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Report reveals team budgets fell 10% in 2009

NEWS STORY
14/02/2010

Some of the strongest evidence yet about why F1 did not need a budget cap comes in the latest issue of Motor Sport in a report written by Pitpass' business editor Chris Sylt.

Despite there being no cap in place last year, F1 team budgets fell by more than 10% according to data compiled by Sylt's consultancy firm Formula Money. The average F1 team budget fell to £173.2m ($271.6m), compared to £191.1m $302.8m in the previous year, while total budgets plummeted from £1.9bn ($3.1bn) to£1.7bn ($2.7bn) as some of the biggest spenders withdrew.

On the sponsorship front, Baugur, Credit Suisse, Dell and ING all quit during the year and contributed to an 8.5% drop in sponsorship and supplier deals from £572.78m ($895.75m) to £522.92m ($819.55m).

However, it was the manufacturer cut-backs that hit the teams the worst. Team owner spending plummeted 30% from £1.02bn ($1.6bn) to £701.9m ($1.1bn) as the car manufacturers reduced costs, but it was still the biggest source of revenue for the teams at 41% of their total. This situation is changing even more this year as the car manufacturers have been largely replaced by smaller teams on significantly lower budgets.

All this downsizing happened of course without the governing body's much-vaunted budget cap being in place. What's more, the resource restriction which the teams have committed to between themselves will take this a step further. One senior F1 source has revealed to Sylt that under this agreement "the maximum number of staff that the teams will be allowed in 2011 is 285 and only 42 or 43 of them will be allowed to go to each race. Now it is about 70." Theoretically at least, it should leave some teams with a lot of free cash.

Formula Money estimates that McLaren was the team with the biggest available resources in 2009 at a whopping £308.77m ($483.85m), which included £143.5m ($225m) from Mercedes and £101.4m ($159m) in sponsorship. It is no wonder that F1 boss Bernie Ecclestone recently told Sylt that he thinks Mercedes pulling out of McLaren will hurt the team.

Toyota contributed more to its team than any other car manufacturer at £162.6m ($255m), but smaller takings in terms of sponsorship and prize money meant that it had only the second biggest budget after McLaren at £262.4m ($411.35m). Ferrari had the third biggest budget at £236.5m ($370.75m) and drew the biggest sponsorship haul at £132.6m ($208m).

Brawn's budget was only the seventh largest and at £103.8m ($162.75m) was only just over a third of McLaren's, although the world champions benefited from substantial spending on the car in 2008 when Honda was still on board. Even in 2009, the car manufacturer spent £63.7m ($100m) on the team as part of the process of severing its F1 involvement. Ironically, this sum alone could well have blown through the proposed budget cap which raises the question of whether Brawn would have been so successful if its spending had been restricted. It doesn't look likely that this kind of question will arise again any time soon.

"For years and years I've been keeping Formula One as expensive and high prestige," Ecclestone recently said to Sylt adding "if suddenly they said once upon a time it cost half a billion to run a team and now it costs 50,000 they would say now we are going to give you 10% of what we gave. Before we gave you £20m in sponsorship, now we will give you £2m."

Losing this kind of status is the very reason why Ecclestone will never let a budget cap put the brakes on F1 spending.

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