Permanent salary cap reduction is now inevitable in financially troubled Premiership - Andy Goode

Premiership clubs have agreed to the 52 recommendations in Lord Myners’ report into the salary cap and a permanent reduction in the cap itself is next to be agreed. Some players may have voiced their displeasure at the initial, temporary 25 per cent pay cuts.

However, they look set to remain in place for the 2020/21 season with the cap being reduced from £7million to £5m plus some additional credits in 2021/22.

The changes are yet to be approved but would come on top of plans to scrap the marquee player rule, which allows clubs to have two players that sit outside of the salary cap. If that is approved, clubs will not be allowed to sign any new marquee players but the current contracts will have to run their course.

Northamton’s Dan Biggar guests on the latest episode of The Rugby Pod, the chart-topping show fronted by Andy Goode and Jim Hamilton

Northamton’s Dan Biggar guests on the latest episode of The Rugby Pod, the chart-topping show fronted by Andy Goode and Jim Hamilton

It’s a big shift but you have to say a necessary one when you see the state of Premiership clubs’ finances at the moment. They lost a combined total of £89m in 2017 and 2018 and things have obviously got even worse because of coronavirus.

Leicester, who may not have been performing well on the pitch but are arguably the biggest club in the country, have just announced that they will have lost over £5m by the end of this financial year and are having to make over 20 people redundant as a result.

Those redundancies won’t come from the playing squad so while it is possible to have sympathy with the players because this financial situation is not their fault, the effects are being felt far more severely elsewhere.

In reality, players have never had it so good as in recent years and wages have escalated disproportionately when compared to clubs’ revenue. This tipping point was on the horizon even without coronavirus but now it is here.

There are currently 99 players being paid over £300,000 per year as part of the Premiership salary cap, as revealed by Lord Myners’ report, and that number has risen dramatically from just five players in 2013/14.

In addition, the 24 marquee players in the Premiership this season are earning a combined total of £14m or around £600,000 each on average. It would be great if paying players those sums was sustainable in rugby but it just isn’t at the moment.

The pinch is being felt at Welford Road https://t.co/g5cfrcpMUJ

— RugbyPass (@RugbyPass) June 4, 2020

We know Bristol and their owner Steve Lansdown isn’t on board with these changes but it is expected that at least ten of the 13 clubs – the number that is required for a change to happen – will be and they will become a reality. Clearly, it will be a tricky task for clubs to get their expenditure on wages down to £5m by the season after next and there will have to be a number of renegotiations with players who already have contracts in place for the 2021/22 season, but the vast majority of clubs obviously can’t afford to go on spending at the levels they are now.

It’s great that Premiership Rugby have now set a target date of August 15 to return and it needs to return to ensure TV revenue keeps coming in, but there has been no rugby since March 8 and we have no idea when clubs will be able to have fans in stadiums again and then have full stadiums. That support makes up a significant proportion of their income.

There will, of course, be credits for academy, English-qualified players, injury dispensation and the like on top of the £5m but it’s a significant reduction from £7m and some tough conversations with players lie ahead.

“From a squad building perspective, the next few years are likely to challenge Premiership directors of rugby in a way that they have not been in recent history”

– @alexshawsport weighs up the state of play at Gloucester following a tumultuous few weeks ???https://t.co/cbkIpsWJXy

— RugbyPass (@RugbyPass) June 3, 2020

Legal challenges and talk of strikes may even follow too but hopefully that isn’t the case because the alternative looks to be certain clubs going bust and us not having a twelve-team top flight in a couple of years’ time, or a 13-team competition if ring-fencing comes to fruition.

Nobody wants players to earn less in an ideal world but their wages have spiralled over the course of the past five years or so and we are where we are in terms of the financial situation. We have to make sure the league and the game is sustainable and players have to play their part.