F1 ‘AGREES’ COST CAP INCREASE
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After months of discussions and no little argument, Formula 1 has agreed to raise the budget cap for this year: the teams will be allowed to spend about $4.3 million more than initially permitted. The given reason for this is the unprecedented spike in freight costs and utility bills following the outbreak of hostilities in Ukraine.
Talks about a possible cost cap increase began in the spring, when it became apparent that a number of teams – first and foremost the leading ones – wouldn’t be able to meet the limit originally set by the rules. Ferrari boss Mattia Binotto insisted at the end of May there was “no chance” his team would remain within the allowed range, and similar comments were made by his colleagues from the Red Bull and Mclaren outfits, Christian Horner and Andreas Seidl.
The subsequent push to move the budget ceiling initially faced resistance from three teams: Alfa Romeo, Haas and Alpine. It seemed that a compromise may not be found – hence the paddock began to talk about a scenario in which a group of teams would be willing to commit a deliberate violation of the rules by overspending. If this were to eventuate, then Formula 1 risked a scenario in which a financial structure many had hailed as the category’s salvation collapsed into disfunction and scandal before the end of its second season in existence.
However, a compromise was eventually reached. In mid-july the FIA issued a statement about the cost cap, saying: “Following consultation with the Financial Advisory Committee over recent weeks, the FIA brought a proposal to the Commission that was approved by the required majority with support from the FIA, Formula 1 and nine of the teams.
“The proposal recognises the unexpected increase of costs incurred by teams in 2022 thereby permitting indexation at a limited rate of 3.1% (which takes into account the original 3% inflation threshold already set out in the regulations) and permitting compounding of this rate as from 2023. This will preserve the long-term integrity of the financial regulations.”
Alpine was reportedly the sole team not to vote in favour of the proposal. “It should have stayed the same,” the team’s boss Otmar Szafnauer told GP Racing’s sister publication motorsport.com. “I’m obliged to accept it because of the governance. Eight teams voted, and then it goes through. And now, that’s the new rule, and we’ve got to follow it.”
Yet even the loudest critic of the amendments, Alfa Romeo’s Frédéric Vasseur, eventually agreed that raising the limit was necessary – especially since an increase of 3.1% will still force the big teams to use their money cautiously. Many of them have had to reduce their planned upgrades.
“Is it enough? Not compared to inflation,” said Red Bull’s Christian Horner. “It’s not enough for us, and it’s too much for the little ones. So it’s a compromise, and a consensus was found in the end.”
The final amount teams are allowed to spend in 2022 will total about $145.5m. In addition, next year’s limit will be increased by the same amount of $4.3m.