RFU warns English Premiership clubs that soaring player salaries are no longer sustainable
England’s top clubs have been warned that the soaring inflation in players’ salaries is no longer sustainable, with the Rugby Football Union predicting a significant downturn in funding to the Premiership because of the tough economic climate.
The increase in the salary cap to £7 million at the start of last season, and the ability for the clubs to exclude two ‘marquee’ players from that cap, has seen wages rise sharply in the last two seasons, including Bristol’s £1m-per-year record signing of Charles Piutau.
Salary inflation has also been driven by the increase in funding to the 12 Premiership clubs from the Rugby Football Union, which agreed to pay a fixed four-year payment of £112m as part of an eight-year deal struck in 2016 to secure greater access to the England players.
However, 11 of the 12 Premiership clubs still posted losses last year and suffered combined losses of around £20m.
Now the clubs have been warned by the RFU that the level of the second four-year payment from 2020 could fall as it is dependent on the financial performance of the RFU as part of a model called "rugby revenue share partnership".
The RFU, which increased its own payments to England players per Test match (including image rights and training fees) by around 30 per cent in 2016 from £17,000 to £22,000, is currently in the midst of making at least 62 people redundant as part of a cost-cutting exercise to save up to £3m a year.
The cutbacks have been forced because of the rise of their fixed costs, including player salaries and the deal with the clubs, and the RFU is now warning that the tough financial climate is likely to lead to a fall in future funding to the clubs – making high salary rises for players unsustainable.
“The good thing about the PGA (professional game agreement) which we put in as a safety net was that the income part of it becomes flexible after the first four years to move with our finances,” said RFU chief executive Steve Brown. “So if our income comes down, so does the agreement payment. So it doesn’t cause us a problem forever, it is just within the next two years.
“They (the clubs) are already aware. That has always been the case. I guess from the club point of view they have looked at securing their revenues for four years... they are full informed.”
Brown defended the governing body’s decision to make the England squad the highest-paid players in world rugby but admitted that future salary levels had to become more realistic.
“England can afford the England player salaries, but lots of countries can’t afford to keep their players within the country,” said Brown. “You can argue the French and the English markets have driven that inflation.
“It is not sustainable for those clubs either - our wage caps are really important - I don’t see the same level of inflation, there is not enough money in the system... unless we see something radical commercially.
“Certainly in England, and France as well, that salary inflation has gone beyond the affordability of clubs - some clubs - and some nations as well.
“That is a challenge that we have in the game as a whole. The England piece specifically; it is high but reasonably well contained. There is a reasonable performance element to it as well, they (the players) tend to earn more when they’re performing as well.”