Is the salary cap crippling Premiership Rugby?
It is a miracle that English rugby union teams are competitive in Europe. English clubs are heavily restricted by a £5m annual salary cap, which is dwarfed by the almost £9m that the French Top 14 and Pro D2 clubs can spend. If the cap constrains English teams, why was it introduced?
The Premiership cap was initially introduced in 1999, after London Scottish and Richmond went into administration. The future of Premiership Rugby was in the balance: just three years after its professionalisation, the league was on the brink of collapse.
It survived, but the league is again in a similarly precarious position after three clubs went into administration in the 2022-23 season: London Irish, Wasps and Worcester Warriors.
Although the salary cap’s main goal was to improve the financial stability of each club, it has significantly impacted other facets of the Premiership.
Because the cap is at a flat rate, it has greater effect on improving the competitive balance of the teams within the league. If Premiership Rugby wanted to focus solely on financial stability, then a cap proportional to revenue or profit, like the Premier League’s, might have worked better.
The cap has also led to French dominance in Europe due to the wage budget differentials between the leagues. The salary cap is hamstringing English teams in international competitions, but is it as harmful as it seems?
Financial Stability
Between the introduction of the salary cap in 1999 and the COVID lockdown ending the league prematurely in 2020, no Premiership club went into administration. However, over the last 18-months, four English clubs have gone bust.
Jonathan Beardmore, from the EggChasers Rugby Podcast, thinks that the main reason the teams entered administration last season was because of the Premiership’s deal with CVC, rather than anything to do with the salary cap. CVC (a private equity company) bought a 27% stake in Premiership Rugby in late 2018 to try to make a profit from growing the commercial side of the game, as they have done previously with tennis, cricket and Formula 1.
He said: “People might say the salary cap is too high in order for clubs to be sustainable. I don’t think it’s quite that simple. In terms of sustainability, I think the CVC deal has a lot more to answer for because not only has it [the injection of funds] allowed owners, who can’t afford to stay in the game, to stay a bit longer, it also acts as a barrier to new ownership.”
The CVC deal traded future revenue away from the Premiership for upfront funds. However, the intended benefit of the investment never materialised as the money was diverted to COVID bailout costs. Arguably, the deal kept the league alive during COVID, allowing sides like Harlequins and Leicester to stay afloat despite the financial struggles created by the pandemic.
Although no Premiership clubs went into administration between the introduction of the cap and COVID, both London Welsh and Leeds, who had spells in the Premiership, were unable to find stability and have both dropped down the leagues to an amateur level. Both sides, due to the broadcast revenue sharing system of the Premiership, were significantly underfunded during their time there and were unable to fund the investment needed to succeed in the top division.
Competition within the Premiership
Generating excitement and interest for fans is crucial for any league and close competition is one of the best ways to engage supporters.
The most obvious success of the salary cap has been the increase in competitiveness within the Premiership. As you would expect, since the cap was introduced, the differences between most teams have reduced to create a more competitive league.
The best ways of measuring competition are to look at how close the results of individual matches are within the league (average winning margin) and how the average finishing positions of each team change within the league (league position inequality).
Before the implementation of the salary cap, the average winning margin fluctuated wildly, including extreme highs of an average of over 18 points per game in 1996/97. However, the average winning margin declined rapidly at the turn of the century, before flatlining at a low rate once the effect of the cap was realised. After the 2001/02 season, there is just one instance of the average match margin being above 13 points.
Before the cap was introduced, the average winning margin was at 13.5 points per game. After, however, average winning margin declined to 12.1 points per game, and if you exclude the first three years (when clubs were acclimatising to the new regulations, the average is 11.5.
When looking at league position inequality, the trend is extremely similar. League position inequality calculates the change in teams yearly finishing points compared to if the league was completely equal and all teams finished on the same number of points. A lessening of inequality therefore suggests the league is becoming more competitive, as teams points totals become closer year on year.
The league gets less competitive almost every year from its creation in 1987/88 until the implementation of the salary cap, when the league becomes significantly more competitive again for the next two decades.
Beardmore agrees that the league has become more competitive since the introduction of the salary cap and that this is the biggest success of the cap – but he is unsure how much of a focus Premiership Rugby had on competition when implementing the cap.
He said: “I think the salary cap is working. Most years, there’s a hell of a scrap for that fourth position.
“It is key for the Premiership to keep attendance and interest in the game high – otherwise the sport will continue to struggle. But the evidence suggests, from the amount of people watching and the amount of people attending games, that it’s not working.
“However, I think that the reason attendances are down are because of other factors like lack of marketing, lack of awareness, lack of overall strategy.
“I think, accidentally, they stumbled upon a structure which works and promotes competition, but I’d be very reticent to give the RFU or Premiership Rugby any credit for that. I think it’s probably a complete accident.”
Although the league has become more competitive since the turn of the century, it doesn’t seem to be helping attendance. In December 2023, City AM reported that attendance at Premiership Rugby matches is down by more than 1,000 spectators per game since last season.
Competition within Europe
The most significant issue with the cap is the fact that other teams in Europe do not have the same restrictions, especially the teams in the Top 14. When the English teams try to compete in the Champions Cup, they are competing with a significantly lower wage budget than their French counterparts, which means they are often significantly less competitive.
This is evident when you look at the Champions Cup success by teams from each country. Since the competition’s creation in 1995/96, the wealthier French teams have dominated. Although they have won similar numbers of titles as the English, 50% of all teams who reach the final are French, as well as the significantly larger proportion of French teams who reach the semi and quarter-finals.
It is also crucial to remember that Saracens, who dominated English rugby during the 2010s, broke the salary cap. They spent more than £2m above the cap for three seasons and won two European titles during this time. When Saracens are removed from the equation, the French teams’ dominance looks even more significant.
Jonathan Beardmore believes the fact that the French teams can spend so much more is key to their superiority.
He said: “The Premiership, because of the salary cap, has a situation where effectively you have to decide what [skill-sets] you’re leaving out of your squad.
“Their [the French teams’] priority is just raw power. And this is where the difference comes in. Because to get those very rare humans, the Will Skeltons, the Uini Atonios, whoever it may be, you need to pay a premium.
“And you can afford to leave out an awful lot of stuff, because size really does matter. I think that’s what the French have done, they have prioritised going after the rare body types, which are incredibly expensive.”
Over the last 12 years, only Saracens and Exeter (a lone victory in the COVID-stricken 2019-20) reached the final of the European Championship. Compared to the 12 years prior, Northampton, Leicester and Wasps all had multiple appearances in the final appearances.
As this gap continues to widen, it seems more and more likely that French teams will continue to dominate, especially with the continual exodus of English players to the Top 14.
The Future
The salary cap was initially introduced to increase the financial stability of the newly professionalised Premiership clubs. However, the flat cap was set too high for smaller clubs, who try to keep up with the big-spenders, and too low for larger clubs, who now cannot compete in Europe.
The cap has successfully increased competition within the Premiership, but there is serious risk that the competitiveness of English clubs will continue to decrease against their French counterparts as the differential in their salary caps continues to widen.
It is a miracle that English teams are competitive in Europe, and unless there is major change it seems unlikely they will be for much longer.
Premiership Rugby declined to comment on this article.
