Four Welsh regions closer to Welsh Rugby Union split

Welsh rugby seems set to reach a new crisis point next week as the four regions are not expected to sign a new participation agreement.

The Welsh Rugby Union had set a deadline of 31 December to sign a new agreement, replacing the current five-year deal that expires in June 2014.

But BBC Wales Sport understands that Cardiff Blues, Newport Gwent Dragons, Ospreys and Scarlets will not sign.

The regions believe the funding in the new deal is inadequate for their needs.

The impasse between the WRU and its four teams could see the regions step up their pursuit of playing in an Anglo-Welsh competition next season.

Regional Rugby Wales, the umbrella organisation that represents the four regions, tweeted on Sunday: "The Welsh regions are continuing to work hard to try to find solutions and have a number of scheduled RRW meetings leading up to and beyond the 31st December.

"With regard to the Participation Agreement, the issue remains that neither competition platforms or revenues contained within this legal agreement are confirmed, so the commitment cannot be defined."

The Scrum V debate: The future of Wales' rugby regions

The uncertainty surrounding the future of the Heineken Cup, with French Top 14 and English Premiership Rugby clubs threatening to withdraw from it in favour of a new cross-border competition, causes further problems.

With no guarantee of what competitions the Welsh regions will be playing in future seasons they are able to make few financial decisions about their future, hence the reluctance to sign a new agreement when other parts of the jigsaw puzzle are not decided.

It has been reported  that Premier Rugby Limited, which represents the top-flight English clubs, and its broadcast partner BT Sport have offered each region £4m a season to compete in an Anglo-Welsh competition.

While the Welsh regions consider the reported English offer, any cross-border competition would require ratification from the governing unions involved - with the WRU and its English counterpart the Rugby Football Union unlikely to give their blessings at this stage.

That could set the scene in Wales for the four regions to break away from the WRU, a move that would cause turmoil in the professional rugby landscape in Wales and feasibly lead to uncomfortable "club versus country" decisions for some players.

The WRU would not escape unscathed either, as it is legally obliged to enter four teams in the Pro12 and Heineken Cup next season and might have to create four new sides in a hurry to represent Wales.

Television money forms the bulk of the regions' income, with the four Welsh sides sharing a pot of around £9m between them from competing in the Pro12 and the Heineken Cup.

The WRU adds approximately another £6m to the shared pot, which includes money for releasing players for international duties, a sum governed by the agreement.

The remaining revenue comes from each region's ticket sales, sponsorship and merchandising, with further cash or loans from owners or benefactors topping up when needed.

A 2012 financial report by accountants PriceWaterhouseCoopers, jointly commissioned by the WRU and the regions, warned that "the four regional businesses are not sustainable on a standalone basis in their current form without continued additional funding from benefactors or alternative funding sources".

The regions voluntarily introduced a £3.5m salary cap to help balance the books, but domestic television deals secured in France and England have seen their clubs able to offer players increasingly lucrative contracts.

This has seen a steady stream of leading Welsh players depart for foreign clubs, with the already cash-strapped Welsh regions often unable to respond to the wage inflation.

The situation has led to the WRU consider offering central contracts to its international players.

The impasse in Welsh rugby comes amid a festive fixture list that has produced some thrilling Pro12 derbies between the Welsh sides, played in front of capacity or near-capacity crowds.

Before both the Scarlets versus Ospreys game and the Dragons against Blues clash, regional fans staged organised protests against the WRU in the power struggle affecting the sport.