ONLY recently invited on to the SRU Board as a non-executive member, Ian Barr is joining at a time when Scottish Rugby faces the most grievous financial challenge in its history. Covid-19 and the government policies arising have the potential to threaten the SRU’s short-term future, never mind its longer-term strategic aims.
Scottish Rugby’s Chief Executive, Mark Dodson, has rightly raised the risk of a loss of significant income – in the region of £12 million he estimates – should the Autumn Tests not be fulfilled. A risk that must be considered high in the current political climate.
The monetary hit of the Autumn Test loss to the SRU equates to 20 percent of annual turnover, apart from the immediate cash-flow implications. Even if the Autumn Tests go ahead, there will surely be some significant social distancing restrictions. Are fans going to turn up? Would you?
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The doomsday scenario is if next year’s Six Nations is cancelled or heavily curtailed by social distancing, which is a very real possibility given some predictions that mass gatherings will be last on anyone’s list for easing restrictions, with some suggesting that they should be prohibited until a vaccine is developed.
With Murrayfield in lockdown, little income from spring and summer commercial activities – either inside the main bowl or in the hospitality suites – must be a given. Cash is absent, with the furlough of staff and reduction in professional wages the obvious proof.
No significant capital reserves (cash) were built up by the SRU in the times of plenty. A failure now coming home to roost.
The big-time investment the SRU was anticipating from private equity houses is no longer imminent, and likely lower when it arrives, and negotiating individual sponsorship deals must be a thankless task at the moment.
The SRU financial model was, and is, predicated on the assumption that future ticket income, broadcast revenue and sponsorship/advertising sales will meet present operating demands. This premise is now clearly under severe strain as the economic impact of the pandemic unfolds.
So, how does the SRU fill the loss in income? Sizeable borrowing if the banks allow (which will require compelling evidence of a repayment strategy), or expense contraction by reducing costs across the broad spectrum of Scottish rugby (from the executive, to the pro teams, to the Murrayfield civil service, to grassroots and player development), or a mixture of both.
What is without doubt is that the SRU Board has a huge fight on its hands.
We must wish them well in the challenge ahead. Our sport needs them to succeed.
In addition to the “investments” mentioned above, there is the question of funding the 6×Super6 Franchises.
These are surely at immediate risk. From memory these were to be funded at a rate of £60k SRU & matched funding from each franchise holder.
With no revenue for the franchise clubs, how do they balance the books?
What unforseen costs will the individual teams have to bear.
If they disband, that would have ramifications across all leagues & all clubs within the leagues.
Difficult to build up cash reserves when one of the clear priorities was paying down debt, for which the SRU has been rightly praised in recent years. Also think it is a tad harsh to criticise the union for failing to anticipate a black swan event like Covid, something we have seen globally across both the private and public sector. The SRU ultimately isn’t a business in the traditional sense – i.e. beholden to generate profits for its owners – but rather its purpose is to invest in the game. Arguably building up cash reserves would be a dereliction of duty in this regard. Agree that the org can be criticised for being fiscally irresponsible for its investments in Stade Nicois and Old Glory, which I don’t think anyone fully gets.
I don’t recall anyone blaming the SRU for not anticipating Covid, there is more than enough to get on with without resorting to matters beyond the SRU’s control. As regards investment in State Nicois and Old Glory, the first thought that comes to my mind is why invest in those clubs when investment could be placed closer to home, for instance what has happened to support for London Scottish, was it ever resolved after the spat 3 or 4 years ago?
As regard not being a business in a traditional sense, the obvious response to that is, tell that to the ‘Remuneration’ Ctte and suggest they don’t offer up ‘City’ structured salary and bonus structures, save the money.
Well said.
I would like Ian Barr to issue a statement or manifesto on the intentions for his presidency. This would go a long way to addressing concerns in clubs across the country on the direction of the Union.
As I’ve said many times before bits during times of crisis that organisations really learn what’s what. And they discover how easy things were when it was just about increased income and money to spend.
Some tough decisions coming for EH12 pretty quickly.
Adding to the worries detailed above is the uncertainty regarding the sustainability of the season-long cross-border Pro14 competition, calling into question the SRU’s wholly-owned proteam structural model – just as we see fresh non-Scottish talent being hired to add to the large player pool financial burden carried by those two major departmental cost centres.
450 employees (including players) anyone? NZRFU has around 90.
Update: NZRFU now employs 160…!