The Scarlets, Ospreys, Cardiff Blues and Newport Gwent Dragons have united under a landmark legal agreement that will seek to deliver greater long-term sustainability in regional rugby supported by the WRU.
A series of pragmatic new measures have been agreed, with the philosophy behind the agreement firmly anchored in the need to protect and encourage investment in development structures and pathways that is investing in the future of bringing forward Welsh qualified talent across professional rugby in Wales.
A fundamental element of that clear direction is the introduction of a European squad salary cap to regional rugby in Wales for the first time.
Designed to be considerably more straight-forward in its execution than other cap mechanisms already in place, both within rugby and other world sports, the regional cap of £3.5m covers purely the registered European squad of each region from the 2012/13 season and does not include development players or academy costs.
In removing the potential for dramatically increasing salary costs during a time of austerity for both businesses and individuals, the effect of a simple and focused salary cap will be to ensure balanced and sustainable costs across each region’s registered European squads. It will also encourage further emphasis on the evolution of the development pathways that are already beginning to deliver exciting new Welsh talent.
The Welsh Rugby Union has offered its full support and has praised the regions for their forward thinking and proactive initiative as a united group.
The agreement will commence July 2012 – 30 June 2013 and will be reviewed annually with the initiative regulated by the scrutiny committee comprising board level representation from each of the regions, Regional Rugby Wales Chief Executive and an independent chairman. The scrutiny committee will ensure the cap is fully adhered to and accurately reflects the economic climate and the financial requirements of the Regional organisations. All existing player contracts will be honoured in full.
The agreement is the starting point for a united long-term strategic approach by the regions to improve financial sustainability with less reliance on the generosity of benefactors and is viewed as a responsible and positive step forward for Welsh rugby as a whole.
Stuart Gallacher, Chief Executive of Regional Rugby Wales said:
“This is a significant step forward for regional rugby in Wales and the future viability and balance of our four rugby businesses that are so vital to the development and promotion of the game in Wales.
“The regions have come together with a shared sense of responsibility to get their own houses in order and find solutions. This agreement is the start of that journey. They are eager to do all they can to achieve greater self-sufficiency and our governing body the WRU has been wholly supportive of and endorsed the initiative we have taken.
“This is a powerful signal of our determination to achieve our aims amidst some tough economic challenges in Wales now and in the future.
“All four regions are working very hard indeed to manage their businesses more effectively in a very difficult environment for everyone. As part of that, it is essential that every element of the circa £30m annual costs involved with operating four professional rugby businesses in European competition, is examined in detail and managed effectively. The introduction of this agreement and the European squad salary cap illustrates pragmatic and responsible action in tough times.
“Nobody will make light of the challenges ahead but initiatives like this new salary cap must give our rugby supporters renewed confidence in our ability to move with the times, be decisive and make a stand with cohesion and a shared vision and united spirit.”
“The regions have come up with a plan to take things forward and create a level-playing field with salary bands that they all agree are achievable, will maintain the quality and excitement of the regional game in Wales and will encourage greater investment in our local talent.”
The Group Chief Executive of the WRU, Roger Lewis said:
”I applaud the regions for the way they have achieved this agreement with one unified voice.
“The WRU invests £6m in cash every year to the four regions, in addition to its funding of the four regional academies so is delighted to see the approach to build greater sustainability being taken by the regions.
“I know how hard Stuart Gallacher and the executives, chairmen and funding directors representing each individual region have worked to secure this solution.
“It faces up to the reality of the economic climate we all work in and ensures the regions progress within a workable financial and strategic plan.
“This is the right move at the right time for Welsh rugby and everyone will benefit from this new arrangement.
“A priority for the WRU, together with the four regions, within the elite game is to nurture and develop talented Welsh qualified players capable of challenging for senior Wales caps.
“Our regions do a great job in supporting the investment and development of new Welsh talent with the opportunities and environments they provide to our young players. It is vitally important for our regions to thrive so that Welsh rugby can sustain and flourish as the national sport of Wales.
“I applaud the regions for taking this important step and enable us to work together in the best interests of the game.”
Andrew Hore, Chief Operations Officer at the Ospreys said:
“This agreement demonstrates that all four of our rugby regions are driven to invest in local talent and that we recognise collectively our continued responsibility to promote and protect the long-term health and viability of the regions and ultimately the game of rugby in Wales.
“This is a progressive agreement, it’s realistic and reflects where the game is today and the challenges we all face. It sets us on the right path with a determining factor that should be on-field sporting merit, not just off-field financial considerations.”
The regions will also update the operation of payment of players’ agents in line with new HMRC guidelines on the payment of agents’ fees.
- The Regions continue to operate within the terms of a Participation Agreement with the WRU which ensures an agreed level of financial distributions based on set terms and conditions. Those conditions cover operational structures, player welfare, development and recruitment.
- The current agreement with the WRU involves a direct contribution of £6million a year to the four Regions (£1.5m gross per region per annum). The WRU also funds the four regional academies.
- The regions say that with the salary cap in place, squad costs across the four regions will amount to circa £14m per annum, which excludes the costs of development, coaching and conditioning structures or fixed overheads. The WRU financial contribution to the four regions for international player release is an extremely valuable contribution towards this cost base.
- The £3.5m represents ‘total cost to the business’ including employers NI, any ‘benefit in kind’ and elements of the packages plus agents fees.
- Please note the salary cap currently in place for English clubs (£4m to increase to £4.26 next season) includes the cost of development players and academy costs – the equivalent costs in Wales fall outside the new Welsh £3.5m salary cap to create a simple, clear structure.