They say that money can’t buy you happiness but try telling that to the Aviva Premiership clubs who are hoping the chance to spend big will bring them unprecedented joy.
English rugby’s leading clubs have been granted the ability splash the cash with the news that from next season the base salary cap will rise to £5.1m a year with an additional £400,000 available in home-grown player ‘credits’.
This is a significant increase on the £4.76m salary cap and £240,000 of ‘credits’ available to the clubs this season and the new figure is also more than double what it was just five seasons ago.
Equally significant is the decision to allow a second ‘marquee signing’ each season whose earnings will not count towards the wage cap. This follows the ground-breaking move ahead of the 2012-13 season to allow the salary of one designated player to be omitted from the wage bill.
The salary cap has been the subject of intense debate since it was introduced in 1999 with the aim of ensuring ‘the financial viability of all clubs’, controlling ’ inflationary pressures on clubs’ costs’, providing ‘a level playing field’ and ensuring ‘a competitive Premiership competition.’
More recently, it has become an important weapon in the battle to retain the services of the country’s leading players and protect the next generation of stars from the riches on offer in France’s Top 14, that operates a salary cap of €10million (£7.85million) – and Japan’s Top League.
Premiership Rugby deserve particular praise for their ongoing attempts to nurture English talent with their ‘credits’ based system that rewards clubs for contracted players who have graduated from their academy and been with them for more than two years. The success of this policy is evident in the fact that last season 70% of those players involved in Premiership matchday squads were qualified to play for England.
Critics suggest that the addition of the option of a second marquee signing threatens to undo much of that good work with fears high-profile overseas signings will require a huge financial commitment, will just be chasing a pay day and will limit opportunities for home-grown players. But it must be said the right high-profile recruit could work wonders for both club and league.
It is worth remembering that the ‘marquee’ signing could also be an England-qualified player returning from overseas with the criteria stipulating they ‘must be new to the Premiership in the 2015-16 season and/or have not played in the competition for at least 12 months’. The budget flexibility offered by the second ‘marquee’ signing may also free up resource to secure the long-term future of those England players who are sure to be targets for deep-pocketed overseas clubs post-World Cup.
Premiership Rugby insist the salary cap extension is being fuelled by an increase in ‘central revenues’ – including the windfall generated by the latest TV rights deal with BT Sport and the income from title sponsors Aviva – but that does not necessarily mean that the clubs will utilise their new allowance.
Profits remain hard to come by for the majority of the Premiership clubs and those that are commercially successful are only registering modest returns. For example, Leicester Tigers, the most successful English club in the modern era and the best supported with just under 15,000 season ticket holders, announced an operating profit of £482,000 for year ending June 2014
Northampton also benefit from a large fan base that witnessed both Premiership and Amlin Challenge Cup glory last season and that success was reflected off the pitch to a certain extent with the Saints recently reported a similar return to their East Midlands rivals – and their 14th straight year of profitability.
But the financial picture is not so rosy elsewhere. The Rugby Paper reported earlier this year that Saracens posted a pre-tax loss of £5.9million for the 2012-13 season while Bath lost £3.8million.
The likes of Harlequins, Wasps and relegated Worcester took similar hits to their accounts – not for the first time – and that level of loss is not healthy and not sustainable without the aid of deep-pocketed benefactors.
While some clubs constantly strive for profitability, wary of the need to repeatedly earn the loyalty of supporters and commercial partners in what is a crowded UK sports market, others appear prepared to gamble with their balance sheet and play what Saracens chairman Nigel Wray calls ‘the long game’.
Will those who have already shown a willingness to spend, push the chips provided by an increased salary cap into the middle of the table? Cautious clubs will be painfully aware of the limited returns offered by relatively small stadiums that remain a battle to repeatedly sell out, but could it prompt a bolder approach in terms of recruitment – even if it is just to keep pace with their rivals?
The real fear is that it could just magnify the contrast in the way these sides approach the business of rugby and leave us with a two-tier Premiership and a sporting contest like the Premier League where only a handful of sides have realistic title chances.
It remains a difficult balance for the league and the clubs to strike as they plot what they hope will be a bright future for the domestic game that must ensure the ‘financial viability of all clubs’ and a ‘level playing field’.
But they are clearly on the right track. The start of this season has only underlined that the Premiership is in a great place right now offering a level of competition that money alone can’t buy.
Will the new cap keep the big-spending French and Japanese clubs at bay? And will England’s homegrown talent thrive? Or will the new rules see the emergence of a 2-tier league of haves and have-nots?