Harlequins, who yesterday announced an additional £1 million investment in the club by an Australian businessman, have warned that the high wages being paid to overseas players are driving Premiership clubs towards bankruptcy.

The London club has also criticised the absence of a long-term strategy for developing younger players within the Premiership.

However, Tony Swift, the Bath chief executive, poured cold water on Quins' doomsday scenario, suggesting that the high level of business expertise that has come into club rugby guaranteed its future good health. Swift pointed out that 18 members of Bath's 41-man senior squad were teenagers, which he said constituted a youth policy that was being followed by the majority of successful clubs.

The fresh investment by Duncan Savile, an Australian entrepreneur who has bought John Beckwith's £3 million shareholding in Harlequins and injected a further £1 million, will cover the £1 million loss the club suffered at the end of last season. Under the new deal, Savile, who now controls 39 per cent of the club, has the option to increase his investment and his share percentage if Harlequins require further financial help.

Guy Williams, the club's financial director, yesterday identified the inflated salaries of overseas players - of whom there are half a dozen at the Stoop - as a significant area of expenditure where money could be saved. "Players know what their power is in demanding a higher salary and this has got out of control," he said. "I think this is to the detriment of rugby as a whole - there has to be a reappraisal to put a salary structure in place that covers all the home unions."

But Swift, who is also a partner in a successful firm of Bath accountants, declared: "No one is forcing Harlequins to pay foreign players high wages. There is no market rate, as such, for overseas players, but we wouldn't pay an overseas player a higher salary than a good international player at home. That's been our policy since the game went professional.

"The most successful clubs invest in a youth policy, which is what Bath have been doing for years, though now we include the youngsters in our first-team squad. "The sooner you invest in young players, the sooner you'll get a return on them. A good relationship with local schools helps to choose the right ones. This season, we've had to pick a number of youngsters because of injuries and with them, we've achieved acceptable results."

Swift also maintained that, "the presence of hugely-substantial businessmen like Sir John Hall, Andrew Brownsword, and Ashley Levett among the Premiership clubs" would ensure their financial solvency. "Yes, some clubs are incurring losses, but you can be quite sure that these very experienced men who have come into the game are going to do something about that," he added. "They haven't become involved just to see things fall apart."

However, Nigel Wray, the city financier who paid £2.5 million to take over Saracens last season, claimed yesterday that he had "lost millions through my investment." He said: "We cannot, as a professional sport, limp along like this. The major investors will not pump in money season after season if we have a situation where club games are being disrupted (by international fixtures) on several Saturdays a season. They will not continue to put money down the drain."

Wray, though, is optimistic that the appointment of experienced chief executives by the Rugby Football Union and English Rugby partnership, the body that administers the clubs, will lead to vital changes. "Obviously, I regret my losses, but I believe we could be in a healthy position in five years if we get the right leadership," he added.