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Are rugby clubs folding like a collapsing scrum?

15th Jun 2023
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Three premiership rugby clubs have gone to the wall in the last eight months.  Will the scrum collapse or are the pack strong enough to shoulder the burden, improve corporate governance and financial management and drive on again?

rugby scrum
Adobestock

A last-ditch attempt to save London Irish from going into administration has failed, making it the third professional rugby club to fold like a collapsed scrum in a matter of months, following the recent demise of first Worcester Warriors and then Wasps. All three premiership clubs have filed for bankruptcy protection, thereby sending shock waves through the sport by reducing the elite competition to a rump of just ten clubs. Other premierships clubs are also rumoured to be losing money, thereby raising the prospect of more elite teams going to the wall. Is the final whistle beckoning!

How did we get here?

Rugby turned professional in 1995 and enjoyed an initial boom in popularity as new investors were attracted to the sport by the prospect of good returns, buoyed by higher TV revenues and a growing fanbase, all of which enhanced the profile of the domestic game, attracted top overseas players, and ushered in the Rugby World Cup and other elite competitions at European level.

So, why is this seemingly successful business model now unravelling at an alarming rate? What, if anything, can be done to stop the rot and preserve these elite sporting institutions and are their lessons to be learnt for other sports, most notably football?

Contributing factors

Although the reasons for collapse differ for each of the distressed clubs, there are some underlying commonalities that have exposed the fragility of their business models; namely:

  • inadequate corporate governance and financial control systems;
  • a failure to diversify their income streams and an over reliance on wealthy investors;
  • poor cash flow management, e.g exorbitant player salaries;
  • rising operating and debt servicing costs; and
  • the ongoing financial impact of lockdown restrictions which initially curtailed match-day revenues, then created the burden of covid loan repayments.

One could argue that the lockdown phase only served to hasten the day of reckoning, as the sport has been living beyond its means for some time and change is urgently needed.

What's to be done?

A key task will be to reinvigorate the partnership and reduce the friction that exists between the RFU and the management body that represents premiership rugby, so that they can provide stronger leadership and enforce good corporate governance and financial discipline. Individual clubs will have to seek new sources of revenue through ambitious sponsorships and other marketing initiatives designed to widen their fanbases, not easy in the current economic climate. Recent events should convince the professionals, that expansion without strong management and a solid financial foundation, is often a common ground for business failure.

Conclusion

So, after a trying few months for premiership rugby the time has come for those responsible to up their game and promote greater business resilience and financial management, turn defence into attack and push this great sport over the gain line once again. Otherwise, failure to evolve will result in being kicked into touch.

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