As families decide what to cut from the budget to keep food on the table and petrol in the car, Formula 1 teams have voted themselves a budget increase but remain concerned that 145.5 million dollars still aren’t enough to get by in the biggest series of motorsports.
The working class might have a little more sympathy if not for the fact that the owners of the F1 team did this to themselves.
Formula 1’s spending cap seemed like a good idea at the time
Prior to last year, Mercedes, Red Bull Racing and Ferrari spent far more than most Formula 1 teams in pursuit of championships and international exposure. This allowed them to pay top dollar for engineers who extracted extra power from multimillion-dollar engines and tweaked designs for aerodynamic advantage.
As in Major League Baseball, however, the financial disparities between the haves and have-nots were apparent season after season. This led to the 10 team owners deciding to cap themselves on most spending categories to bridge the gap between disparate budgets. The pandemic has forced F1 to scrap implementation for the 2020 season.
The cap was fully launched last year, but assessing the effect is not yet possible, especially since some teams have all but stopped spending on old cars while preparing for design changes and engineering of 2022 models.
But now that inflation is eating away at budgets already taxed with unforeseen costs to upgrade the new car, the cap doesn’t seem like such a good idea.
Formula 1 owners have raised the spending cap
The original deal set spending at $141.2 million per team this year, then cut it to around $135 million in 2023. But those aren’t “hard” caps because driver salaries, budgets marketing costs, certain back-office costs and housing costs at race venues are among the exempt categories.
But with inflation approaching double digits in many countries, team principals met two weeks ago to consider changes. With a minimum of eight votes needed, nine owners have agreed to raise this year’s spending cap to $145.5 million.
Gene Haas supported the raise even though his team’s budget is comfortably below the old cap. Still, Red Bull Racing principal Christian Horner came away disappointed with what the new number means for his team.
“Is that enough? Not compared to inflation and what it is today,” Horner told Motorsport.com. “It’s not enough for us, and it’s too much for the little ones. So it’s a compromise, and a consensus has finally been reached.
If inflation remains heavy, next year could pose a bigger fiscal problem than this year. While R&D costs on new models will drop in Year 2, shipping costs between race locations have increased dramatically. Teams are now planning budgets of $138.6 million for a schedule that could grow by three races.
Expect more changes by early next year
When the prosecutor and defense attorney leave unhappy following an evidentiary hearing, the judge has probably made his ruling perfectly fair. The recent Formula 1 meeting apparently worked the same way. While Red Bull’s Christian Horner felt the revised budget was still too low, Alpine manager Otmar Szafnauer voted against the increase. Alfa Romeo boss Fred Vasseur was considered a potential ‘no’ until the very end before giving his support.
“A deal is always a compromise,” Vasseur explained. “If everyone was happy or everyone was unhappy, that means it’s a good deal. And, in the end, we have to move on and find a solution. The situation is critical for everyone.
There is no sign yet that inflation is slowing down. Combined with the costs associated with adding races in 2023, Formula 1 teams face the prospect of additional budget compromises next spring, when they are expected to decide whether or not to pursue a proposal to integrate the salaries of pilots in the ceiling.
If this measure is adopted, next year’s budget will be radically different.
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