Premier Rugby consider salary cap reduction
December 16, 2008
Premier Rugby chief Mark McCafferty is hoping to avert a financial crisis in England's top flight © Getty Images
As the rugby world collectively holds its breath in the worsening economic climate, Premier Rugby chief Mark McCafferty has confirmed that a reduction in the salary cap for Premiership clubs could be introduced in January. The main beneficiaries of such a move will be Bristol and Newcastle, with both sides desperately in need of financial backing to see out the economic downturn.
Bristol are currently languishing at the bottom of the Premiership and are operating at a £1m loss, issuing a plea for new investment last month in order to simply "remain competitive". Bristol chief executive Steve Gorvett has predicted that Premiership clubs will haemorrhage between £12m and £20m this season as the country slips further into recession.
The west Country side already functions at £1m below the salary cap, which was increased at the start of the season despite their protestations. Should Bristol fall into administration then they will incur an automatic 15 point deduction, almost certainly condemning them to relegation into National Division One. A frustration for the clubs will be the new TV deal signed by Premier Rugby, Sky and Setanta Sports, worth £54 million and set to work out at £1.5 million per club, which will come into focrce in 2010. The deal shows the popularity and marketable value of the Premiership, a further spur for Bristol and Newcastle in their bids for survival.
The proposed salary cap reduction from £4m to £3.5m will require a 75% majority vote from Premiership clubs, with problems arising considering the financial clout of French clubs on the European stage.
McCafferty insisted that stability in the English game should be paramount rather than attempting to compete with the French clubs, who are not currently bound by a salary cap.
"Twelve months ago it looked a good decision but now the world has changed and we are reviewing the level of the salary cap for 2009-10," said McCafferty. "There may be a chance we bring it down slightly. We would have to make that decision in January and in time for next season. If we don't do it, we will take a range of other cost measures.
"Over the next 18 months we are going to have to work extremely hard on the short-term financial issues and work with the clubs to try and keep their own positions stable. We will take the policy measures to make sure the competition stays competitive and the likes of Bristol and others can afford to run their club.
"If we bring the salary cap down there is a risk we will lose a little bit of an edge in Europe - but we are all focused on the fact the league needs to remain strong. The Premiership brings in 70% of our revenue. We want our clubs doing well in Europe but this is our core product and everything else comes after that.
"Our job is to turn clubs into businesses that are sustainable without the required indulgence of shareholders."
In recent seasons Bristol have been kept afloat by contributions from a benevolent group of supporters, but this position has become untenable in recent months. Bristol and Newcastle, who could potentially free up a sizable sum of money if All Black prop Carl Hayman leaves the club as rumoured, may find opposition to reducing the salary cap from the league's more affluent clubs, keen not to blunt their edge in the Heineken Cup.
The news has brought back into focus the idea of a breakaway European Super League, something that McCafferty quickly dismissed. "We are seeing a mixed picture across the Premiership with some clubs thriving and others not," McCafferty said. "We don't want a situation where some clubs are racing away and others are getting left behind. I think there is massive support in England and France to maintain the national championship.
"The crowing of the national champion is important and will always be important. You see some of the dangers with the Celtic League of coming away from that."
McCafferty also revealed, to the relief of some clubs considering the new proposals, that French Top 14 clubs had begun looking into implementing a salary cap. Recent signings such as the £30,000 a game paid to Dan Carter at Perpignan have been financed by club benefactors in a manner not available to Premiership clubs.
Ligue National de France, the governing body of the French leagues, approached Premier Rugby in recent weeks seeking advice how to introduce a salary cap. "I think they are looking at some of their policies and they must be looking at the same issues. Nobody is insulated from this." said McCafferty.