By Paul Jones
The Welsh Rugby Union have been told they need to settle their pay cut dispute with their players before they can get their hands on a £20 million loan.
The WRU is in talks with a financial institution for a cash flow injection in order to help pay the bills during the current rugby shutdown caused by the coronavirus pandemic.
Chairman Gareth Davies has said the Union hoped to secure the loan before the end of July, in order to offset potential losses of £50m.
But the Union have been told they can only secure the loan by getting their players to give up any claim to future earnings, which is at the crux of their stalemate in negotiations over pay cuts.
If the players do not agree a new deal with 25 per cent reductions in pay – and reserve their rights to claim for lost earnings further down the line – then the cash advance will remain at the bank.
Wales’ best players are also set to see their Test fees for playing international rugby reduced.
David Lewis, sports lawyer from Capital Law – and the man who negotiated Sam Warburton’s deal to become Welsh rugby’s first ever centrally contracted player – says: “One of the things which was widely publicised in the English Premiership was the advice to players to make statements along the lines of, ‘I’ll continue to play for you, but I don’t agree with this – I reserve my position.’
“The reason they did that is to give them the option to stand and sue – to play for their club and also to claim back the difference between their full pay and 75 per cent pay in the future.
“The problem you have in Wales is the money isn’t there and Covid-19 – like everywhere else – has had a ripple effect.
“If all the players say, ‘We’re not doing this’ it could have a devastating impact on the game.”
The WRU needs consensus in order to successfully apply for the £20m loan but, ironically, that sum would be used in part to pay the 75 per cent of player salaries moving forward.
The latest deadline for an agreement between the players and their employers passed last Friday.
The demands attached to any loan give the players some extra bargaining strength, but it is a stick they may end up using to beat themselves.
The players have agreed to extend the current temporary 25 per cent pay cuts and make them permanent, but the sticking point is how they could reclaim their lost revenue in the future.
In England, many players have agreed new deals on reduced terms, but the loss of salary has been compensated for by clubs extending the lengths of those contracts by a year or more.
The current offer on the table to Wales’ players from Welsh rugby’s Professional Rugby Board is for them to be able to reclaim half of the 25 per cent further down the line.
Encouraging that despite Covid-19, M&A activity for H1 2020 in Wales saw transaction values reach £434m – the highest figure recorded for the first half of any year since 2017. We’re pleased to have advised on 5 public Wales-based deals over this period: https://t.co/J2II9vFbnk pic.twitter.com/W2ufyN9XPQ
— Capital Law (@capitallawltd) July 24, 2020
But the players won’t be able to claw back that money if they move clubs, are offered a new contract in the next three years, or leave Wales altogether.
It is understood the players are not happy with those terms.
“Wales is a bit behind England in terms of these discussions and it’s been interesting to look over the border and see how what’s happened there could impact Welsh rugby,” says Lewis.
“It’s not beyond the realms of possibility to get a strike. If you can’t reach an agreement it would be an option.”
The Principality Stadium is currently being used as a field hospital to ease the burden on health services and the UK government last week outlined a £3bn package that would see the seven so-called ‘Nightingale hospitals’ remain in this role for the rest of the year.
Davies has said that the WRU remains in discussions with the NHS about how long this arrangement might remain in place, and the WRU is reportedly in talks with three venues in London – Twickenham, the Tottenham Hotspur Stadium and the London Olympic Stadium – to host autumn internationals later this year, should the Principality not be an option by that time.
The WRU is not alone in feeling the financial effects of Covid. The RFU has outlined plans to cut up to a quarter of its workforce in England due to the pandemic, and its chief executive Bill Sweeney has said that it could take up to five years for the body to recover from the financial impact.
Even if the autumn internationals go ahead, Sweeney has said that the RFU expects a revenue hit of £85m if fans are not allowed into the venues.
The long-mooted investment of private equity firm CVC Capital Partners into the Six Nations is one potential source of fresh funding for the WRU, but CVC have made clear their reservations due to the pandemic, seeking to insert a “Covid-19 clause” into its contract which would allow it to withhold funding if next year’s event is unable to go ahead or is otherwise disrupted.
CVC has been in talks over acquiring a 14-per-cent stake in the Six Nations for £300m but the move has been delayed because of the global crisis .