Wasps RFC knocked out by revenue problems

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Wasps RFC has entered administration and been suspended by the Premiership following the club’s relocation.

Wasps, one of the oldest clubs in the world, faces retirement 100 miles away from its Hampstead territory following a series of off-pitch miscalculations. English club rugby is in a parlous state, with £500m of gross debt across the Premiership’s 13 clubs. Wasps accounts for about £123m of that sum, by far the largest share.

In 2014 the club announced it would move to a new home in the Midlands, the Coventry Building Society Area (formerly the Ricoh Arena). Previously, Wasps played around the capital, at Queens Park Rangers C’s Loftus Road in the 1990s and Wycombe Wanderers FC’s Adamas Park in the 2000s.

When Coventry City FC had a bitter dispute with the CBS Arena’s operating company over its tenancy agreement, Wasps’ hierarchy sensed an opportunity and purchased the stadium.

The calculation was that the move would function much like franchise relocations in US sport. An example of this is American football’s Los Angeles Rams, which have previously been the St Louis Rams and the Cleveland Rams. The stadium would also provide Wasps with an attractive asset and ownership over its revenue streams, such as hospitality on match days, rent from Coventry City FC and from the conference facilities.

However, a culture of relocation is not only absent in UK sport, it is viewed extremely negatively. Fans based in London complained about the 200-mile round trips to attend home games, while rugby fans in the Coventry area already supported local teams, such as Coventry RFC, Leicester Tigers and Northampton Saints. Turnouts were not only disappointing from a sporting perspective, but they hit Wasps’ cash flow significantly, which had already suffered badly during the pandemic.

Wasps had been hopeful of securing new funding to help with a £35m debt owed to bond holders following its relocation from London, and HMRC pursuing it for £9.5m unpaid taxes. That debt was due to be paid in May 2022, but Wasps defaulted.

Despite saying talks with interested parties were “ongoing”, the club was forced to appoint administrators. In all, 167 club staff and players were made redundant.

There are several lessons here. Chief among them is that sport is not like other business, and fans are not like other customers. Teams have deep, historic links with both their fans and communities. When Wasps moved from London to Coventry, it severed those links and torched any goodwill (both in an accounting and a traditional sense) it had, depleting any revenue with which it could service its debts.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.

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