RFU warns of looming financial shortfall

On the day the Stock Market dropped like a stone and investors felt the chill wind of imminent Middle East hostilities blowing through their bank accounts, the chief executive of the Rugby Football Union – one of the financial engines of the global game – warned that Twickenham would almost certainly slip into the red this year, that more than £20m would disappear from the domestic coffers because of the World Cup in Australia, and that England's leading clubs faced increasing penury for some time to come. Francis Baron could not have painted a bleaker picture had he been christened Francisco Goya.

After weeks of wailing and gnashing of teeth from the Premiership money men, most notably Malcolm Pearce, of Bristol, and Nigel Wray, of Saracens, Baron acknowledged that, while the professional game looked healthy in the medium-to-long term, the short term appeared decidedly grim.

"It is not just the clubs feeling the pinch, the national unions are feeling it too," he said. "We're all in the same boat, and I see no prospect of a recovery before 2004. We have spent the last 18 months in a tough commercial climate and it is down to everyone to cut their coat according to their cloth."

England bank on a gross profit of £9m from each major autumn international at Twickenham, but, this year, the Test team will spend the autumn in Wallaby land rather than south-west London. Budgetary predictions calculated before the 11 September terrorist attacks have had to be revised – "Anyone who assumes they will get everything appearing in a budget forecast are not running their businesses prudently," Baron said – and the new Six Nations broadcasting deal with the BBC brought in far less cash than originally anticipated. "The sharp reverse in the television market has had an impact on all major sports, and it has clobbered us," the chief executive continued.

As a result of all this doom and gloom, any satisfaction the Premiership clubs might have taken from a substantial upturn in match attendances has been overshadowed by an economic slowdown largely outside of their control. All 12 top-flight teams are engaged in cost-cutting exercises, with a majority planning to impose wage cuts on players and back-room staff. "I think we can say that wages are too high for the conditions in which the industry finds itself at this point," admitted Peter Wheeler, the chief executive of Leicester.

Unsurprisingly, new tensions are beginning to arise between the clubs and the union. The issue of automatic relegation, centred on Rob Andrew's struggling Newcastle team, threatens the very future of professional club rugby in the north-east and is likely to be a major bone of contention between now and the end of the season.

"I care passionately about Newcastle," Wheeler said. "It will be bad for the sport if they go down, but that is what our game is subjected to with open-ended promotion and relegation. It is not impossible that the Premiership will be expanded and that the bottom team will stay up, but I fear it is extremely unlikely."

The Premiership owners are also accusing the RFU of slowing the flow of central funding from Twickenham – a charge Baron denies – and are concerned about the iniquities of a fixture list that has left several clubs with only four home matches between this weekend and the middle of May.

"It is a very difficult situation," Wheeler said. "People looked at the financial forecasts and put commercial schemes, academies and facility developments in place. Suddenly, the climate changed. That is why some club owners have been making noises recently. We need a re-adjustment of some kind to help us through this rough spell."

Wheeler's club, the European champions, may well have to negotiate a Heineken Cup semi-final at a neutral venue in France in April if they are to claim a third successive title.

Toulouse, the favourites, play Northampton in the last eight, and if they progress as expected, the semi will be held on Tricolore soil. The other tie will be in Ireland or France after the Leinster-Biarritz quarter-final was drawn ahead of the tie involving Llanelli and Perpignan.