Government officials say they are increasingly pessimistic over the financial stability of professional rugby union, as they defended loans given to sports organisations during the pandemic.
A National Audit Office (NAO) report published last year said that as much as £29m of a total £474 million lent to sports organisations during the pandemic will not be recovered. Central among the defaulters are three rugby clubs – Worcester, Wasps and London Irish – who went into administration after being lent £41.6m in public money.
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Speaking in front of the Public Accounts Committee in parliament on Monday, the director general of policy at the Department for Culture, Media and Sport (DCMS), Polly Payne, said the government was now monitoring financial risks not only to clubs but the Premiership itself, and that concerns over financial viability had grown.
Asked by MPs if she anticipated more rugby clubs going into administration in future, Payne said: “We are absolutely reviewing and updating our forecasts. Are we more or less pessimistic than at the time when we gave the loans? I think given everything that has gone on in the sport, we are more pessimistic than we were then. I wouldn’t want to talk about our individual borrowers but absolutely we keep it under review and really care about it.
“In rugby when we have been thinking about likely insolvencies and the financial strength of the individual clubs, we have also thought about the financial situation of the Premier League (sic) as a whole,” she continued. “We have not only been taking account of it, we’ve been using the government’s convening power to try and help with the financial sustainability. We take this very seriously.”
Payne defended the decision to award a total of £123.8m to Premiership clubs, a quarter of the total amount lent at the time. “It wasn’t that there was any special treatment and we didn’t think about it sport by sport,” she said. “I think it’s worth saying that the [total amount] we could have spent was underspent, so it was not the case that other sports missed out.”
Payne also argued that the clubs had shown themselves to be solvent before Covid struck, a key requirement of the loan system. “Unfortunately within the next three years, [those assessments were proven wrong] ... but I have no reason to believe the information given at the time was inaccurate,” she said.
DCMS officials also pointed out that money had been retrieved from the three former Premiership clubs, more than £10m to date, and that a further between £7.3m and £11.1m is expected to be recouped from the nine recipients of Covid loans who have become insolvent.
Also speaking in front of the committee, the most senior civil servant in the DCMS, the permanent secretary Susannah Storey, defended the Covid loan system, calling it a “relatively solid” approach.
“These were broadly effective interventions,” she said. “We were quite careful at the time that the loans were given to have some specific due diligence on the borrowers. So we did know who they were. And as a result of that, the [NAO] evaluation showed that the fraud levels have been relatively low. So, we’ve definitely learned some lessons. We’ve definitely made some improvements as we’ve codified this process. But I think with hindsight, it was a relatively solid intervention.”
