History has counted very little for Wasps in recent months.
The English rugby union club may have amassed six Premiership Rugby titles, three Anglo-Welsh Cups, two European Rugby Champions Cups and one European Challenge Cup. But a stacked trophy cabinet could not hide years of financial mismanagement and debts reaching UK£35 million (US$40.2 million), all of which finally caught up with the club in October.
At the same time, fellow top-flight club Worcester Warriors also found themselves on the edge of a financial precipice, owing more than UK£25 million (US$28.7 million). Both sides were being pursued for unpaid taxes, having been served with winding-up orders by HM Revenue and Customs (HMRC).
The inevitable did not ease the pain. Worcester were placed into administration towards the end of September, with Wasps suffering the same fate weeks later. Mass redundancies and competition suspensions swiftly followed.
It is worth reflecting on the human cost of all this. Wasps players were reportedly “bawling their eyes out” at the news, a reaction likely repeated by hundreds of newly unemployed staff fully aware of the cost of living crisis and rising inflation.
The emotional consequences are one thing. But the plight of Wasps and Worcester has also exposed some harsh truths for English rugby. Clubs have been allowed to operate with minimal accountability for too long and the subsequent fallout has cast doubt over the commercial viability of the domestic game.
There may be hope yet for Wasps and Worcester. At the time of writing, both had drawn interest from prospective new owners. But even if they do return to the top table, it is clear a major overhaul is needed in order for on-pitch ambition and off-field prosperity to coexist.
Was this inevitable?
The warning signs have been there. At one point, Wasps were losing UK£175,000 (US$201,000) a week for seven years. Expenditures have rocketed courtesy of spiralling salaries, with revenues unable to keep pace.
Many Premiership sides have been living hand to mouth, a situation that worsened as Covid-19 annihilated matchday income. Some UK£59 million (US$67.7 million) of the UK government’s UK£300 million (US$3444 million) ‘Sport Winter Survival Package’ in November 2020 was allocated to English top-flight rugby union clubs.
Speaking to SportsPro in February, Premiership chief executive Simon Massie-Taylor admitted it was “amazing” that all 13 teams were kept intact. Aiding those efforts were wealthy owners who stumped up cash to keep their clubs afloat, something which has papered over the financial cracks for too long.
“Because of the demographics of people who support the game, it does attract wealthy people,” Kieran Maguire, a sports finance expert and lecturer at the University of Liverpool, tells SportsPro. “But it tends to be domestic rather than the global investor pool that football has.
“When those people decide to turn off the taps, or they have to due to personal circumstance, then the clubs are very vulnerable.
“There’s also the jeopardy issue in terms of having relegation, which means that the clubs towards the top of the division want to win the league or get into other competitions. The clubs towards the bottom are incentivised to spend money to avoid relegation because it’s a big drop in terms of revenue and kudos. Everybody is incentivised to overspend.”
Worcester Warriors’ debt had exceeded UK£25 million
Clubs may have advocated for a salary cap, which has been reduced from UK£6.4 million (US$7.3 million) to UK£5 million (US$5.7 million), but those chasing success are still able to rack up significant losses. Having only become a professional sport in 1995, there is also a hangover from the amateur days to consider – old habits die hard and efforts to catchup commercially with other sports have been required.
The Premiership and England’s Rugby Football Union (RFU) have been criticised for not taking stronger action on Wasps and Worcester sooner. But only the Department for Digital, Culture, Media and Sport (DCMS) could have put the two teams into administration “because of government loans as a creditor”, according to RFU chief executive Bill Sweeney.
And what about the money from CVC Capital Partners? The private equity firm struck a UK£200 million (US$230 million) deal to a take reported 27 per cent stake in Premiership Rugby in December 2018. According to Ian Ritchie, the league’s chairman at the time, funds would be “re-invested to drive continued growth in the sport, for the benefit of the fans, clubs and players”.
“In the case of Wasps [the CVC money] delayed the club going into administration,” says Maguire. “Clearly, rugby was impacted by Covid more severely than football because it didn’t have the benefit of the broadcasting deals which effectively acted as a safety net.
“So having a windfall income, which is effectively what happened with the CVC money, you’ve then got to go and use that money wisely. And the fact that we’ve lost two rugby clubs is indication that wasn’t the case.”
Are more clubs at risk?
Massie-Taylor said in mid-October that he hadn’t “been given any direct red flags from clubs”, but added he couldn’t give a firm answer until he got complete financial oversight.
One feeling is, if it can happen to a side as renowned as Wasps, who else could be in trouble? Harlequins’ owners have reportedly talked to players about the club’s finances in a bid to allay fears.
Pulling back the curtain further makes for grim reading. Total operating losses for the 13 Premiership clubs reportedly exceeded UK£250 million (US$287 million) over a six-year period from June 2016 to June 2021. Current champions Leicester Tigers posted modest revenue of UK£12.6 million (US$14.5 million) for 2021, UK£3.2 million (US$3.7 million) of which came from CVC.
For Maguire, if English club rugby is to exist in its current form, costs – and wages specifically – must be controlled or wealthy benefactors will need to remain. The former risks players upping sticks to join other leagues – even if that might dent their England international prospects – and the latter is hardly the most watertight of business plans.
Regardless, strong leadership and a clear direction is required to prevent matters escalating.
“As well as supporting efforts to find a long-term sustainable future for both Wasps and Worcester, it is our responsibility to set a more sustainable path for English club rugby,” said Massie-Taylor last month.
“This was on the agenda already, but we need to now accelerate the work we are doing with our clubs, the Rugby Football Union, and other stakeholders across the game.
“Our shared goal must be to put in place stronger foundations that underpin the long-term prosperity for the sport in this country.”
Saracens’ chief executive Lucy Wray says the club is working to control its own financial destiny
Is the existing model viable?
Not according to current league leaders Saracens. The club has had its own financial misdemeanours to contend with, having been relegated in 2020 due to salary breaches. But that has not stopped its chief executive Lucy Wray from having her say.
“You can tell that the financial model of rugby doesn’t work and clubs are losing far too much money,” she told City AM.
“From a Saracens perspective, we really took the view of ‘right, how do we control our own destiny?’.
“We’re not reliant on the magic wand that CVC might wave, or that a broadcaster will offer three times what they are now.”
It is approaching nine months since the UK£32 million (US$36.7 million) takeover of Saracens by the Kimono House consortium and Wray feels teams have prioritised on-field success over long-term planning.
“The finances of the game are very difficult,” she told the Leaders Week sports business conference in London. “The pandemic has been really hard but I don’t think [the current situation] is just because of the pandemic. I think investment in rugby is just too skewed towards the performance side. There hasn’t been enough investment on the business side by the clubs themselves.”
Sweeney, meanwhile, believes the model is “broken” and clubs have been “living beyond their means” for too long.
“[Premiership Rugby] clubs were losing UK£4 million to UK£5 million a year prior to going into Covid and Covid has exacerbated that,” he said.
“Some clubs have had more precarious business models than others and I think we’re seeing the outcome of that at the moment.
“We’re seeing the effects of a system that’s been broken for some time. I don’t think there’s a short-term solution we could impose now.”
What are the solutions?
Many have been bandied about, some realistic and others a distant pipedream. In no particular order, here are the most prominent suggestions.
1. Central contracts
Dubbed the “nuclear” option by Sweeney and an idea set to be floated when the RFU and the Premiership hold talks on a new Professional Game Agreement (PGA). In the past, even a murmur of fully-fledged central contracts would have caused conflict, as it would hand extra control to the national team.
“We’ve got an ongoing lack of trust between the RFU and the club owners, because it will cede more power to the RFU,” notes Maguire. “The club owners don’t want that. They see the players as their assets.”
Central contracts in English cricket, introduced more than 20 years ago, show the system can endure and aid self-sufficiency at county level by easing the wage bill. Joint contracts shared between club and country could also come into play, with Sweeney stating multiple possibilities are on the table.
However, there is a worry in some quarters that these proposals might further distort the relationship between the RFU and Premiership clubs, given the national governing body effectively competes with the league for players and sponsors.
Now is not the time for division. Former Wasps and England fly-half Rob Andrew, who is currently Sussex County Cricket Club chief executive, reckons the bodies should deepen ties to get the game off life support.
“The challenge is that Premiership clubs are effectively self-governing and are privately owned businesses,” Andrew told BBC Radio 4’s Today programme.
“The irony is that the rugby on the field, from the players and coaches, has probably never been better. But these are private businesses and they’re getting into financial difficulty.”
Premiership Rugby chief executive Simon Massie-Taylor is being tasked with finding a more sustainable path for the domestic game
2. A ten-team league
All 13 Premiership shareholding clubs have been in the top flight since Saracens’ return last season. Exeter director of rugby Rob Baxter has branded the prior decision to expand as “madness”, also saying that it “wrecked the calendar”.
The downside of a streamlined league, though, is less matchday income for teams. The hope would be that quality beats quantity and attracts bigger crowds to a better spectacle. Revenues and elite players would also be concentrated, though the gap between the haves and have-nots could widen.
“Again, using the cricket analogy, there’s been talk about Andrew Strauss’ proposed changes to cut back on the amount of four-day [county] cricket,” says Maguire. “You’ve got to have something to fill that gap which is going to attract an audience.
“In cricket, they’ve got T20 and The Hundred. They’ve got products which will actually generate income. Will people come and watch a sevens tournament to fill that gap? I’m not convinced that they will. I think that’s the challenge.
“So what you’ll do with a ten-club Premiership is cut the number of home matches, so you’ve lost revenue. If you say to the players ‘we’re going to cut your wages by 20 per cent as well’, then you’ve got problems.”
3. A franchise model
A controversial scheme, as dispensing with promotion and relegation may be deemed heresy by some. Beyond tradition, there is also return on investment (ROI) to consider.
“People buy franchises to make money,” says Maguire. “MLS does not exist because owners love football. It exists because an MLS entry fee will cost you more than it cost [Saudi Arabia’s Public Investment Fund] to buy Newcastle United. The [MLS] product is generating a fraction of the money of the Premier League.”
Investors would likely need to be in it for the long haul, ruling out many seeing as there are other sporting alternatives offering quicker rewards. Preserving the Premiership could also just transfer the same problems to the second-tier RFU Championship and end any ambitions clubs have of joining the elite.
There are worries introducing central contracts would hand even more power to the England national team
4. Look to Europe
France, specifically. The country’s Top 14 competition has a deal with pay-TV broadcaster Canal+ worth some €454.4 million (US$448.9 million) over four years, dwarfing the Premiership’s three-year contract with BT Sport worth a reported UK£110 million (US$126 million). More rights revenue would provide security for clubs, not to mention tempting more external investment.
Actually achieving that is a different matter, so establishing a structure similar to the one in France may be necessary. There, the finances of Top 14 and second division Pro D2 teams are overseen by the Direction Nationale d’Aide et de Contrôle de Gestio (DNACG), which is independent of the French Rugby Federation (FFL) and the French National Rugby League (LNR). Requirements include keeping 15 per cent of yearly cost projections in cash in the bank. Additionally, any investor wanting to cover losses must provide a bank guarantee.
Sweeney likes the idea, saying the English game needs “something like that” in place.
5. An independent regulator
English soccer has been toying with this since last November. That would be part of sweeping changes, including a transfer levy, to support clubs further down the pyramid.
This would be a long-term alternative for rugby union when factoring in the time needed to conduct, present and implement a review. There may not be patience for it, given the calls for immediate action.
“Regulation has cost implications because somebody’s got to pay for it,” notes Maguire. “So that’s taking money away from the clubs.
“I’m not convinced that it would work. And then you’ve got the compliance cost to go along with it.”
Clubs could adopt a financial model similar to the one used in France’s Top 14
6. More financial transparency and owner tests
Greater oversight of club balance sheets could prevent a bad situation from getting even worse, as well as create stronger foundations and greater accountability.
A fit and proper test for owners also may well have helped Worcester’s cause. The Warriors’ debt, which included at least UK£6 million (US$6.9 million) in unpaid tax, was accompanied by growing resentment towards co-owners Colin Goldring and Jason Whittingham, who have been accused of asset stripping the club. The pair fanned the flames by appearing to blame the squad and supporters for the team’s predicament.
For Sweeney, a thorough test would look to prove that a prospective owner “can provide financial sustainability for a club”.
“That’s something we need to look at very, very closely,” he added.
“No quick fix”
That is the assessment of Massie-Taylor, who is pushing for fewer clubs in the top flight and a more “integrated” Championship. Changes are expected to kick in from the 2024/25 campaign.
Sweeney also wants to see a structure where teams can “at least break even”, as well as “attract new investment”.
Irrespective of how the overhaul takes shape, English rugby finds itself at a crossroads. Even before Wasps and Worcester’s woes came to light, the domestic game has had to contend with everything from a global pandemic to player welfare concerns.
The latest developments have resulted in some serious soul searching. Yet there is also a chance to forge a new path. The one English rugby’s stakeholders choose will have enduring consequences for the professional game.