Leading rugby clubs in England say they need to act together to reduce wage inflation and control costs as the Guardian today reveals the most recent recorded losses of Premiership clubs total a combined £28.5m.
The Guardian analysis, backed up with interviews from the majority of the Premiership’s chief executives, shows clubs are still struggling to become sustainable 21 years after the league came into existence. With insiders predicting the total losses will be about 20% worse in the next set of accounts, the data shows:
• Exeter was the only Premiership club to clearly turn a profit in 2016-17.
• Worcester, at £8m, showed the most significant losses and spent more on wages than their turnover.
• Overall turnover for Premiership clubs went up £11.93m with wages increasing by £10.42m.
‘The market is very difficult’ : Premiership clubs battling for sustainability | Paul Rees
“Clubs are no better off than when the Premiership started 20 years ago and that is a real shame,” said Leicester’s chief executive, Simon Cohen. “The percentage of extra revenue over the years that has gone to players has put clubs in a position where it has been difficult to invest in other areas of the game. You want to spend more on infrastructure and the matchday experience for fans but you are less able to do it because of the amount going on wages.”
Another club chief executive said the Premiership’s losses would show an increase when all the 2017-18 accounts were published – “the clubs are losing just under £35m cumulatively” – and blamed a rise in the wage cap and a failure to secure the extra projected income from a new title sponsorship agreement with Aviva staying on for an extra year at a reduced rate before Gallagher became a permanent replacement from this season.
The salary cap for clubs is set at £7m, plus two marquee players and allowances, for the next three seasons. Premiership Rugby receives £28m a year, distributed between the clubs, with small variations according to success and number of internationals, from the Rugby Football Union.
The Guardian’s analysis, following the model of our exercise on Premier League football, shows that Worcester (a loss of £8m) and Harlequins (£4.6m) were the most in the red in the financial year 2016-17. Worcester, who had made a profit the previous year after shareholders wrote off loans of £20m, had a wage bill that exceeded turnover and their finance director, Kirsty Fisher, resigned last month. Harlequins had the second highest turnover but the club’s loan from its parent company grew to £37m.
Wasps, thanks to activities at the Ricoh Arena, enjoyed the biggest turnover but lost £3.7m despite being the only club to trim its wage bill that year. The cuts came on the administrative rather than playing side. Saracens, the European champions in 2017, posted a deficit of £2.8m. Newcastle generated £9.7m and lost £3m with wages accounting for 81% of turnover.
Accounts indicate Bristol reduced its accumulated losses by £1.2m in the year to £20.4m. The club is reliant on funding from their owner, Stephen Lansdown, and states it is “currently loss-making”.
While the turnover for the clubs increased by a total of £11.9m, wages went up by £10.4m, allowing them little scope to help fans by subsidising ticket prices and forcing up borrowings to fund investment in facilities, ground improvements and new pitches. Gloucester took out a bank loan this year for a new playing surface that cost nearly £1m while Saracens are looking for a mix of debt and equity to pay for their planned £20m development of a stand at Allianz Park.
The entire turnover of £189.1m for the 11 clubs in the accounts is equivalent to that of a middle-income Premier League club such as West Ham (£183m) or Southampton (£182m).
The Premiership can be crudely split into three: the clubs with lower attendances, such as Sale and Newcastle; those run on company lines, spending what they earn, which include Gloucester and Exeter; and those indebted to wealthy backers, such as Bath, Bristol and Saracens. Each club has someone who will make good the losses each year – but all know that cannot continue indefinitely.
While the figures appear bleak, for the first time since the game went professional the clubs are ready to put rivalry to one side to make the game sustainable.
“Wage inflation has been hard to manage and we have been unable to keep up with the growth in our commercial revenues,” said the Northampton chief executive, Mark Darbon, whose club on Friday announced a pre-tax loss of £2.8m for 2017-18.
Premiership finances: the full club-by-club breakdown and verdict
Four years ago, the clubs voted for significant increases in the salary cap to help protect them against big-spending French clubs but they say the flattening out for the next three seasons gives them the chance to take control of costs. “We have to take it,” said the Gloucester chief executive, Stephen Vaughan. “A few years ago it was all about a win-at-all-costs mentality but the signs from the ownership group now are that sustainability is the priority and there is a sense of togetherness about the clubs. I am optimistic about the future because rugby is still touching the surface in terms of its commercial appeal. We have just been using new revenue to increase wages. In any other business an extra £1m would be invested, not got rid of as quickly as possible.”
The Saracens chief executive, Mitesh Velani, believes the RFU should offer the clubs more assistance. “There is enough money in the professional game but there is something to be done in terms of the balance between the revenues generated at international level and the losses suffered at domestic level. You want supporters not just to pay very high sums of money to watch England play New Zealand at Twickenham but to follow clubs. There needs to be a more collaborative approach, such as the sharing of supporters’ data.”
The RFU’s turnover in 2016‑17 was £184m and the RFU chief executive, Stephen Brown, said: “The professional game agreement has linked us closer together. The agreement is based on a share of the revenue from matchdays at Twickenham. It is fixed for the first four years and after 2020 it becomes variable based on our revenues: if they go up or down, the clubs come with us.
“We have millions watching England on television or coming to Twickenham. We want them to be interested in rugby in England, not just the national side, and we are doing everything we can to encourage people to support their clubs.”