Newcastle could be the next club to go under as a fresh crisis grips English rugby
There are concerns within the Premiership that its bottom club Newcastle Falcons will be unable to confirm it has enough money to last another 18 months.
That is the central crux of the question to be asked by the league’s financial monitoring panel. The panel requires the necessary information by the end of next month, with decisions finalised at the end of this season.
The other nine clubs and the league’s commercial investors CVC Capital Partners have discussed a contingency of bridge financing – either an advance on future earnings, or a simple loan – to keep the Falcons in the division next season.
Why Newcastle are in real danger
Just as the Saudi Arabia-backed Newcastle United are having their week of weeks after winning the Carabao Cup, the city’s rugby union club are struggling to make ends meet.
Falcons’ owner Semore Kurdi said publicly a few weeks ago he does not want to keep making good the losses, which are more than £2m a year. Attendances at Kingston Park aren’t high enough, and costs exceed income.
A&W Capital, a firm who exclusively advised CVC on their winning bid of $750m (£554m) for the Gujarat Titans IPL cricket franchise, are seeking investors for the Falcons, and the Premiership say there are “legitimate buyers interested”.
The Government has a keen interest, as Newcastle and their fellow Premiership clubs already owe £88m for Covid-survival loans from the Department for Digital, Culture, Media and Sport.
Falcons’ head coach Steve Diamond told his squad on Monday that recruitment of new players is on hold. The club have retained 28 senior players, and they need another half-dozen for next season.
Diamond told an online press conference on Tuesday morning: “Finding players is not the problem – making sure we can pay them next year is the problem.
“It’s looking like this [bridging arrangement] might be an option to maintain the club’s position in the league, which is important to CVC.
“They’re a huge stakeholder, holding 27 per cent of the [commercial business of the] league.”
Falcons bought a team to win the Premiership in 1998, were relegated in 2012, and spent comparatively lavishly to finish fourth in 2018, but Kurdi cut the budget the following season and they were relegated again, returning the next season.
The abrupt departure of hooker George McGuigan in December 2022 was the start of a concerted shedding of top players and their wages.
Why it’s a huge headache for English rugby
Most of England’s top players compete in the Premiership, which dropped from 13 clubs to 10 when Wasps, Worcester Warriors and London Irish went bust in 2022 and 2023.
It is generally understood that broadcasters and sponsors are unwilling to stump up their money for a nine-club league, as there are too few fixtures for a meaningful schedule.
Diamond’s view of 12 clubs as an optimal number may chime with the broadcasters – although remember not so long ago Bristol Bears boss Pat Lam said 10 would be good. This is related in turn to trying to keep club fixtures separate from the international ones.
Diamond is a kind of human touchstone of the issues at stake, as he was at Worcester when they went under, and the Warriors have just engaged a coach, Matt Everard, in their attempts to come back as a “phoenix” club in the second-division Championship next season. They would need to pay off the “rugby creditors” – of whom Diamond is one.
Also, Newcastle’s next opponents this Friday are Sale Sharks, another of Diamond’s former clubs, and where the co-owner Simon Orange has pledged to keep spending.
This is significant, as Orange and the likes of Bruce Craig at Bath appear to have a positive view of what rugby’s future holds.
However, Northampton Saints chief executive Julia Chapman told the BBC last week the Premiership’s salary cap needs to come down “by £1m, maybe a little more”, to control costs.
“Saints made a profit every year from 2000 to 2016,” Chapman said.
“But there was a viable business model there and the club didn’t have to look externally for support during that whole period.
“The thing that broke the model was the level the salary cap went up to, by several million pounds over a very short period of time.”
What might come next
If Newcastle fail, or even voluntarily drop down the leagues, where would a 10th Premiership club come from?
The outcome of the audit for clubs to be able to play in next season’s Premiership was announced by the Rugby Football Union (RFU) on Tuesday.
All the current Premiership teams passed, but of the three Championship clubs who applied, only Doncaster Knights passed while Coventry and Ealing Trailfinders, to no-one’s surprise including their own, failed.
Doncaster are eighth in the Championship, and not going to win it, so as it stands no-one can contest the end-of-season promotion/relegation play-off with the Premiership’s bottom club – currently Newcastle. If they wish, Ealing can appeal this decision within 14 days from Tuesday.
Newcastle and Sale are de facto Premiership representatives of the entire north of England – historically a huge rugby hotbed. So would the RFU get involved to save them?
Diamond, who temporarily consulted for the RFU on their plans for the Championship last year, said on Tuesday: “I don’t think they could, really.
“However, geographically it’s enormous. It’s not just the north-east, it’s from Cumbria across the top of England. There needs to be an investment plan where we’re looking at the whole regeneration area.
“In a case of desperation, the Premiership clubs, and Premiership Rugby assisting, would probably be a methodology for keeping [Newcastle] going for a year. [But] there’s no point solving the problem for a year, as in 12 months’ time we’ll be in the same boat.
“For the investors who need to come into Newcastle it needs to be a 10 to 15 year plan. It needs the stadium to be up to 15,000, the development around the ground to be done – it’s not just a sport play, it’s a property play. It needs us to go up to the salary cap [but] then there will be some losses incurred on that initially.”
Diamond assessed the financial reality of the Premiership as it stands after 28 years in its current ownership format.
He reckons a normally-funded Championship club would get beaten “100-0 every week”, while one partially-funded like Newcastle will just get beaten every week, and a team at Sale’s level of funding would “lose eight, nine million quid in year one”.
Adding in the costs of a stadium, coaching staff, five physios, three doctors, four strength and conditioners, and an academy, to cater for a 50-man squad, plus coming up and staying up for three years, Diamond gave a price tag of promotion of £30m.