The financial crisis that English rugby is facing was laid bare after a post on Sunday The inquiry revealed Premiership clubs have racked up more than £500m in debt.
With the future of Worcester Warriors in serious doubt just five days before the new league season, it can also be shown that London Irish, Newcastle and Wasps have also admitted any fears about whether they can continue to operate as viable businesses.
A detailed analysis of clubs’ most recent financial accounts also revealed that Premiership clubs owed more than £36m in taxes, with just two of the 13 clubs having any credit with HMRC.
A handful of Premiership clubs admitted they feared they could no longer operate as viable businesses
The top flight lost a total of £24m in the last financial year despite receiving substantial government Covid loans to help it cope with the financial backlash of postponed games and a temporary crowd ban.
Such measures are hitting the domestic game hard, but sports finance experts say the problems existed before the pandemic and warned more clubs could go under without radical changes.
Figures from an investigation by Mail on Sunday show Premiership clubs have racked up more than £500m worth of debt
“I think that’s a real possibility,” said Dan Plumley, senior lecturer in sport finance at Sheffield Hallam University, who researched Premiership rugby finances before the pandemic.
“Covid has accelerated the situation but these numbers are consistent with what the numbers were telling us a few years ago.
“And what we found a lot during our research is that if you just keep doing the same things, that situation becomes the status quo.
“The product is still attractive enough to survive and fans will continue to look at it. But unless you seriously change governance practices at Premiership rugby level and introduce cost control measures beyond the salary cap, things will just continue as they are.
The MoS has audited the accounts of the 13 Premiership clubs for the year ending 30 June 2021, with the exception of Worcester, who are yet to publish figures for this year and are facing a winding-up petition over an unpaid £6million tax bill is. We used their accounts for the previous financial year.
The club’s total combined debt is £509m, with a combined net debt of £105m after assets are taken into account. Wasps have accumulated the largest gross debt at £112.3m, followed by Bristol at £51.2m and Newcastle at £39m.
Eight clubs made a loss for the year in their most recent accounts, with Exeter and Wasps both posting operating losses of £8m, while Saracens recorded £4.6m and Worcester £4m.
Newcastle recorded the biggest gain of £3.4million, but with the caveat that they had included a “significant” government Covid loan in the calculation.
Warriors boss Steve Diamond is struggling to keep Worcester afloat while the club is financially ruined
Worcester was on the brink of collapse with debts in excess of £25million and struggling to pay their players
Wasps also recorded the largest amount of deferred tax at £9.5m, while Leicester reported the second highest at £8.4m.
Additionally, in May, Wasps defaulted on 6.5 per cent interest payments to investors who lent the club a total of £35m via a private loan linked to the purchase of a 32,000-seat stadium in Coventry. According to reports this week, the club had received a refinancing offer that would allow them to repay bondholders.
A statement on the club’s accounts said: “[Owner] Derek Richardson is said to be providing financial support for the foreseeable future. However, the Directors have concluded that a material uncertainty exists which may cast doubt on the Group’s and parent company’s ability to continue as a going concern.’
Only five clubs turned a profit last year – and several only after receiving Sport Winter Survival Package loans from the Department for Culture, Media and Sport. But they have faced a number of clubs with repayments of up to £800,000 a year.
Whilst most Premiership clubs rely on the goodwill of their owners, they are reaping significant revenue from the broadcasting deal signed with BT Sport, which is reportedly worth £4million a season.
Clubs will soon be back in action when the new Gallagher Premiership season begins on Friday
Plumley said the league could have gotten more value from the deal and suggested more of it was shared out among the Premiership to help secure the future of smaller clubs.
He also highlighted the £200m stake private equity firm CVC had taken in the league and questioned whether it had been reinvested with a view to the clubs’ long-term sustainability. He cited the gradual growth of Exeter Chiefs as an example of how to buck the general approach.
“The challenge is when the club gets an equity injection, where does that money go,” he said. “Most of the time we see money flowing back into players’ wages.
“You have to look for ways to actually use it to become sustainable, rather than chasing that short-term success.”