THE SCOTSMAN REPORTS



Published Date: 26 February 2009
By Stuart Bathgate
THE Scottish Rugby Union is well placed to withstand the worst effects of the economic downturn, according to Gordon McKie, its chief executive. But he warned that even when conditions pick up he cannot foresee circumstances in which the union re-establishes a third professional team to compete alongside Edinburgh and Glasgow.
"Our finances are now pretty robust," McKie said. "The debt is down and we have good financial procedures in place, so we're in a position to deal with the current economic climate."

The SRU's last reported debt was £17.6million, but it has since
been reduced considerably. McKie said that at present it was around £13million, but added the position changed from week to week, so that, while the overall direction is downwards, there will be short-term fluctuations.

He went on to explain that under present conditions the debt would not be cleared entirely unless the union took one of two options. Neither is on the cards at present, and according to McKie neither is preferable to maintaining a manageable debt which allows the union the financial resources to help the sport grow. "There will come a time where the debt will plateau. I wouldn't like to say exactly where, but it will never go away unless we either sell land or have a debenture issue. And we don't intend to do either."

It is partly as a consequence of that analysis, but also as a result of other factors, that the SRU will not try to turn the clock back and breathe new life into a Borders pro team. Since rugby union finally said goodbye to strict amateurism following the 1995 Rugby World Cup, the SRU has had four pro teams, then two, then back to three, and now just two again.

Supporters outwith the Central Belt may see that as less than ideal, but for McKie it is simply a fact of economic life, and will remain such for as long as present conditions are in place. "The two pro teams are essential ingredients of the national team," he added. "They are very much in our plans for the future. Speaking personally, I don't see a third pro team being realistic ever again. I don't see the population, the stadia or the demand that would support a third pro team."

What McKie does see is a current situation in which several kinds of income are under threat. "We're most troubled by a possible fall in attendance revenues. There is a linkage to the team – we know that – but also to the state of the economy.

"Secondly, hospitality revenues have been significantly reduced. Advertising revenues have also been a wee bit slow, particularly the sale of matchday advertising within the stadium.

"We are working on the preservation of existing sponsors and the identification and recruitment of new ones. Most of our significant sponsorship is in place for the medium term, 2010 to 2013." The most high-profile sponsorship agreement is the one which sees the name Murray appear on the Scotland team's jerseys. Sir David Murray, owner of the group of companies which bear his name, made the three-year deal, worth £2.7million, in late 2007, so that is secure for some time to come. That deal, however, is just one which highlights how much wealthier rugby is in England, where the RFU's jersey deal with O2 is worth £4million a year.

McKie's overall impression of rugby union worldwide is of a recently professionalised sport which may experience short-term difficulties, but which will continue to grow. "Professional rugby is a young industry. Football is much better insulated in terms of broadcasting, but rugby is growing.

"The whole sport faces difficult challenges. Overall, though, there is still a healthy demand for the top professional players in Europe, as we have seen with the recent exodus from Wasps.

"We are fully aware of the difficult environment we're in at the moment. It's difficult, there's no question of that, but we're confident we can come through this bad weather."

After putting their faith in a free-market model for over a decade, the top clubs in England have agreed to a salary cap for their playing squads, to be set at £4million for the next two seasons. Already, however, there have been fears that will do no more than drive leading players out of the country – principally to France – and as a result, crowds, and hence, income will fall.

The RFU has appointed a troubleshooter, Malcolm Duncan, to offer advice to any clubs who seek it. "The biggest danger is that these clubs won't realise that they are running into problems until it's too late," he says. "So the message is they should carefully review finances and expenditure and take action as soon as possible."

IN NUMBERS

£1 million

The net surplus made by the first Rugby World Cup back in 1987. The sport has grown steadily since then, and went professional after the third World Cup. The surplus has grown as follows: 1987 £1.0m. 1991: £4.1m. 1995: £17.6m. 1999: £47.0m. 2003: £64.3m. 2007: £122.4m.

£2.7m

The amount the Scottish Rugby Union will receive from a three-year deal for the Murray group to be the national team's jersey sponsor. The deal, which came into force just after the last Rugby World Cup, will expire in November 2010.

£16m

Worth of the Rugby Football Union's four-year sponsorship deal with O2. The agreement, which has the telecom company's logo on the England team's shirts, will expire in August 2012.

£20m

Value of new four-year agreement with title sponsors of the RBS Six Nations Championship.

£54m

Worth of the new broadcasting agreement between the RFU and TV companies Sky and Setanta to screen the Guinness Premiership. The deal is worth three years and is an increase of 45 per cent on the previous agreement. It starts with the 2010-11 season.

£0

The SRU has no deal in place to screen the domestic club game. It does, however, share receipts with Ireland and Wales for the Magners League TV rights.

£160m

Cost to the BBC of its agreement to screen the Six Nations from next year until 2013 inclusive. The price has steadily increased since the first TV deal for the newly-created Six Nations back in 200, when the company paid £36m for three years (that excluded England's home games). In 2003-05 the sum rose to £70m. The current deal, which has run from 2006, is worth around £100m.



Barnes issues stark warning over future of Scottish club game in current economic climate



Published Date: 26 February 2009
By David Ferguson
IT WAS perhaps only a matter of time before Ian Barnes, a chartered accountant, moved into the inner sanctums of Murrayfield where accountants appear to have spread like wildfire in recent times.
But the former Hawick and Scotland lock forward has a deeper awareness of the financial running of rugby clubs than any at Murrayfield. Last year he took up the charge of representing Division One clubs in the new governance structure, utilising his decades with the country's most successful club, Hawick, and its oldest, Edinburgh Accies.

He is fearful that the current global financial pressures will merely hasten the demise of the club game. "It is serious and I have huge worries about the future of club rugby in Scotland," he said. "It can't continue the way it's going right now.

"I remember bringing in a bonus scheme when I was at Hawick which paid the players £20 one week, £30 the next, £40 the next and so on if they kept winning, and they did, so the boys got a good share of that pot, but I'd worked it out against the prize money available so that the club would benefit. We won £25,000 for winning the league and cup in 2001-02.

"But I can't do that now because there is no prize money. The SRU don't dish that out any more, and are struggling to get genuine sponsorship money.

"What they have got from Scottish Hydro Electric is handed out in different ways, but the reality is that of the £2,100 each Division One club receives £1,200 goes to referees, we give an advert in the programme to the sponsor which is worth £500 and we are always drawn away in our first cup tie, which results in expense of £400 upwards. So that sponsorship money is gone, and there is no more at the end of the season for winning cups or leagues anymore.

"We have been looking at getting a sponsor for Premier One and have been approached by one, but I don't think that's on the table anymore and the reality there is that the Division One club championship doesn't attract a lot of sponsorship nowadays.

"On top of that we used to receive accreditation money to help with player development, but that is now kept in house by the SRU yet we still have the player development costs.

"We don't pay players, but it still costs around £125,000 to run the rugby side at Accies plus another £50,000 to cover development costs with our linked youth set-up – the successful BATS. We get £10,000 for that from the Scottish Rugby Union, so we need to find £40,000.

"We have one development officer and three SVQs and we have to think about whether we can continue to do that next season."

He continued: "We are the biggest club in Scotland and we pay junior club coaches to maintain the teams, but because we don't have facilities we also spend £15,000 a year on gym memberships and we have a couple of flats to look after for boys who come here. These are the things you need to be a reasonable club in Scotland now, but it really is impossible financially just to stand still now. In the past with crowds of 2-3,000 people paying to get in, but now gate money is a pittance.

"Many rugby clubs have also relied on individuals in the past, past players, committee members, supporters whose businesses are doing OK, but even if they're still willing they may not have the resources themselves anymore. And the first thing to go in club terms when we make cuts is player development, which means teams go, clubs struggle and some close, and, for me, that is very worrying for the future of Scottish rugby.

"Many clubs will remain, but either with 1st XVs stacked with Polynesians brought in from abroad to fill the widening gaps of talent or like village cricket teams. And the worry for everyone then is where do you get the professionals and internationalists from?"

This article was originally posted on 26-Feb-2009, 11:45 by Hugh Barrow.
Last updated by Hugh Barrow on 26-Feb-2009, 11:48.