The Rugby Football Union (RFU) said on Wednesday it was cutting its funding of clubs in the Championship, the second tier of English rugby union, by almost half next season.
The RFU said its contribution towards the 12 Championship clubs next season will be around 3.46 million pounds ($4.48 million), or 288,000 pounds per club, down from 6.36 million pounds during the 2016-20 cycle.
Bill Sweeney, the RFU chief executive, said the Championship clubs had failed to hit objectives set out after funding was increased for the last cycle, and the decision had been made as part of a wider review of resource allocation.
"There are many worthy requirements from both the professional and community game and we need to make sure that every pound spent is clearly justified," he said in a statement.
Sweeney said the RFU's analysis was that no Championship club would be put out of business by the funding cut.
He said the move was not a step towards ring-fencing the Premiership: "The gateway is still open for clubs to get into the Premiership if they have the necessary financial resources and meet the minimum standards required.
"The Championship is, and will continue to be, a way to develop players between the Premiership and the Championship.
"It is a legitimate way to get additional developmental experience, but we do not believe it is the primary place where Premiership and England players are discovered and developed."
The Times reported that the average salary for a Championship player had not increased from the 27,000 pounds a year paid in the 2016/17 season despite the rise in funding.
The RFU found that Exeter Chiefs prop Harry Williams was the only player in England's 45-man elite squad who could be called a product of the second division.
English and European champions Saracens will play next season in the Championship after being relegated from the top flight for breaching salary cap rules.