HomeNewsFinance & MoneyMotor RacingGlobal

F1 close to agreement on $145m budget cap

Red Bull's Max Verstappen (R) leads the pack during the 2019 Brazilian Grand Prix (by CARL DE SOUZA/AFP via Getty Images)

Formula 1’s managing director of motorsport, Ross Brawn, has said an agreement is close to being reached that will see the proposed team budget cap set at $145m (€133.7m), a reduction of $30m from the originally intended figure.

Brawn was speaking following a meeting yesterday (Monday) with F1 chief executive Chase Carey and the championship’s sanctioning body, the International Automobile Federation (FIA), over the future and sustainability of the sport.

Brawn told F1’s UK broadcast partner, Sky Sports, that the reduction for the 2021 season onwards has been proposed as the sport and its teams tackle the impact of Covid-19. Following final talks with the teams, F1 will attempt to drive down this figure further in the coming years.

Brawn said: “The message is clear – we’ve got to cut costs – and therefore there’s another big step in the reduction of the cost cap. We started at $175m, that was a long battle to get it there. With the current crisis we’re now going to start at $145m and the discussion really is how much further we can drive (it down) over the next few years.

“Today’s meeting was (between the) FIA and Formula 1…and the details will be going out to the teams in the next few days. There’s been a lot of consultation and I think now we’re at the very final stages. It’ll all become clear shortly.”

In October, F1 and the FIA revealed the set of new regulations that sought to overhaul the championship from the 2021 season, headlined by the introduction of the sport’s first cost cap. The regulations were two years in the making and had been the subject of fierce debate in the F1 paddock. They were ratified by the World Motor Sport Council (WMSC) and broadly seek to promote closer racing, more balanced competition and ensure greater economic and sporting sustainability.

The cost cap had been set at $175m per year, covering a team’s expenditure which relates directly to the race car’s performance. It will apply equally to all teams and is based on there being 21 grands prix – one fewer than was originally intended for the 2020 season – on the calendar. Should there be an increase in that number, the teams were to be allowed to spend an extra $1m for every additional race. The figure was to be reduced by the same method if the calendar is shorter than 21 races.

The cap excludes all marketing costs, race driver fees and the costs of the team’s three highest paid personnel. Teams such as British outfit Williams run Heritage car programmes, which will be excluded along with all corporate income tax and other non-F1 activities. The cost for a team purchasing a customer engine supply deal, which has been capped at €15m per season, had also been excluded.

Last month, teams agreed to reduce the 2021 cap to $150m, but some called for it to scale back even further to $125m. Brawn added yesterday: “The initial objectives (of the budget cap) were a more competitive field and I think with the situation we have now, economic sustainability is the priority, and I think that counts as much for the big teams as it does for the small teams.”

Brawn said that the resource gap between the established ‘top three’ teams of Mercedes, Ferrari and Red Bull Racing, and the other outfits, will be further shrunk by an increase in prize money for midfielders.

He added: “There’s going to be a much more equitable prize fund in the new agreement. The midfield teams are going to be much better off in terms of their proportion of prize money. So it’s being balanced in every direction.

“We’re reducing the amount of money that can be spent in Formula 1 and improving the distribution of the prize fund more evenly amongst the teams. A good midfield team should be able to score podiums, maybe a win, and it should make a small profit. And if we can achieve that then we’ve got a very sustainable future.”

Brawn’s latest comments come after he last week set out how F1 is planning to establish a “biosphere” to enable its 2020 season to commence amid the ongoing spread of the pandemic.

Read this: Covid-19 drives F1 to a crossroads