The future structure of Welsh professional rugby is in doubt after the Welsh Rugby Union (WRU) announced its four regions will no longer be equally funded.
The governing body made the announcement amid reports it intends to cut a team from its professional tier. The WRU has neither confirmed nor denied if cutting a team is part of its plans.
But WRU bosses intend to implement a new two-tier funding system after serving a two-year notice on the current agreement that underpins the Welsh professional game.
That current Professional Rugby Agreement (PRA) deal runs out in 2027 although it was due to be superseded by a new five-year deal that Ospreys and Scarlets have not signed.
Wales' four professional regions were given a deadline to sign the new PRA by 8 May, but only WRU-owned Cardiff and privately-owned Dragons put pen to paper.
The four sides are expected to continue to exist in their current form until at least June 2027 when the old PRA runs out, but the future of the organisations will be under scrutiny.
There is no mention in the WRU statement that it will cut a region reducing the number to three professional sides.
The governing body says it has an "open mind to all constructive and realistic proposals on the way forward".
"We are continuing to talk to all four clubs about what the future will hold," said WRU chief executive Abi Tierney.
"We recognise this will be a time of uncertainty and are committed to treating all the clubs, players, and supporters with respect and fairness throughout this process.
"We acknowledge the continued commitment of each club to Welsh rugby and will formulate a new plan with the best interests of the whole game in Wales at the forefront of our thinking."
Why have the WRU changed course?
The WRU had continually insisted maintaining four professional sides on an equal footing was at the heart of its long-term strategy that was launched in 2024.
The governing body says that was the preference from the outset, but the system will not return to the model "given seismic changes in the rugby landscape".
The WRU now says it has taken "the difficult but necessary decision" to issue the formal two-year notice to terminate the current PRA agreement, in particular, to proceed with its debt refinancing with its bank NatWest.
They say it was not a decision that was taken lightly, however "given the WRU's duties to the game in Wales as a whole, the broader performance, financial and strategic needs of the game must take precedence".
"When I announced the headline strategy back in July 2024, I said one thing is for certain, given the challenges facing rugby in Wales and globally, there will be times when we need to adjust our course," said Tierney.
"We must seize this opportunity. Our continued aim is to build a resilient and world-class structure that will support Welsh rugby's next generation and beyond."
The Professional Rugby Board (PRB) is the organisation set up to represent the four professional sides and the WRU.
"The next phase of consultation, as always, will be conducted with the best interests of the whole of Welsh rugby at its heart," said PRB chair Malcolm Wall, who is also a WRU board member.
How did we get here?
The WRU and regions have been trying to get the new PRA over the line after months of negotiations.
The deal included increased and fixed funding rising up to £6.5m in the next few years - compared with the current £4.5m - from next season.
When the WRU took over Cardiff as it went into administration in April, the governing body absorbed around £9m of the capital city team's debts and spent £780,00 in fees in the process.
It is understood that having signed the new deal, Cardiff and Dragons will receive the new figures while Ospreys and Scarlets will have the old funding.
A glimmer of hope was offered in February when the PRA had been agreed in principle, with all parties ready to sign at the beginning of April.
The process was derailed when Cardiff went into temporary administration and was taken over by the WRU.
Scarlets and Ospreys had said they would not sign until they had further clarity from the WRU, with the two west Wales sides stating they wanted some "key issues" resolved after Cardiff's takeover.
But with Scarlets and Ospreys waiting on a response, the WRU had an option to serve a two-year notice on their current PRA deal.
They agreed to this drastic measure at a WRU board meeting last week before formally telling Ospreys and Scarlets of this intention and their decision not to have four equally funded businesses.
What happens now?
In the WRU announcement there is no official direct mention of cutting a region and reducing to three professional sides, but all supporters, players and coaches will be concerned about the latest crisis to hit Welsh rugby.
The WRU has a contractual commitment to provide four sides for the URC and European commitments and will face financial penalties of around £5m if that is not fulfilled.
WRU chief executive Tierney even used this as one of the reasons for the Cardiff takeover by stating it was more financially prudent to maintain four professional sides.
Ospreys and Scarlets are meeting to consider their response and are understood to have sought legal advice. They are also expected to respond in the coming hours.
Dragons have welcomed the WRU announcement saying they are delighted to have signed a deal which "provides the club with three years of agreed fixed funding".
A Dragons statement read: "We did so to demonstrate our commitment to provide stability and security to Dragons RFC as we continue to develop on and off the field.
"As demonstrated by signing the agreement, our owners are committed to the long-term future of professional rugby and the financial stability of Dragons RFC."
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Posted: 19 Oct 2023 at 11:10
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