As the sun set on 2022, so too ended a tumultuous year for professional rugby union in England. The end of Eddie Jones's seven-year tenure as England's head coach might have dominated the headlines, but it has been the financial plight of two of England's most prominent professional clubs that most embodied English rugby's annus horriblis. The problems within the professional game have served as a trigger for the start of sweeping financial and governance reforms. Whilst the details remain embryonic at this point, the blueprint for the future of English professional rugby will be one to watch carefully in the coming year.
Wasps' fall from the upper echelons of European club rugby
On 18 October 2022 the holding company of Wasps, the six-time English and three-time European champions, entered administration with huge debts totalling £95 million. The operating companies of Wasps' stadium, the Coventry Building Society Arena, were also placed into administration, but have since been bought out by Mike Ashley's Fraser Group for £17 million.
Wasps' administrators have reported in their proposals that Wasps' debts are spread far and wide. Trade creditors total over £3.5 million, whilst its former owner had outstanding loans of £16.5 million when it entered administration. Wasps' bondholders, who invested in a retail bond scheme to help the club pay off its debts following the purchase of the CBS Arena in 2014, are owed £35.2 million. The taxpayer has also been hit hard – a Covid Sport Survival Package (SSP) loan of £14.1 million from the Department of Culture, Media and Sport is outstanding, as is a £7 million HMRC debt.
Worcester Warriors – the fall of a community club
Worcester Warriors' became the first Premiership rugby club to go into administration since Richmond in 1999 (beating Wasps to this most unwanted of accolades by just a few weeks).
A longstanding pillar of its community, the club's growth accelerated hugely in the 1990s under the ownership of Cecil Duckworth. It has been a regular participant in Premiership rugby since the early 2000s. However, on 26 September 2022, Worcester's trading entity, WRFC Trading Limited, fell into administration with debts of over £30 million. £16.1 million is owed to the DCMS in respect of the SSP loan, and £2.1 million to HMRC. Other creditors, including suppliers and supporters, are owed in excess of £5.8 million. In addition, the entity that paid the wages of Worcester's staff, WRFC Players Limited, was wound up with debts totalling £6.8 million.
The nature of Wasps and Worcester's debts make for similar reading. However, an additional element of concern within Worcester's downfall has been the purported conduct of its owners and, indeed, the lack of regulatory oversight that allowed them to become owners of one of England's leading rugby clubs in the first place. Colin Goldring and Jason Whittingham's ownership of the club has been shrouded in controversy, and their conduct whilst running the club relentlessly questioned in the media.
Whilst Goldring and Whittingham have repeatedly denied any wrongdoing, the DCMS select committee has been stinging in its criticism of the RFU, accusing it of allowing Goldring, who has been struck off as a solicitor by the SRA, and his co-owner Whittingham to "[drive the club] into the ground". The DCMS Select Committee Report has said that "One of the most striking facets of the problems at Worcester Warriors was the lack of due diligence undertaking regarding its owners, particularly Colin Goldring". Likewise, the club's administrators have stated that they have "undertaken an initial assessment of possible actions in relation to the manner in which the business was conducted prior to the administration of the Company [WRFC Trading Limited] …". These investigations have focussed on intercompany debtor and creditor positions, wrongful trading, and land and property transfers by WRFC Trading Limited prior to entering administration. The administrators are also looking at the owners' use of the club's funds, and whether transactions at an undervalue had been entered into prior to the appointment of administrators.
What next for the clubs?
Wasps and Worcester have been suspended from playing and relegated from the English Premiership. Both clubs appealed their relegation on the basis that, due to the COVID-19 pandemic, they were "No-fault Insolvency Events". However, these appeals have been rejected because "there were factors beyond Covid that resulted in the clubs entering insolvency".
In respect of Wasps, the RFU took the view that there was "insufficient evidence" that there was no fault on the part of the club or its directors. Whilst COVID-19 had an impact on Wasps' finances, even without those impacts the club "could not transform what was a loss-making and debt funded business (specifically via the retail bond issued in April 2015) into a sustainable and self-serving operation".
It was acknowledged that Worcester had been significantly impacted by COVID-19. However, the RFU concluded that the club had a business model "perpetually funded by debt, with no apparent attempt (except anecdotally in the last few months) to execute the wider business plan and develop the land around Sixways [the club's ground] which would have ultimately improved the chances of creating a self-sustaining model". It also stated that "the directors of the club had allowed the club to be in such a precarious position that a shock such as Covid, the challenging debt markets or another external event would have created a real and increased likelihood of an insolvency event happening."
Both clubs are now in the process of having their business and assets purchased by respective consortiums, albeit with varying levels of progress and success.
Atlas Worcester Warriors Rugby Club Limited, headed by Worcester Warriors' former CEO Jim O'Toole, were named as the preferred bidder to purchase the business and assets of WRFC Trading Limited. However, the bid has been rejected by the RFU, and Worcester's future remains uncertain. Atlas has since submitted an improved offer but, as things stand, the club will not participate in English rugby's second tier, the Championship, next season.
There is better news in respect of Wasps. A takeover offer from a consortium led by "former Wasps legends" has been accepted by the administrators and, subject to meeting multiple RFU conditions, the club looks set to participate in the Championship next season.
Reform on the horizon for English rugby
Irrespective of whether Wasps and Worcester are reborn and play rugby again, the saga will have far-reaching implications for the professional game in England. The DCMS Select Committee has said that "The financial situation of Premiership rugby clubs is clearly unsustainable", and that the demise of Wasps and Worcester "is not indicative of a healthy professional setup". Identifying the 2023/24 season as being a "transitionary year", Premiership Rugby has outlined four priority areas that it intends to tackle ahead of a de facto "relaunch" in 2024/25.
Of particular interest is the proposed establishment of an independent financial monitoring panel to oversee club finances and wider governance reforms. Whilst currently light on detail, such a move is understandable given the plight of Worcester and Wasps.
Although so far only Worcester and Wasps have suffered the most brutal of fates, the remaining 12 Premiership Rugby clubs also harbour significant debts and losses. Media investigations suggest that clubs have amassed losses of £300 million over the last six seasons. These clubs are, in the words of the current RFU chief executive, "living beyond their means". The appointment of an independent financial monitoring panel is, therefore, seemingly a response to the RFU and Premiership Rugby's call for greater financial transparency and sustainability.
The wider governance reforms also include a reformed owners' and directors' test, and more robust insolvency regulations, in what will no doubt be the biggest reform of English club rugby union since the game was professionalised in 1995.