Rugby clubs have been warned after the Department of Culture, Media and Sport (DCMS) said it “wouldn’t hesitate” to use “all financial levers” available to recover loan payments owed by sports organisations from the pandemic.
Those powers could see the government department aid in forcing insolvency on sports clubs to ensure the taxpayer recoups the maximum possible sum of emergency Covid-19 loan cash.
The admission will be a stark reminder to England’s rugby union teams, who received the biggest sports loan when DCMS was scrambling to keep clubs and cultural assets alive during a period of acute financial uncertainty.
Three of the nine organisations, out of a total of 46 loan recipients, who are now insolvent are former Premiership rugby clubs.
Pessimistic about rugby
Those speaking at the Public Accounts Committee – which assesses value for taxpayers’ money – said they were more pessimistic about rugby’s ability to repay loans now than they were when they initially handed them out.
It prompted Luke Charters, Labour MP, member of the committee and former FCA and Bank of England regulator, to tell City AM that “it’s clear DCMS didn’t manage these loans from the beginning.”
Worcester Warriors ceased to exist after a series of financial mismanagements and are currently trying to earn a place back in the rugby pyramid.
Wasps went under with more than £100m of debt – not all owed to DCMS – and are now facing an uncertain future.
London Irish were the final of the three Premiership clubs to go with administrators in place.
Though DCMS permanent secretary Susannah Storey was unable to be specific on rugby union due to her husband’s role on the board of Premier Rugby and as a managing director at Premiership investor CVC Capital Partners, she admitted that the department wouldn’t hesitate in using all financial levers to recover as much money as possible.
“It is absolutely essential that any of these borrowers who have a legal undertaking to us as the lender appreciates that if they were in that situation, we wouldn’t hesitate to use all of the financial levers we had,” the permanent secretary said.
‘Yes’
Added Polly Payne, the director general of policy of the department, on the same rugby point: “I don’t think we’d probably come at it with a blanket rule. I think we would look at any decision around when there was a possible insolvency situation. How do we maximise money for the taxpayer?
“Yes, we would [force insolvency], except if there was a policy reason, in which case we would go to ministers.
“If we thought it would maximise the financial return… yes.”
Payne added that the three insolvent rugby clubs had not made a DCMS repayment before going under.
It is understood that the 10 surviving Premiership clubs have been told of their responsibilities to repay their Covid-19 loans in full. Clubs, if any, who were able to defer payments are set to officially begin repaying this year.
Rugby in damning place
Added Charters: “For those of us who care about sport, the fact that there was this admission on the future of rugby is damning.
“The financial sustainability of the sport is under threat and it is clear some of these loans propped up these clubs.
“Maybe they should have gone for grants, and going forward there’s question marks about what comes next.”