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On 6 October 2022, the Rugby Football Union (RFU) announced Worcester Warriors Rugby Football Club’s (Worcester Warriors) men’s team had been relegated from the Gallagher Premiership. This was after entering administration ten days earlier. Two days before, Wasps Rugby Football Club (Wasps) filed its second notice to appoint administrators.
This Insight explains what the Gallagher Premiership is, how the finances of rugby clubs are regulated and what happens to these clubs next.
What is the Gallagher Premiership?
The Gallagher Premiership is the top tier of men’s domestic English rugby competition. It’s owned and operated by Premiership Rugby Limited (PRL).
According to the Premiership Rugby website, 73% of PRL is owned by the stakeholder clubs, and the remaining 27% by the private equity firm CVC Capital Partners. Its rugby rules and regulations are agreed with the RFU. The Premiership has complete autonomy over its commercial arrangements.
How do Premiership rugby clubs generate revenue?
PRL has responsibility for the commercial and sponsorship rights of the Gallagher Premiership. For instance, the sale of the competition’s broadcasting rights. Revenues generated by the PRL are then distributed among its shareholders (including the clubs).
The Premiership clubs also receive funds from the RFU. The relationship between the PRL and the RFU is governed by a Professional Game Agreement (PGA). The current PGA was signed in August 2016 and lasts until 2024.
Under this deal, the clubs received £112 million in the first four years. Payment for the second four-year period is not a fixed figure as it is linked to the financial performance of the RFU.
In response to Covid-19, the Government provided funding. In March 2021, it announced £88 million in loan support for Premiership clubs as part of its Sport Winter Survival Package. The loan was administered by Sport England and comprised a 10-year term with a two-year holiday and repayments over eight years at an interest rate of 2%.
Finally, clubs can generate their own revenue through ticket sales and independent commercial dealings.
How are Premiership rugby clubs’ finances monitored?
The RFU’s regulations (PDF) place financial monitoring in the hands of a ‘relevant body’. In the case of Premiership Rugby, this is PRL itself.
PRL financial monitoring centres around administering the salary cap. The salary cap sets the total amount a club can spend on the salaries of senior players. For the 2021-22 season this is £5 million. Under these regulations, the league has an independent Salary Cap Director who receives copies of all player contracts and completes an annual audit.
These auditing powers are used solely to enforce salary regulations. They do not permit PRL a more holistic consideration of the potential debts, or financial sustainability, of each club. The financial difficulties of Wasps and Worcester Warriors have led Simon Massie-Taylor, the Chief Executive of PRL, to suggest widening these powers.
What powers does the RFU have?
The RFU can only become involved in a club’s finances after an ‘insolvency event’ (PDF). Under RFU regulations, the club must cooperate with any requests from the RFU. This includes requests for financial information.
These post-insolvency event regulations also act as a deterrent to financial mismanagement. To this end, the RFU can either relegate or deduct 35-points from clubs that experience insolvency. A club can appeal RFU sanctions if it enters insolvency due to circumstances beyond its control.
What powers does the Government have?
The Government is the primary creditor for both Wasps (HM Revenue and Customs) and Worcester Warriors (Department of Digital, Culture, Media and Sport). Aside from this role, it has no regulatory powers within the Gallagher Premiership.
It has signalled that its previous financial support was linked to the extraordinary circumstances of Covid-19, and that the future ownership of Worcester Warriors or its funding arrangements are not its responsibility.
What next for the Wasps and Worcester Warriors?
The Wasps has not entered administration. Instead, the club has filed two notices of intention to appoint administrators. This enables Wasps to negotiate repayment terms with its creditors, seek additional investors and keep trading. The outcome of these negotiations will inform the next steps.
However, in late September 2022, Worcester Warriors entered administration. Administrators will assess any rescue options for some or all of the business. The company employing the players, WRFC Players Ltd, was wound up on the 5th of October 2022. As a result, regardless of the outcome of the separate administration process, every Worcester Warriors player has been made redundant.
The table below shows the Premiership rugby clubs total debt in 2021.
Source: Companies House
The next important decisions will be to do with the RFU punishments for both clubs. Worcester Warriors has already been relegated, but it remains to be seen whether a potential new owner would appeal this sanction under the ‘No-fault Insolvency Event’ (PDF) provisions. Wasps may also be relegated. However, the RFU could use its discretion here, and permit the club to remain in the Gallagher Premiership.
About the authors: Joe Tyler-Todd is a researcher at the House of Commons Library, specialising in home affairs and Yago Zayed is a statistician at the House of Commons Library specialising in sports statistics.
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