Following a number of years stormy relations with Bernie Ecclestone, the Silverstone F1 race promoters’ secured a new 17 year deal to host the British GP.
This deal was reported by the BBC to cost £12m in 2010 and each year a compound escalation fee of 5% would be added.
This year, the fee was £16.08m and Silverstone did not have the money; so uncle Bernie kindly deferred the payment until 2016.
At the time the deal was signed, Martin Brundle hailed it as “brilliant news. I always assumed it would happen in the end because everyone wanted the same thing. The new circuits are exciting and interesting but they always had to balance up with the historic circuits, like Silverstone.”
Of course in 2009 Silverstone required significant investment and the thinking behind signing a longer contract than the then usual five year term, was that the security of hosting the British GP would allow the circuit greater borrowings leverage.
The British Government Sports minister at the time – Gerry Sutcliffe – was quick to welcome the announcement saying, “The news the British Grand Prix is to stay at the iconic Northamptonshire track will be welcomed by millions of fans – not just in this country but across the world.”
Now Silverstone are in debt, can’t pay the hosting fee and in danger of losing the GP.
Silverstone was revalued in last year’s financial reports which in fact saw the circuit declare a profit of just over £3 million, however, had the capital value of the circuit not been revised, this would have seen a like for like – year on year – loss of around £3.5 million.
The cold reality is that the Northamptonshire circuit has been mismanaged for years and is struggling to clear its debt.
Further the ‘new’ deal with Ecclestone in 2009 was a tragic misjudgement. The agreed escalator increases the fee by 218% (£26.2m) and this was agreed without proper thought given to how revenue could also be more than doubled.
Over this time this would require ticket prices to more than double, when in fact the circuit management were been forced to discount tickets in 2015 and again for 2016.
Prior to the discounts offered for the 2015 British GP, Silverstone already charged the highest general admission prices in the world, at £155. This is a price which the new circuit CEO believes to be close to ‘the limit’ of what people will pay.
Ecclestone revealed recently, the unpaid fees mean he can invoke a clause and cancel the 2016 British GP. Yet Bernie has a solution; and calls upon the British government to step in and assist. “Our government should support the British Grand Prix. They support the Olympics and that costs a fortune plus other events.”
The ‘early bird’ discounting scheme in place for the 2016 British GP has seen ticket sales by the end of September 163% ahead of this time last year says circuit CEO, Patrick Allen. However, the circuit chief admits, “We have got strong sales but it is absorbing the escalator that is in the contract so just to stand still you have to sell increasingly more tickets each year and that will become increasingly difficult as years roll by.”
Along with paying a year in arrears.
If prices can’t rise much further, then attendances must and in 2015 some 15,000 more spectators attended the race – a total of 240,000. However, Mr. Allen reveals this is close to the capacity the circuit can manage.
The British audience has been turning away from their screens in their drovers over the past few races – with audience numbers down year on year between 25-40%.
Patrick Allen says Silverstone is ‘seeking a new investor’, but then again they’ve been on this hunt for years.
If the race going public act likewise, then without government intervention, the future at Silverstone looks very bleak indeed.