Government warn Premiership clubs are 'teetering on the edge'

The Government has been warned to keep a close eye on Gallagher Premiership clubs “teetering on the edge” after a new report set out the cost to taxpayers of three top-flight clubs going under.

In total, Premiership clubs received £123.8million in loans from the Department of Digital, Culture, Media and Sport (DCMS) designed to help the sports and culture sectors manage the financial shock of the Covid-19 pandemic.

A new report from the National Audit Office (NAO) said that £41.6m of that went to London Irish, Worcester and Wasps, out of £46.1m that was handed to entities that are now insolvent.

The NAO report says DCMS does not expect to recover up to £29m of that figure, and a further £11m in interest payments that will not now be made.

Sir Geoffrey Clifton-Brown, the chair of the Public Accounts Committee, said in response to the report: “Although progress has been made in recovering initial repayments, it is concerning that up to £29million of taxpayer money could be lost from borrowers who have since gone under.

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“DCMS should continue to keep a close eye on English rugby union clubs that have been teetering on the edge.

“Given the public money at stake, the department has more to do to show it has a long-term plan for managing and recovering loans across the sectors.”

The NAO report states DCMS has recovered £9.8m from the administrators of Worcester, plus £300,000 from the administrators of Wasps. DCMS expects to recover between a further £7.3m and £11.1m from all the loan book insolvencies.

The money loaned to Premiership clubs amounted to 26 per cent of the overall total.

In June last year DCMS appointed two independent advisors to help the Rugby Football Union and Premiership Rugby stabilise the future of the sport.

The report added: “Acknowledging its ongoing role as a key stakeholder, DCMS is closely monitoring the remaining Premiership clubs to identify any which may be behind on their repayments and facing financial difficulties. In doing so DCMS is monitoring the risk it faces to protect its investment on behalf of taxpayers.”

All solvent borrowers should make a first repayment no later than September next year. The report found 45 per cent of solvent borrowers had made at least one repayment by October this year.

DCMS has recovered 97 per cent of scheduled repayments to date, the report said.

The three Premiership teams were among nine borrowers who had fallen into insolvency by October this year, 7.5 per cent of the total number of borrowers.

DCMS’ own projections expected five per cent of borrowers to fail in the first three years of the loans, rising to 14 per cent after 10 years.

Gareth Davies, the head of the NAO, said: “Government issued loans to the culture and sports sectors in extremely demanding circumstances, helping many organisations survive the immediate threat of the pandemic.

“It has since made progress in achieving 97 per cent of the repayments scheduled to date.

“However, with all borrowers scheduled to start repaying next year, and ongoing risks to future recoveries, government should strengthen its longer-term plan for protecting taxpayers’ exposure.”

Premiership Rugby has been contacted for comment.