ICSM Business News: rugby union’s topflight league in danger of collapse as another club is set to enter administration as Credit Crunch 2 hits more teams
By Harry Mottram: Worcester Warriors and now Wasps rugby clubs have (or are about to) enter administration. The Cost Of Living Crisis (Credit Crunch 2) has hit professional rugby union clubs in the Gallagher Premiership hard with two of the most famous clubs withdrawing due to financial hits. The league of 12 clubs is now two clubs down with potentially more to follow making the entire structure potentially unviable with fewer games and less revenue from the fans on match day. Match days pay big money when you throw in corporate and private hospitality, programme sales, bar and burger takings with The Mirror reporting for instance that Leicester Tigers RFC who were due to play both teams will lose around £700,000 as a result of the suspensions.
Ian Carrotte of ICSM said suppliers to all professional rugby clubs need to be careful as the idea a club will always be good for their money is clearly not true. “Once a club goes into administration unsecured creditors can kiss goodbye to their unpaid invoices,” he said, “it’s very rare that they will receive anything from the administrators and if the club is bought out or re-floated there is no reason why the new owners have to pay the old debts.”
The reason why rugby clubs are in trouble is not hard to spot. It’s all about debt and with the hike in inflation and interest rates suddenly those debts are impossible to service. Worcester went into administration owing around £25 million while ICSM understands Wasps are in debt by £100 million pounds. According to the website Ruck, Bath RFC owe £37 million, Newcastle Falcons are in debt to £39 million, Saracens RFC have debts of £40 million, and Bristol Bears owe £51 million. Harlequins have hit out at a report in the Daily Mail last month that they owe the taxman £1.6 million saying that was not true – but they still have debts of more than £33 million pounds – and that’s the problem. If the Bank of England raise interest rates in November as is expected – then servicing these volumes of debts will push more clubs into administration and the league will potentially collapse. Much of the debts are from banks and lenders, but also the taxman, VAT and major suppliers such as food and drink wholesalers. One supplier of meat to Worcester was reported to be chasing £17,000 in invoices ahead of their administration. And to add to the concerns it is widely reported that of the remaining ten clubs in the now endangered league five are up for sale due to financial woes. That’s enough to give suppliers and staff at those clubs the jitters.
Ian Carrotte said: “Don’t take the old excuses about the equivalent of ‘the cheque is in the post.’ With all of these clubs chase and chase again – we have heard anecdotally of suppliers refusing to leave the offices of these clubs until they get paid. The first thing to do is to stop trading with a club if they fail to stick to your credit terms. Stop means stop.”
The Cost Of Living Crisis – or perhaps better described as Credit Crunch 2 – is the main reason behind the problems in rugby union. But there are other issues - international matches such as the Six Nations take away many of the best players for weeks at a time. That has an affect on match attendance for the league games. Wasps moved from London to Coventry – to ground share with the football team – and that alienated many loyal supporters. Plus there are the spiralling wage bills – not as high as football – but players have more injuries and of course the team squads are much larger for the 15 player game. Hospitality has been a vital and growing part of the modern game with hotel and flight packages at premium prices – especially popular for European games – and if there are fewer games as is the case now then there’s less revenue. And finally with a credit squeeze on incomes many fans will stay away.
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ICSM CREDIT
For information on ICSM visit www.icsmcredit.com or call 0844 854 1850.
ICSM, The Exchange, Express Park, Bristol Road, Bridgwater, Somerset TA6 4RR. Tel: 0844 854 1850. www.icsmcredit.com. Ian.carrotte@icsmcredit.com
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For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.
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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk