Players in the firing line as cash runs out

Wage cuts and sackings on the way as recession bites

The Rugby Football Union's revamped bid to host the 2007 World Cup was unveiled this week to the sound of anguished squeals from England's cash-strapped clubs. But though the RFU are a favourite target for Malcolm Pearce, the soon-to-be-departing chairman of Bristol, the truth is that the owners and investors of the Zurich Premiership have created a monster they are unable – never mind unwilling – to keep feeding.

The latest blast from Pearce's equally voluble counterpart at Saracens, Nigel Wray, is typical. "It can't go on like this, it is time for action," Wray said on Thursday in proposing pay cuts of up to 10 per cent for his players. "We are affected by the same economic realities as every other business. Premier Rugby are going to lose about £8m, but I don't think the RFU care about the clubs."

It is the familiar anti-RFU mantra of some within Premier Rugby, the umbrella organisation of the 12 Zurich Premiership clubs: "They don't like us, they don't care." Never mind that those same clubs went into partnership with the governing body when signing up to the joint venture, England Rugby Ltd, in July 2001.

With the cost of running a club running way beyond the revenue being generated, the benefactors want the RFU's help. Pearce and company see crowds of 75,000 at Twickenham to watch a vibrantly successful England team, and argue that the clubs are due more of the proceeds.

The RFU insist they are meeting their contractual obligations, and that they are hurting just as much from the general economic downturn. It is Premier Rugby's forecast of £1.8m per club in central funding which is proving unsustainable. Pearce last week alleged on BBC's Rugby Special that Bristol's funding for this season was short by £350,000. Prompted by John Inverdale, Pearce added "from the RFU", when he should have said Premier Rugby.

"People assume that central funds and RFU funds are the same thing," says Nick Eastwood, finance director of the RFU and England Rugby Ltd. "RFU funds go into Premier Rugby, to be pooled with their other sources of income."

Confirmation of the clubs' shortfall came from London Wasps' chief executive, Alistair McLean, who told the Independent on Sunday: "The forecast from Premier Rugby is for central funding of between £120,000 and £150,000 a month from July 2002 to June 2003. We were short by about £60,000 in December, though we have been told it will be put right in the summer, or as soon as possible."

The most rudimentary research invariably returns to the bottom line that club wages are too high. A recent study by Deloitte & Touche put the average salary of a Premiership player at £51,000. A squad of around 35 players tots up to a wage bill of £1.78m. That can safely be doubled to account for coaches, physiotherapists, sales and administration staff, and other overheads. Add on, for a club like Bristol, the cost of renting their first-team pitch and training facilities, and annual outlay zooms past £4m.

"Clubs are looking at potentially reducing the size of their squads," said McLean. "We are not minded to tear up contracts but we have to look at whether people have moved ahead of the market rate. Of the contracts coming up for renewal, some will be renewed, some will not." Or, as one international put it: "If your club goes bust, you might have a three-year contract, but would you see the money?"

When Eastwood says, "The RFU are delivering exactly what was agreed in the [England Rugby] contract", he is referring to two undertakings made in July 2001, when the RFU's priority was to secure the release of England players. There was a loan of £4m paid to Premier Rugby (roughly £330,000 per club), half of which, with interest of six per cent, is up for repayment this autumn, with the balance by 2005. Another bill for the hard-up clubs to meet.

The RFU also guaranteed to pay Premier Rugby £1.6m in season 2001-2, then £4m per annum for seven years, with an additional £1m in the 2003 and 2007 World Cup years. Even assuming this all goes directly to the clubs, it amounts to no more than £330,000 per club, per season.

Rugby's shining lights, Leicester and Northampton, turn a small profit by combining a good supporter base with owning their grounds. Pearce and several other benefactors reckon they are subsidising club rugby by £1m a season.

At the launch of England Rugby Ltd, the RFU's chief executive Francis Baron said: "The key thing is how much revenue upside we can generate by working together." The answer has been a resounding "not enough".

The clubs get television money from a domestic contract with BBC and Sky, plus a share of the Heineken Cup deal. The Premiership collectively has a group of sponsors but, according to one club's commercial manager, some of these deals are "very disappointing". The heavy hitters have gone for the wider appeal of the Heineken Cup and the Six Nations.

Bristol had their best crowd of the season for the visit of Leinster last Sunday, but had to cover up 27 advertising boards for their main sponsor, Mitsubishi, because it was a European tie, and therefore involved Peugeot.

There are blows raining down on all sides. Harlequins claim the RFU owe them £68,000 in back wages for Dan Luger's absence since getting injured on England Sevens duty. The Union reply that insurance claims take time. But time, like money, is something the clubs have too little of.

Anthony Arlidge QC is investigating, at the RFU's expense, allegations that Premier clubs conspired to pay Rotherham to turn down promotion last season. Rotherham go to London Irish in the cup today seeking to prove their credentials on the pitch.

Meanwhile, the Office of Fair Trading are investigating a complaint by the National League One clubs that the criteria set for promotion are anti-competitive. Perhaps the pithiest of Pearce's comments was: "Why anyone would want to go up, I don't know."