The Premiership's big dilemma: Keep speculating to accumulate or tighten the salary belt?

It’s not a state secret that there are forces within Premiership Rugby pushing for a lower salary cap in the coming seasons, nor is it a secret that these factions existed prior to the coronavirus outbreak that has wrought havoc on rugby’s finances of late.

When BT Sport came into existence, it invested heavily in becoming the home of English club rugby, something which brought a welcome swelling of the coffers to Premiership sides up and down the country. It was the fuel the Premiership fire needed in its efforts to keep pace with the ever-increasing money on offer in France’s Top 14.

As a result, an additional marquee player allowance was introduced in 2015, while the overall salary cap in the competition has risen to its current mark of £7million. While the overall cap increase has helped clubs retain homegrown talent, it has also driven wage expectation among players, something which the additional marquee player slot – allowed solely to be used on players being signed from abroad – has also significantly contributed to.

Chart-topping book author Ben Mercer guests on the latest episode of The Lockdown, the RugbyPass pandemic interview series

Chart-topping book author Ben Mercer guests on the latest episode of The Lockdown, the RugbyPass pandemic interview series

There is no denying that players are the key commodity in rugby, as without them there are no games for the fans to attend or sports networks to subscribe to and watch. But the increase in wages has come at a speed which has not allowed revenues to catch up and keep the game breaking even, at the very least. In the rare instances that it does, such as Exeter Chiefs, it is driven heavily by non-rugby incomes such as conferencing, hotels, events etc.

Whether the initial reasoning behind these increases to the cap was to keep homegrown players at home, to compete with the riches on offer in France in terms of making sure the Premiership is the pre-eminent domestic competition in rugby (or a combination of both), it was a battle English rugby was always going to struggle to win. In an arms race with the Top 14, the French competition has the Premiership’s number in terms of both lucrative broadcast deals and frequency of rich benefactors capable of underwriting clubs.

The situation has certainly been exacerbated by the coronavirus outbreak and were it not for the government’s furlough scheme, there is a good chance that multiple clubs could be teetering on the brink of administration. Clubs can certainly be forgiven for not expecting a global pandemic, but it highlights just how quickly they can get into trouble given their considerable outgoings when revenue dries up for an extended period of time.

There have been multiple reports surfacing in recent weeks that the salary cap could be reduced in forthcoming seasons, with some sources suggesting it could drop all the way to the £5m mark for the 2021/22 season after tentative suggestions it could be dropped for next season were rejected. There have also been reports stating that the two marquee player slots will also be removed.

Staggering outlayhttps://t.co/n3DYKWgMrN

— RugbyPass (@RugbyPass) May 14, 2020

If – and it’s a big if at this point – both of those changes were to happen for the 2021/22 season, it could see expenditure on player salaries drop by over £3m at certain clubs in the space of a season. While a fall of £2m in the salary cap alone might be too drastic a move, even a reduction in the cap from £7m to £6m, particularly if done in conjunction with the removal of the marquee player allocations, would also cut costs significantly.

The genie can never be fully put back in the bottle, however, and this is not going to immediately lower wage expectations. If you tell a 27-year-old in his prime that he has been worth £500k over the last two years but moving forward he will only be worth £350k, there is a good chance they are going to pack their bags and head to France or Japan.

If certain forces among the Premiership clubs are capable of forcing this through, and that is far from guaranteed given multiple clubs are happy with the status quo, the player recruitment market will become particularly interesting. Premiership clubs will be faced with a dilemma: if they want to maintain their current squad sizes, they will have to allow some high earners to leave. They could mitigate this by further squeezing the middle out of squads, but even with those players moved on and replacements brought in at the league minimum, there would still not be enough space to keep all of those premium players.

Alternatively, clubs could move to smaller squads. Again, this would squeeze the middle out, especially if they want to keep those high-end players. In this scenario, it would seem to be the death of the Premiership Shield, where teams are already having to rely on guest players. Between European competition, the league, the Premiership Cup and international call-ups, there simply wouldn’t be enough players to keep up with the commitments of the Shield competition on top of all that.

Either way, should those driving to lower the cap and/or remove marquee players succeed, a substantial amount of professional players are going to hit the market without an increase in professional clubs globally who are able to offer them a temporary or long-term home.

From a recruitment perspective, it is a salivating prospect. From a human perspective, it would be brutal. If high-profile England players end up departing, will the RFU relax their home-based selection policy? Will Premiership clubs on reduced player budgets be able to compete with the French clubs and Irish provinces in European competition? With the budgets cut in the Greene King IPA Championship, how many players can be provided with safety nets in the second tier of English rugby? There is no shortage of questions.

“The abundance of players cut within one or two years of signing their first professional contracts across the league is a damning indictment of the structure in general”
– @alexshawsport runs the rule over @premrugby academy structure ??? https://t.co/CxnX2aKqPP

— RugbyPass (@RugbyPass) May 6, 2020

There are, of course, clubs who have felt the pinch less than others over the last few months and they will not be keen to reduce the cap or remove those marquee allocations having spent recent seasons building squads they are happy with that take up that full £7m cap and two additional eligible players. They will not be keen to so quickly disassemble them.

If they were to be successful in blocking any changes to the salary cap, there is a pressure on CVC to deliver on the commercial potential they promised when they invested in the competition last year. Therein lie further fascinating debates such as whether or not changes are made to English club rugby to make it more appealing to new fans or how hard-ball PRL will play when it comes to negotiating the new heads of agreement with the RFU in 2024?

It’s an uncertain time and although opportunity exists for those that look hard enough for it, it seems it is a time of tightening the belt for English rugby and there will be inevitable human costs to that in the coming years. Hindsight is 20/20. Engaging in an arms race with the Top 14 was never going to end well but equally, there were significant challenges facing the Premiership at the time, such as players departing for France. The BT Sport money was burning a hole in the pocket.

The pros and cons of the decisions to increase the cap and add an additional marquee player can be debated, but the final decision was understandable if not necessarily the right one. Given not every club is lucky enough to be owned by a Stephen Lansdown, Bruce Craig or Nigel Wray, steps now need to be taken to make the sport more sustainable in general in the competition and reverse some of the collateral damage that has occurred since those initial decisions were made.

How that is ultimately accomplished over the next few years could be the most fascinating question of all.