support’ by crisis of its making… years of reckless spending put clubs on edge

English club rugby has been warned it is ‘a life support game’ amid financial turmoil that has led to the collapse of Wasps and Worcester – barely a month into the new season.

The aftershocks continued on Thursday after Wasps announced they were about to follow their fellow West Midlands club into administration and, almost certainly, relegation.

Premiership Rugby and the RFU have released a joint statement recognizing ‘the need for rugby stakeholders to address the wider challenges facing the professional club game’. The authorities know that urgent action is needed.

But this problem has been brewing for a long time. At the domestic level, rugby has shown no signs of sustainability, even since the £200m investment by private equity firm CVC in 2019. Clubs have been hit by the Covid lockdown, but many were building up huge debt long before the outbreak of the coronavirus pandemic. pandemic broke out postponement.

So why is English rugby unable to support itself financially? “Governance is the number 1 factor,” said former Harlequins chief executive Mark Evans.

“Historically, PRL was established as a commercial agency to own the commercial rights, not a regulatory or governing body. Much of the governance business was outsourced to the RFU – if that’s the right word to describe it.

It means that PRL has a shareholder council without a significant degree of independence. It’s hard to do things they feel should be done because it’s too easy for a small number of clubs to make changes at the expense of the public good.

Wasps have followed Worcester, which was the first Premiership club to enter the administration

When asked why English rugby can’t support itself financially, former Harlequins chief executive Mark Evans (above) said ‘governance is the number 1 factor’

“Government is incapable of repairing a broken business model. The only clubs with any certainty are those with an owner who is willing to pump in money. That’s not a business plan, is it? That’s a life support game. I know at least four other clubs that would sell for a dollar if they found another buyer.’

According to Evans, the stark fact is that the English elite have been spending beyond their means, despite the fact that resources have increased significantly.

“There’s a myth that the league doesn’t generate enough revenue, which is just not true,” he added. ‘The Premiership has quadrupled revenues since 2000, but in 2004 collective losses were around £2million. Moving on to 2019 – pre-Covid, I stress – revenues had quadrupled, but losses had risen to £50m. So it’s not just about income.

“We need to change the business model so that our costs are comparable to our revenues. There is this argument that players earn high wages. Why? Bankers don’t earn what they get – it’s the market that gives them ridiculously high salaries. People who work in care homes earn a lot more than they get, but they don’t get it.

This arguing that, “it’s a hard game, so they earn what they are paid”. No. Earning is not in it. You should be paid what your employers can afford.’

Former Leicester chief executive Simon Cohen agreed that English rugby has made more money but is spending so much that it is left standing on a cliff.

Former Leicester chief executive Simon Cohen agreed that English rugby has made more money, but that he is spending so much money that he is on the brink of collapse.

“As I have been saying since 2017-18, this is a crisis that has been years in the making,” he said. “Income doesn’t seem to be an issue as it has grown exponentially since the game went professional. But despite having a cost control mechanism in place, it has exceptionally been unable to do so – or unable, but unwilling to do so.

What contributed to the demise of Worcester and Wasps has been the decisions of all owners to accept having a second tent player per club, which was clearly inflationary, or to set the salary cap based on expected earnings rather than actual income. I think those are the kinds of things that have caused this crisis.

Anyone who thinks Covid is the cause of this is misguided at best. Covid has exacerbated a situation that would have happened at least within the next 24 to 36 months.”

For Cohen, the concern is how the club game can recover without cutting spending, as room for further growth is limited. “I don’t see how rugby can significantly increase its revenue streams,” he added. “It can tinker around the edges, but what it can’t do is move the needle significantly. That only happens with TV rights and I haven’t seen anything to indicate that TV rights will increase significantly like football did.

“Rugby is a minority sport, so you’re not going to get big subscribers on Amazon, BT or Sky. Rugby as a participatory sport is declining and attendance is declining, so where are the incentives for TV companies to pay more money? If you can’t significantly increase your income, you need to look at your costs.’

Tony Rowe (above) said Exeter’s approach to entering the Premiership was to try and create a company that did not rely entirely on rugby

Comparisons are regularly made with the vibrant countryside across the Channel, but Cohen adds: ‘In much of France, rugby is the national sport. The richest people want to participate. The big sponsors want to participate.

In addition, in France they are significantly better at making decisions in the interest of the competition, rather than based entirely on self-interest. And their tax rules are much stricter, so those factors contribute to more resilience.’

From the Premiership, another leading voice spoke about how rugby alone cannot sustain itself, so additional revenue streams are needed. Exeter has been the most solvent club in recent years and chairman Tony Rowe said: ‘Our approach to entering the Premiership was to try to build a business that was not entirely dependent on rugby.

‘We have a strong conference and banquet business. We were the last people in the Premiership and we had a blank sheet of paper, so we designed Sandy Park knowing we needed another string on our bow. That is a difference with others who were already there and had to build and adapt along the way.’