Rugby must tackle the credit crunch

As the Premiership's money men prepare to wield the axe on the salary cap, one club's story should serve as a lesson of what can go wrong when the bubble bursts

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It's impossible to pick up a newspaper or switch on the television these days without being greeted with news of the impending recession or details on the global financial crisis affecting the money markets in London and New York.

Yet it is against such a gloomy financial backdrop that the Guinness Premiership teams are contemplating abandoning the salary cap - a move that some warn could lead rugby union down the same path as football with the richer clubs spending freely and thus widening the gap between the haves and have-nots.

According to Northampton Saints chief executive Allan Robson it is "inevitable" that the salary cap will disappear as bigger clubs in the UK look to break free of their financial shackles in a bid to keep pace with the big budgets enjoyed by French clubs.

Saracens chairman Nigel Wray tends to agree: "Whether we like it or not, rugby will go the same way as soccer," he said. "That means, very simply, you will need substantial resources to play at the top table and if you're not at the top table, you're probably nowhere."

But before the big spenders start waving their cheque books at the likes of Bryan Habana and Schalk Burger, they should take the time to consider the fate of Richmond Football Club.

Formed in 1861, Richmond are one of the oldest clubs in the world. They are steeped in history and tradition but discovered that those attributes count for very little in the financially driven world of professional rugby.

In October 1995, Richmond were playing in division three and drawing crowds of around 600. Richmond Athletic Ground was hardly a field of dreams, yet it was enough to tempt financial markets trader and Monaco tax exile Ashley Levett to buy the historic club.

And then Levett began to splash the cash, making Richmond one of the first truly professional clubs in the land. He made a bold move from the outset, signing England international Ben Clarke from Bath and making him his captain. Clarke was considered the magnet to draw other big names to west London.

Internationals such as Brian Moore, Scott Quinnell, Allan Bateman and Barry Williams followed Clarke to Richmond and the wage bill grew considerably.

Levett was spending £2.5 million per season in player wages alone and while that was good enough to reach the Premiership and finish fifth in 1997-98 and ninth in 1998-99, it meant the club was still losing between £1.5 million and £2 million per year, even taking into account sponsorship and central funding money from the RFU.

"There was no salary cap then and people were overspending," Richmond finance director Peter Moore admits. "We dropped at least £6-7 million in three years."

While the financial writing was on the wall for Richmond, it was not just pounds and pence that saw them slide down the rugby ladder. According to Moore, politics also played a key role as the Premiership was overloaded with 14 teams due to a Heineken Cup dispute in September 1998.

Faced with not playing in the European competition, Premier Rugby added two clubs to its line-up for the 1998-99 campaign. When the Heineken Cup issue was quickly resolved, they wanted to remove two clubs for the 1999-2000 season. They offered £500,000 to any club willing to take voluntary relegation,

£500,000 each to two clubs willing to merge and £1.5 million to three clubs willing to join forces.

With a forecast loss of at least £1 million for the 1999-2000 season, Levett decided enough was enough and said he would not commit to covering Richmond's financial shortfall. The club was placed into administration in March, 1999.

"I believe that was absolutely the correct and legal thing to do," Moore insists. "But I am sure, with the benefit of hindsight, that we shot ourselves in the foot. I know many other clubs who should have done that but have worked their way through the difficulties one way or another.

"You have to remember the Premiership clubs were still looking to get two teams out of the league. Premier Rugby took legal advice and said they would cancel our shares in the Premiership because we had gone into administration. As a result, there was no way we could play in the Premiership the next year even if we had £30 million in the bank.

"No potential new investor could get assurances from Premier Rugby that we would be allowed to continue in the Premiership. Premier Rugby frustrated our attempts to refinance and as a consequence, and with the RFU sitting on their hands not knowing what to do, politics played the bigger part in our removal. As soon as the administrator knew there was not going to be a new investor coming in he had to start sacking the players."

While Richmond were floundering, London Irish took full advantage, as Moore explains: "London Irish did a smart thing and bought our shares in Premier Rugby for £150,000. And they did the same thing with London Scottish. What they did was refinance London Irish because Premier Rugby then paid them £1.5 million on the basis there was a merger between London Irish, Richmond and London Scottish. The RFU's view was that there was a merger of three clubs but not a player, not an asset, not a single thing moved to Irish other than Richmond's shares in Premier Rugby."

After playing a season of friendlies with youngsters such as Andrew Sheridan, Richmond then suffered the ignominy of being re-introduced to league action nine levels lower than the Premiership in Herts/Middlesex One. "It was the best we could do," recalls Moore. "We felt being founder members of the RFU stood for something but we have very bitter memories of those events."

While others might have given up having suffered such a catastrophic fall, Moore, chairman David Corben, director Tony Hallett and several other life-long Richmond men fought to regain control of the club, invested considerable amounts of their own time and money and began taking steps back towards respectability.

"It was a hell of a road back," Moore laughs. "It was a huge challenge and we put our own money into the club. There were different motivations for different people - it was the history of the club, all of us involved felt we had been absolutely shafted in terms of where we were placed, we wanted to prove that we wouldn't be swept under the carpet by the RFU and we weren't dead - there was something worth fighting for."

Richmond reeled off 86 league wins in a row, moving from level nine to level five and they continued to thrive as an amateur organisation with healthy mini and women's sections. They are now proudly playing in National Three South and are comfortable with their standing in the sport.

"I don't believe it's possible for us to make it all the way back to the top," Moore admits. "There is a huge gulf between Level 1 and Level 3. We recognise we're not going to be able to provide a full-time professional opportunity but our short term ambition is to go one stage higher and take stock. We'll see where rugby is, what we're capable of financially and commercially but we won't put the club at risk again. We have learned the lessons of the past."

While Richmond are taking a sensible financial approach on their comeback trail, will Premiership clubs do the same without the safety net of a salary cap?

"I haven't seen any evidence to suggest there are more than three or four Premiership clubs making a profit and until that is the case I don't see why you would want to remove the salary cap," Moore says. "The salary cap was introduced as a common sense measure to make sure clubs didn't go out of business and also it helped to keep the quality of competition so you don't have four breakaway teams like you have in football.

"When you hear people talk about Premiership rugby they feel it is a very open competition and you don't want to widen the gap between the clubs within that league."

This story was sourced from International Rugby News