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One or two of Wales’ professional sides would have gone bust if a new financial deal had not been agreed, says Welsh Rugby Union acting chief executive Nigel Walker.
But Walker admitted the next couple of seasons will be tough.
“It is not going to be easy, nobody is sugar-coating it,” said Walker.
“The alternative is for the possibility of a region or two going bust if we did not make this correction.
“If we look across the bridge with England, their budgets are £5m, yes they can have a marquee player, we are coming down to £4.5m the year after next, so it is possible that we can still be competitive.”
A long-form Professional Rugby Agreement (PRA) has been agreed which runs until 2029.
Under the agreement, salary caps will be introduced for the 2023-24 season, £5.2m reducing to £4.5m for the 2024-25 campaign.
There will be “fixed” and “fixed and variable” deals available to players to whom the regions were unable to offer new contracts until March 2023.
Contracts for players of “national interest” will be agreed by the club and the WRU performance director.
Uncertainty over the deal had led to the threat of Wales players refusing to play against England in this season’s Six Nations.
Walker outlined his emotions after the deal was agreed.
“If I am honest it has taken too long and I have apologised to the players and other people who have been affected by the delay, but we got there in the end,” added Walker.
“It is a complex deal, four regions and the WRU, and that is why it has taken so long because we wanted to make the deal one that would give us sustainability.
“We got there in the end, so we are delighted and now it is a question of looking forward.
“When you have got five entities involved in negotiations over a deal, there has to be compromise on all sides and there has been.
“Everybody has had to give a little bit in order to reach the conclusion.
“It is a six year framework, we are already in year one. The idea is that it gives the regions confidence that they can plan, put their squads together and move forward.
“We know it is going to be tough in the first year or two, there is a correction taking place, nobody is hiding from that, but as we move into years three, four and five, it will give us the platform that we need in order to give us professional regions who can be successful.”
The new agreement includes:
- A central clearing will hold all contracts “to monitor spend, ensure contract compliance and effect a new player-loan system across clubs”.
- The WRU performance director and the regions will agree “contracts for players of national interest”.
- Academies will be supported by a commitment to “a minimum spend”.
- There will be regular audits of “expenditures, contracts, business plans and academy performance”.
- Scarlets, Ospreys, Cardiff and Dragons “are committed to centralising aspects of their commercial operations, with work already in process in this area”.
PRB chair Malcolm Wall outlined the financial element of the deal which he claims is a £300m package.
“Historically the funding that flows from the WRU into the individual clubs was negotiated every year,” Wall told BBC Radio Wales.
“It was extremely hard to do any forward planning on that basis. So we’ve moved away from that annual funding agreement to a six-year framework that’s made up of the WRU of pledging over £100 million directly from their projected profits to the professional clubs over the next six years.
“On top of that they’re injecting another £25 million that was money derived from the CVC deal.
“They did a private equity deal on future rights and that’s going straight into the hub first four years of this period.
“The WRU are helping raise some debt of around about £8m. The club investors have returned to the party and they too are pledging alongside this WRU money over £11m over the four-year period.
“Also we’ve worked on a commercial plan so it’s a £300m package for the clubs over a six-year period.”
Dragons back in private hands
As part of the deal, WRU-owned Dragons have 90 days to agree a return to private ownership.
The WRU increased their 50% share and took over the region in the summer of 2017, buying the nine-acre Rodney Parade site from Newport RFC in the process.
Chairman David Buttress has looked to return the region to private ownership in recent years and is now expected to complete that process in the next three months.
Head coach Dai Flanagan said: “Hopefully the agreement can just settle Welsh rugby after such a turbulent time because we need to start looking forward.”
‘We need proper alignment’
Cardiff have lost centre Max Llewellyn and fly-half Jarrod Evans to Gloucester and Harlequins respectively and director of rugby Dai Young admits there will be a natural evolution in their squad.
Young admits it will be a struggle next season but hopes the long-term future will be more positive.
“A lot of things have happened over the last six months which in an ideal world would not have done.
“I would like to think now the deal is done and it’s six years and hope we can all move forward together and start building a proper future for for Welsh rugby from grassroots up.
“We are looking for a proper alignment throughout the game.
“We know there is going to be an adjustment and there had to be. That’s the stark reality.
“The game in Wales could not sustain paying the salaries the regions were paying.
“If that was not adjusted we would have teams going bust on our hands and nobody wants that.
“Everybody realises it’s been done for the right reasons, as hard as it is, because in all walks of life, nobody wants big pay cuts.
“From here hopefully we can build strong foundations for Welsh rugby. Next year will be tough for all of us but hopefully it will move from there.”
‘Welsh rugby is a tough market’
Scarlets head coach Dwayne Peel welcomed the deal but the region have been hit by the current pinch.
The semi-professional side Llanelli RFC have dropped out of the Welsh Premiership next season because they say they will not have players available in a World Cup year.
Scarlets will not have the services of Sione Kalamafoni and Tomas Lezana next season while there are doubts over the futures of Rhys Patchell and Leigh Halfpenny.
“It’s important for Welsh rugby because we start to move on [and] build for a positive future,” added Peel.
“There are decisions that can be made now that can actually benefit us in the future.
“Welsh rugby and world rugby is a tough market now. For us as Welshmen, Welsh clubs or Welsh regions we can look forward and build on what’s now in place.”
