THE TIMES REPORTS
By Lewis Stuart



SCOTTISH RUGBY officials have performed a policy U-turn in an attempt to solve the union’s crippling debt and mounting losses. After months of saying it needs to own the professional teams, the union is now prepared to sell any or all of the sides to save professional rugby as a whole.
Making the announcement, Gordon McKie, the chief executive, issued a warning that unless it wins outside investment and makes big savings, one of the professional sides may have to be axed before the start of next season.



He also announced a raft of cost-cutting measures, including dropping the full-time sevens squad and merging the four age-group sides between 18 and 21 into two, one at under-18 and one at under-20.

There will also be a cut in the budget for the women’s international side and among the office administration. Set against that, there will be £500,000 extra invested in community rugby to get more people playing the game and a similar amount ploughed into the academies where young players are trained.

If nothing had been done, he warned, Scottish Rugby would lose £3 million in the financial year that starts next week, adding to the £23 million overdraft it has already accumulated after making operational losses in nine out of the past 11 years.

The savings will only staunch the losses, allowing the union to break even, and it will still have to find other ways of cutting its debt, possibly including property development on land it owns at Murrayfield.

However, McKie does not believe the decisions will affect the proposal to stage the International Series sevens finale at Melrose. There will continue to be a sevens team, though it will now be a branch of the academies, and with subsidies from the International Rugby Board it will continue to take part in international events. If the Melrose tournament does not lose money for the union it is likely to go ahead.

McKie admitted that the true nature of the financial crisis facing Scottish Rugby had become clear only in the last fortnight. When he took over the top job late last year, he inherited a chaotic accountancy system that made it hard to pin down what money was coming in from all the union’s different activities and where it was being spent. He had expected he could break even without these savage savings and selling the professional teams but has had to reassess everything.

Attention is bound to focus on the fate of the professional teams and in particular the threat that “as a last resort” one may be dropped over the summer. McKie is pinning his hopes on attracting outside investors, but in doing so is treading a well-worn path. In ten years of professional rugby, four different administrations have tried to do the same thing, and not one has found a buyer. What is at stake this time, however, is a controlling interest and the freedom to site the team where the commercial openings are greatest.

The three professional teams lose almost £6 million a year between them, and McKie said he is hoping to find “strategic investors” willing to take a substantial stake in the clubs.

“With a running cost of £2 million each, if they put in £1 million, then that is a 50-50 split before any further investment is contemplated,” he said. “If someone comes in and says I will put in £1.5 million and you only need to put in £500,000, but I want 60 per cent and you get 40 per cent, then that is fine. Equally, if somebody comes in and says I will give you £250,000 but want only 20 per cent, then I don’t think that will work because we cannot afford to be a majority investor.

“We have been overambitious at the elite end of the sport, this is a business after all and we can only do what we can afford to do.”

McKie is not interested in small investors but is looking to offload a substantial part of the costs on to the external partners. The £1 million figure for a half share in one of the clubs that he mentioned would appear to be a minimum.

This article was posted on 29-Apr-2006, 13:21 by Hugh Barrow.