Teams can leave F1 if prize money falls

26/05/2012

Much has been made of the fact that the majority of F1's teams have agreed to sign a new Concorde Agreement, the contract which commits them to race in the sport until 2020. The agreement is as watertight as they come and has been vetted by all the key financial institutions working on the planned flotation of F1 on the Singapore stock exchange. However, all contracts have break clauses, that's part of life since no one can be forced to do to anything come what may. The Concorde Agreement is no exception.

In today's Guardian, Pitpass' business editor Christian Sylt reveals that there are indeed circumstances under which the teams can leave F1 even when they are signed up to the Concorde Agreement. Ferrari of course has its own terms.

Under the current Concorde Agreement the top 10 teams receive a 47.5% share of F1's underlying profits which came to £748.8m ($1.17bn) last year. In addition to the 47.5%, a total of £19.2m ($30m) goes to Caterham, HRT and Marussia whilst Ferrari gets an additional 2.5% share of the profits all to itself in return for being F1's longest standing team.

In the new Concorde Agreement, which runs from 2013 until the end of 2020, 60% of F1's profits will be shared among top 10, top 3 and longest standing teams based on performance. However, if F1's profits fall below £456.4m ($715m) all of the teams are allowed to leave. Ferrari can leave if there is a change of control of F1 and its profit falls 25% over the next two years.

Bernie Ecclestone has told Sylt that F1 is "more secure than most businesses but having said that, as secure as it is, there is still risk but probably a lot less risk than lots of companies." That seems to be quite an understatement as there aren't many other businesses which can boast having around $7bn of revenues already contracted over the next few years as Sylt has revealed F1 has.

It's hard to imagine F1's profits plummeting enough that the teams would be able to leave. Economic meltdown could bring it about but if that happens then the world, let alone F1, will have a very big problem on its hands. So although the teams have got break clauses in the new contract don't expect them to be using them any time soon.