F1 fails to agree budget reduction as smaller teams at risk of being lost
Formula One teams have failed to reach an agreement to adopt a substantial cut to the budget cap set to be imposed in 2021. Talks on Thursday between team principals, the FIA and F1 were understood to be constructive and they will come together again next week to readdress the issue. The original spending cap of $175m (£140m) has already been agreed to be reduced to $150m but the proposal being considered is to drop it further to $130m.
The meetings are considered a vital step towards ensuring the sport emerges intact from the coronavirus outbreak. The four-hour virtual meeting was the second in seven days to discuss the proposed changes as the sport attempts to come to terms with the financial implications of the virus. The president of the FIA, Jean Todt, described it on Twitter as an “Important meeting by video conference today with Chase Carey, @F1 & @FIA teams to build together a New Deal for the future of our sport”.
The discussion centred on setting a ceiling of $145m for 2021 and then $130m in 2022. The latter was the target figure F1 had proposed to the teams under their plans for the future of the sport set out in 2018.
Nine races have been called off this season, potentially placing F1 and its teams under enormous financial strain, with reports on Thursday suggesting Silverstone could host multiple races when it finally starts and Austria could be the venue for the opener. Race hosting fees are one of the three major sources of income for the sport and they are highly likely to take a major hit. Should more races be cancelled or postponed, broadcasting fees and sponsorship income are also likely to suffer.
The concept of a sliding scale for the volume of aerodynamic research based on a team’s position in the constructors’ championship, weighted in favour of reverse order of success, was also discussed. The idea is understood to have been viewed favourably by F1.
The McLaren team principal, Andreas Seidl, has been emphatic in warning that F1 could lose smaller teams if it failed to address the spending issue and his team had been pushing for a cap of $100m.
F1’s sporting director, Ross Brawn, had said that coronavirus has forced F1 to look hard at it spending and that it had to act. “I think when we introduced the budget control there was always the anticipation that if we had a crisis we could turn the dial down,” he said. “The dial has been set at 11 for too long. We need to wind it down. We said this [sort of crisis] was what the budget cap was for when it was introduced. We’re there sooner than anyone hoped or wanted, but we are there now and it would be irresponsible to ignore it. We’ve all got to respond.”
The big three teams, Mercedes, Ferrari and Red Bull, are estimated to spend in excess of $400m a year, with
the remaining teams having costs of between $150m and $250m. There are serious staffing implications with such a drastic cut for the top three teams, who employ between 800 and 1,000 staff.
There had already been an informal agreement to drop the cap to $150m but it is understood both Red Bull and Ferrari were resistant to it falling any further. Ferrari’s team principal, Mattia Binotto, had pointed out that a flat rate ceiling did not necessarily work across the board. “When discussing a budget cap, we should not forget that we’ve got different situations, and it’s important that we find common ground somehow which is suited to the different situations,” he said last week. “There is still analysis required to make the right decisions. I think we should avoid being really emotional at the moment.”
Ferrari had pointed out that smaller teams buy parts form the larger ones and that they do not have to spend on research and development on these parts. Equally some teams such as Racing Point and Haas buy major elements of their cars from other teams, while Williams and McLaren remain independent manufacturers purchasing only engines.