Rugby Issues

Rugby Issues

The Future Development and Structure of National League One (FDR)

On 15th November 2007 the RFU announced a new eight-year agreement with PRL effective from 1st July 2008. The Agreement followed a long period of negotiation between the RFU and PRL covering all aspects of Professional Rugby in England with the aim of building on England’s position as one of the leaders of the game at both club and country level while creating a long-term structure for continued success.

Within the Agreement was a section (Section 141) outlining the implications for First Division Rugby Ltd (FDR) as follows:

141      The RFU and PRL agree that FDR has an important role to play under the new structures being put into place under the terms of this Agreement. The RFU and PRL will enter into new agreements with FDR to implement the proposed changes in the arrangements between the three parties. It is intended that the following issues will be dealt with under those agreements:

i)          The annual fee paid by PRL to FDR. The amount of the annual fee will be subject to FDR agreeing to the terms necessary to implement the proposals in this Agreement;

ii)         The annual fee to be paid by the RFU to FDR. The amount of the fee will be subject to FDR agreeing to the terms necessary to implement the proposals in this Agreement and RFU policy in respect of fee or grant payments to RFU member clubs. The RFU will not, however, require any “clawback” for sponsorship or other commercial rights in the new agreement;

iii)        The RFU will require FDR to agree to an EQP scheme and a ground facilities improvement scheme. The RFU’s annual fee will be linked to delivery against these schemes;

iv)        The RFU will consider extending the ‘dual registration’ scheme to a wider group of eligible EQP players;

v)         FDR will produce a plan in consultation with the RFU and for the RFU’s approval to reduce the size of their division to 12 clubs within a reasonable time period (target season start 2009-10);

vi)        PRL will consider establishing a formal “twinning” scheme with each FDR club within 12 months following implementation of the provision in v) above;

vii)       PRL undertakes to use reasonable endeavours to secure for FDR joint sponsorship of FDR and the Premiership with incremental revenues (less any agreed direct costs incurred by PRL) accruing to FDR. The RFU will make available the necessary rights to achieve such joint sponsorship;

ix)        FDR will agree clear and defined terms of reference for its Board to be proposed by the RFU so as not to conflict or overlap with the viii)      FDR will continue to have two RFU representatives on its Board terms of reference of the RFU, PRL or the Professional Game Board (PGB);

x)         FDR will be invited to nominate its Executive Director to be a member of the PGBand will invite a representative of PRL to join its Board;

The Agreement also provided that “Automatic promotion and relegation of one club, subject to the winner of National Division One meeting the Criteria for the Premiership, shall remain in place between PRL and FDR. PRL shall continue to be responsible for any parachute or related payment to the relegated club”.

Stage Two

On 21st November 2007 the RFU’s Chief Executive (Francis Baron) wrote a letter to FDR under the heading “RFU Strategy for FDR Development” as follows:

The RFU policy regarding the strategic development of FDR and the National Leagues was set out in the RFU Strategic Plan 2005/06 – 2012/13 approved by Council in 2005. As you will recall the section in the Plan on the National Leagues was drawn up and approved by a National Leagues Strategic Plan Task Group comprising Bob Rogers, David Hammond, the late Neil Hannah (replaced by Sir Hal Miller), Terry Burwell and myself. I attach as schedule A the relevant pages from the Strategic Plan.

The RFU’s thinking has been further developed during the long and difficult negotiations with PRL over the terms of the new agreement. The RFU believes that over the course of the next eight years, FDR should develop into becoming a fully professional league supporting the Guinness Premiership. In the past FDR has been either considered to be part of the Community game or a semi-professional league hovering somewhere in between the Community game and the Premiership. This uncertainty about its position and role needs to be brought to an end. A new RFU funding agreement with FDR needs to be related to delivery of key and specified elements to achieve this objective. It is fully accepted that the transition will take time.

The RFU has now reached agreement with PRL on a new eight year agreement covering all matters relating to Elite Rugby. As part of this agreement the support of PRL for the transition of FDR to a fully professional league has been obtained. The agreement sets out a number of requirements and provisions for the development of FDR. These are attached as a schedule B to this note.

In your email of the 8 November you asked me to set out the reasons why the RFU wishes FDR to reduce to 12 clubs as part of the above process. I set out below the principle reasons why we believe this is necessary:

i)                 To meet the objective of FDR becoming a fully professional league in support of the Premiership requires more focus and concentration of talent than is possible in a 16 club environment;

ii)                The Premiership will stay at 12 clubs over the next eight years under the terms of the new agreement. It will be helpful to develop closer working relationships between PRL & FDR – whether via ‘twinning schemes’ or otherwise – to have the two leagues of the same size;

iii)               By improving focus and delivering further improvements in quality there is a real chance to get dual sponsorship of PRL and FDR. PRL have committed to seeking to achieve this with the financial benefit going to FDR;

iv)               The RFU believes the new ‘player loan scheme’ and ‘dual registration scheme’ would work more effectively in an environment where the league sizes of the Premiership and FDR were the same;

v)                The RFU believes that improved competition formats, particularly at the end of season will add significantly to spectator and TV interest. We believe a more focussed FDR with an exciting end of season format will deliver an increased commitment from Sky to additional and regular live coverage of FDR thereby underpinning the attractiveness of getting joint sponsorship in place;

vi)               The RFU intends to propose and invest in an EQP Scheme and a Facilities Improvement Scheme as part of the new funding agreement for FDR. These can only be attractive and effective if focussed on a smaller number of clubs.

vii)              The attendances at FDR matches over the last three years (exc the relegated PRL club) have at best been flat – this year (see attached chart) they have been in decline. This is in spite of improved quality particularly at the top end. We need to get attendances growing again and this, we believe, needs more focus delivering further improvements in quality, more TV interest & coverage with matches played in bigger and better facilities. All this needs further investment by all stakeholders which we believe can only be achieved in a smaller, more focussed league.

Attached to the letter were draft proposals for an EQP scheme, a Facilities Improvement Scheme (FIS) and an additional England Qualified Coaches Scheme (EQC) together with a number of options for replacing fixtures that would be lost in any reduction of the league size.

Stage Three

On 9th January 2008 the Chairman of the RFU Management Board (Martyn Thomas) attended a meeting of the FDR Board of Directors held at Coventry RFC. Martyn faced some lively and occasionally hostile questions and comment as representatives of the National League One clubs debated the recent Agreement (LFA) between the RFU and Premier Rugby Ltd  and the implications for FDR. Martyn has made it very clear that the RFU is determined to pursue the strategy and achieve the targets referenced in Section 141 of the Agreement and in the Chief Executives letter of 21st November.

FDR is not opposed in principle to adopting an EQP and EQC scheme but at present the current amount of money on offer for these schemes is well below the level believed to be necessary to achieve the stated objectives. In addition FDR feels that the proposed FIS is not appropriate as a basis for future funding as it fails to take into account the tremendous facility development that is already taking place at many clubs. The FDR Board also considered the various implications of reducing the size of the league but is adamant that in any revised league structure clubs must have around 32 weekends of meaningful fixtures in the season and to date there have been no acceptable proposals to replace the league fixtures that would be lost in a restructured league containing fewer than 16 clubs.

FDR has no significant issues with the other imperatives contained in Section 141 except that neither FDR nor PRL believes that any formal “twinning” arrangements are necessary and would prefer to develop informal alliances where appropriate.

Stage Four

Representatives of FDR met with the RFU’s Chairman of the Management Board and Chief Executive at Twickenham on 18th February. During the discussion FDR argued that at present National League One could in some respects be considered to be at the same stage of development as the Guinness Premiership was some ten years ago.If current progress is maintained, and enhanced with the support of the RFU, it is reasonable to expect that in around eight years time NL1 could be where the GP is now in terms of development

FDR’s funding objective is to secure guaranteed partnership funding from the RFU for a
significant period of time (2008-2016) so that “over the course of the next eight years, FDR should develop into becoming a fully professional league supporting the Guinness Premiership”1  (F Baron proposal to FDR dated 21 November 2007)
–    Improving and maintaining standards at the top of the English game
–    Developing facilities towards Premiership standards
–    Increasing the pool of talented English qualified players
–    Stabilising and enhancing the financial and administrative infrastructure of NL1 clubs 
–    Having adequate funds to cover its operating expenses.
–    Providing incentive funding for NL1 clubs via EQP and EQC schemes.

Future partnership funding should be structured to help FDR clubs to achieve defined targets for the improvement of playing standards, facilities, spectator attendances and infrastructure so that by the end of the partnership funding period FDR clubs should have established a sound playing and business base that will enable them to sustain their progress without further recourse to RFU funds other than via incentive funding programmes such as EQP and EQC schemes..

FDR now expects to receive a revised funding and development proposal from the RFU following which further discussions will take place in an effort to reach a formal agreement not later than 30th June 2008.

 FDR has repeatedly said that it wishes to be regarded as part of the “elite game” and not the “community game” and therefore welcomes the RFU’s statement that FDR has an important role to play in the future of the elite game. The RFU has also stated that it “ believes that over the course of the next eight years, FDR should develop into becoming a fully professional league supporting the Guinness Premiership”. However the RFU appears to be reluctant to help to fund such development to any significant degree. FDR would argue that the RFU has a responsibility to help to fund the development of the game in partnership with its member clubs and not just rely on the goodwill and financial resources of wealthy individuals together with the huge voluntary input that sustains most of our clubs. FDR therefore believes that he RFU has to be prepared to provide significant core funding plus incentive funding to its clubs over a sustained period (2008-2016) to enable this vision of development to become reality.

RFU finances are forecast to be healthy in future years particularly now that the redevelopment of Twickenham is nearing completion. The RFU business had a turnover of around £100 million in 2006-07 and declared operating profits of £28.1 million. The results for 2007-08 may not be so good due to the loss of the Autumn International programme due to the World Cup and over-run on the Stadium project among other factors. Presumably more cash will flow into the coffers in future seasons as a result of the redevelopment even taking into account the loans that need to be serviced. According to the latest RFU Annual Report (2006-07) the money allocated by the RFU to clubs and constituent bodies in 2006-07 was £ 19.3 million  (some £300,000 less than in the previous year). At the same time the RFU’s salary costs were £19 million, an increase of £1 million (including pay awards of 4.65%) with an average number of 412 employees. Business and admin costs accounted for £15.6 million.

 At present the average turn-over of a Premiership club is around £7-£10 million per year with some £2.2 – 3.5 million (capped) being spent on playing squads and with average spectator attendances of circa 10,000 per match. It has been suggested that the current PRL salary cap will be increased to circa £4 million per year next season or the year after

The RFU has agreed to pay PRL clubs £102 million over the course of the new agreement plus a share of the revenues from a fourth Autumn International which should take the total RFU payment to PRL clubs to around £110 million (circa £9 million per club). Current FDR turn-over levels (excluding Northampton) average around £1 million with some £750,000 average commitment to playing squads and with average spectator attendances of around 1,500 per match (4,000 high – 500 low). The entry criteria for the Premiership stipulate a ground capacity of around 10,000 and this is scheduled to rise to 15,000 within the next five years.

Current funding to FDR is around £3 million per year in total (around £187,500 per club) including the money from the EDF National Trophy scheduled to end after 2008-09. Out of this clubs pay referee costs of around £8,400 per club per season and £3,000 per club per year towards FDR’s operating costs.

There is a big gap to bridge but if the RFU is sincere in its intent to facilitate the development of a second fully professional club league then it should be prepared to meet a significant element of the cost. England is the biggest Union in world rugby with some 1900 clubs and more than 700,000 registered players. A top professional tier of around 24 clubs accommodating the best players in the country should be achievable and sustainable.