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BRDC triggers British Grand Prix break clause

NEWS STORY
11/07/2017

As expected, the British Racing Drivers' Club has triggered the clause in its contract to cease hosting the British GP after 2019

This means that unless a new contractual arrangement can be reached with Liberty, the new owners of F1, 2019 will be the last year that the British Grand Prix takes place at Silverstone.

The official statement confirming the move reads as follows:

"This decision has been taken because it is not financially viable for us to deliver the British Grand Prix under the terms of our current contract. We sustained losses of 2.8m in 2015 and 4.8m in 2016, and we expect to lose a similar amount this year. We have reached the tipping point where we can no longer let our passion for the sport rule our heads. It would not only risk the very future of Silverstone and the BRDC, but also the British motorsport community that depends on us.

However, I want to be clear that although we have now activated the break clause, we are fully supportive of the changes the Liberty team are making to improve the F1 experience. Our hope is that an agreement can still be reached, so that we can ensure a sustainable and financially viable future for the British Grand Prix at Silverstone for many years to come."

The BRDC has been the custodian of Silverstone for almost 70 years - owning and operating the circuit, which is the only venue licensed to run a Grand Prix in Great Britain. The organisation has invested 50m over the last 10 years to develop Silverstone - creating a world-class venue for fans to enjoy one of the great global sporting events. Today, the British Grand Prix attracts over 350,000 spectators - making it the best attended Grand Prix in the world - and draws a TV audience of over 400 million people.

However, as has been widely reported, the BRDC's current contract to host the British Grand Prix - agreed in 2009 with the previous owners of Formula 1 - requires the organisation to pay a Promoter's Fee to Liberty Media in order to host the British Grand Prix.

As has also been reported, this Promoter's Fee increases by 5% every year. This means that over the first eight years of the contract, the 5% escalator has increased the Fee from 11.5 million in 2010 to 16.2 million in 2017. By contrast, had this fee escalated in line with UK inflation (CPI), it would have increased to only 13.6 million - some 2.8m less. By 2026, the last year of the contract, the Promoter's Fee will have risen to 25m.

The cumulative effect is that, despite being the most popular weekend sporting event in the UK, the net revenue from ticket sales and hospitality at the British Grand Prix is not enough to cover the Grand Prix's share of Silverstone's overhead costs. This is why the BRDC has taken the decision to trigger the break clause in its contract with Formula 1/Liberty Media.

The BRDC is determined to secure a sustainable future for the British Grand Prix at Silverstone. The organisation remains in discussions with Liberty Media about finding a solution that secures the long-term financial viability of the event, and hopes that an agreement can be reached."

Speaking at a subsequent press conference at The Silverstone University Technical College (UTC), Grant, said:

"It is with regret that I am today announcing that the British Racing Drivers' Club, the owners of the Silverstone Circuit, has triggered the break clause in its contract with Formula 1, now owned and managed by Liberty Media. This means that, unless a new contractual arrangement can be reached with Liberty Media, 2019 will be the last year that the British Grand Prix takes place at Silverstone - the only viable venue for a British GP.

"This decision has been an extremely difficult one for us to take. The BRDC is at the heart of British motor racing and we have been promoting the interests of our sport and its fans for generations. We've been the custodians of Silverstone for almost 70 years and have nurtured the British Grand Prix into one of the world's great sporting occasions. The BRDC has also invested 50m over the last 10 years to improve facilities here at Silverstone.

"However, we have reached the tipping point where we can no longer let our passion for the sport rule our heads. Put simply, it is no longer financially viable for us to deliver the British Grand Prix under the terms of our current contract. By running the British Grand Prix we sustained net losses of 2.8m in 2015 and 4.8m in 2016 - that's 7.6 million over two years. We expect to lose a similar amount this year. To continue on this path is not only unsustainable, it would put at risk Silverstone, the home of British motor racing.

"The challenges associated with the contract signed in 2009 with the then owners of Formula 1 have been well documented. As has been widely reported, the current contract requires the BRDC to pay a Promoter's Fee to Liberty Media to host the Grand Prix, with the fee increasing by 5% every year.

"Looking back, the decision to sign this contract was made to preserve the British Grand Prix and ensure this great, historic race was not lost. This was the only deal on the table at the time and the decision was taken to keep the British Grand Prix alive.

"But the reality is that for many years the British Grand Prix has made a net loss. Despite being the most popular weekend sporting event in the UK - with a live audience of over 350,000 attendees - the net revenue we receive is not enough to cover the Grand Prix's share of our overhead costs, let alone turn a profit.

"This situation is not sustainable - for the BRDC, but also for the British Grand Prix and Silverstone. We cannot continue to sell our core assets in order to fund the Grand Prix. Put simply, we've run out of road and have been left with no option but to trigger the break clause.

"Our membership is fully aware of the financial challenges facing the BRDC and Silverstone, and the risks we have taken as an organisation to keep going up to this point. While we would hate to lose the British Grand Prix, Silverstone will have a bright future without it - both commercially and in terms of continuing to serve as the heart of the British motor racing community.

"But losing the British Grand Prix would have a negative impact that is felt far beyond Formula 1 and Silverstone. The UK motorsport industry today is worth an estimated 10.5 billion - employing over 45,000 people and exporting over 75% of its output. That is larger than the equivalent sectors in Germany, Italy and France combined. Having the British Grand Prix at Silverstone - the biggest occasion on the motor racing calendar - serves as a focal point for so much of what is great about UK motorsports, and the wider engineering and manufacturing sectors.

"Seven out of the 10 F1 teams are based in the UK - many close to Silverstone. This brings vital jobs to the country, as well as having a positive impact on the local communities and economy. There's a good reason why the area around Silverstone is known as the "Silicon Valley of motor sport". Take away the British Grand Prix and this is all placed at risk.

"Under its new Liberty ownership, Formula 1 has put forward some great ideas for developing F1 and we fully support their plans for creating a better show and fan experience. Putting fans at the centre of our sport is exactly what we believe in - that's one reason why Silverstone has become the most popular Grand Prix on the calendar.

"That's why we've been in ongoing discussions with Liberty's new F1 team about how the situation could be resolved - putting forward a number of proposals that we believe could secure the long-term, financial viability of the event.

"Although we have now activated the break clause, we have made it clear that we are open to working with our friends at Liberty to find a solution that works for all parties. Our hope is that an agreement can still be reached, so that we can ensure a sustainable and financially viable future for the British Grand Prix at Silverstone for many years to come."

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READERS COMMENTS

 

1. Posted by The stogie, 13/07/2017 23:19

"It's time to renegotiate the brutal contract imposed by Bernie. There was just not enough money left over for the track to implement the mandatory improvements, etc. not to mention an ROI. This track is in the home base area of F1 and gets, reportedly, one of the largest crowds of the year. Instead of going to sand traps where the races are seen only by a bunch of men in dresses and a few camels let's stay where it all started. The fans, the teams, the sponsors and everybody else deserve it. "

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2. Posted by Paul C, 13/07/2017 4:19

"F1's new owners need to recognize Silverstone is as much a heritage race as as the Monaco parade of F1. Freeze or reduce the promotion fees. Get those seven F1 teams in the area to kick in for the fee."

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3. Posted by Pavlo, 12/07/2017 21:12

"As I said already, something is definitely wrong with the management of BRDC. Firstly, having so popular and "historic" event, one should be able to negotiate a good deal with promoters. Secondly, there are ways to generate revenue from F1 race.
To compare with Austrian GP - in the innaugural GP they had twice less visitors than Silverstone has every year, and this year they had probably 20% of Silverstone attendance, and the tickets are cheaper. Red-Bull had to invest 50 millions in the track, it's in the middle of the mountains (definitely less accessible than Silverstone), but still they are ok with it. Firstly, because it's a huge advertising opportunity for Red-Bull. Secondly, because being "the home of F1" allows to sell other things much more expensive. It's like Ferrari - Formula 1 is definitely not profitable for them, they invest more than prize money, but it allows to sell cars better.
Talking about selling other things, 5 years ago I went to Silverstone to drive a racing car there just because I saw F1 there. Had no wish to go to Brands Hatch or whatever. Take F1 away and my children will never want to go there. By the way, driving experiences on the Silverstone are likely to be the cheapest in Europe."

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4. Posted by Bill Hopgood, 12/07/2017 18:43

"I think the irony of some in F1 wanting more races in Asia, an area that can't sell out the venues they have now and some like Malaysia are pulling out, while the British GP is one of the more popular is going to be lost, is the oddest part of this whole situation.

Aside from the irony, what on earth did the BRDC expect to do to cover off the 5% increase when they signed the original deal?

I wonder if the BRDC would have signed up if they had a "Names" policy in place for when things get tough fiscally.

I did read once that committees on clubs are not necessarily made up of the most competent but by those that are keenest to get the position and also because no-one else wanted to do it... "

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5. Posted by TokyoAussie, 12/07/2017 3:42

"I wish Silverstone would join forces with other key venues (Monza, Suzuka, etc.) and bargain as a group with FOM. Of course, it's highly unlikely to ever happen. But imagine the power of venues to shape fees and control circuit advertising if they worked as a group."

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6. Posted by mittagongcalling, 12/07/2017 0:06

"Doesn't the Texas circuit have an annual fee increase of 10%??? At that rate it takes less than 8 years for a 100% increase in the cost. If I was starting a business I would be knock knock knocking on Bernies door."

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7. Posted by MKI, 11/07/2017 22:59

"Better late than never by the sound of it! I seem to recall Silverstone tenant IPG also lost tens of millions to be released from their motor sport related investments once they realised the seriousness of their situation back in 2005. Had the BRDC been equally hard nosed....but clearly they were not. Very costly 12 years have passed for them since then too. But you do have to wonder how it comes to pass that in the private enterprise culture that exists in this country, how does one side of a bargain stand to make, what, 20m or so each year, and the venue provider lose, apparently, 4-5m? It really makes no sense. The event needs a venue. The venue needs events. Basis for a deal in the normal run of things. Which leads to a couple of somewhat obvious questions; is there something structurally unsound financially somewhere? Surely the FIA must have something to say on the subject! A key round of their world championship is at risk. I can't really get my head round this.

"

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8. Posted by Editor, 11/07/2017 18:25 (moderated by an Adminstrator, 11/07/2017 19:12)

"What he (Peter Rickitt) said...

Agree with every word."

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9. Posted by Peter Rickitt, 11/07/2017 18:13

"finishing of
...pollution - tourists visit four cities: London, Edinburgh, Chester and York: there has to be a circuit there somewhere.
And the BRDC member? Most of them could do with the 1-2m plus that they would get from Silverstone becoming a new town.
Heritage ? What heritage ? That was Brooklands (a housing estate) and Donington.......Liberty buys
donington ?"

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10. Posted by Peter Rickitt, 11/07/2017 18:04

"And so, 'Swan Lake' reaches its final denouement - except, from a spectator's view, Silverstone never was, nor ever will be a swan; it never even reached the status of an ugly duckling - it has always been the vanity home of the ilk of the super-smug Stewart, the incompetent Hill and several, but by no means all, self-aggrandising or self-important members of the BRDC: I know several who have for many years been unhappy at the turn of events.

Let us start with the spectators

- the bald fact is that Silverstone is, always has been and always will be a rubbish place to watch motor-
racing of any sort;
- it is not a 'bowl' or variable street circuit like most other F1 circuits - where undulations, such as other historic venues such as Spa and even the relatively flat but spectator-viewable Monza, make for a good spectator experience;
- it is a breathless dust-trap when hot and a muddy-slide when wet;
- you can only see the corner you are at and perambulation is a challenge for the fit, impossible for the unfit and, worst of all, practically banned: yo;u lose your space and have no reliable means of mobility around the site;
- following the Stewart/Hill/Warwick vanity wing, no-one knows where they are - worse still, this comes over on the television.

And now let us turn to the management.
But not the daily management who for 30/40 years have been hidebound, bullied, circumscribed and consistently let down by the BRDC grandees on the one hand and the members who, in my view correctly, resent such an attitude.
I single out the self-satisfied Stewart, the obviously unbusinesslike Hill and, in the latter's defence, m Iany other titled or household names who acquiesced or positively supported, and certainly luxuriated in, the 'glow' of the 2009 contract and the opening of the vanity wing as the culprits in this piece.
Were I a BRDC member, I would say :
- British motorsport circuits are safe in the hands of Jonathan Palmer, Denis Carter and others who do actually know what they are doing;
- so long as their plethora of circuits continue, the industry of motorsport, including the high-tech f1, will have plenty of opportunity for development;
- they are not daft enough to sign a British GP deal that is not profitable, ergo the future of the BGP is as a street circuit, where the fee can be clouded, the spectators guaranteed, the sponsors seduced and everyone makes money (and, remember, it does not have to be London - where crappy Kahn is already talking about the effect on pollutio
"

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11. Posted by GrahamG, 11/07/2017 15:06 (moderated by an Adminstrator, 11/07/2017 19:12)

"Totally support them. Silverstone is about motor sport for all the many different events and competitors who race there in national and international events. The future of the circuit for everyone is much more important than lining the pockets of the "owners" of F1.
If a British GP is so important to them then charge accordingly. Monaco don't pay a penny because they are regarded as important.
Elsewhere in UK - I'll believe it when I see it, no other circuit is interested and as for a new circuit in the city, just wait for the protest groups to get going and they will realise just how little most people think of F1"

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