The issue of a Formula One cost cap has been discussed for some years. Under the leadership of Bernie Ecclestone the teams could not agree to enforce one yet since Liberty Media took over the reigns a cap was agreed. The limit was originally set at $170m dollars though the larger teams agreed to reduced this in its inaugural ayer to $140m due to fears that Covid may see smaller teams go under.
Ferrari and Christian Horner have been lobbying this season for an increase in the amount teams are allowed to spend due to the global inflation hitting double digits since Russia invaded Ukraine.
Yet team’s like Alfa Romero, Alpine, Haas and Williams have blocked an increase at recent meetings with Liberty media. An increase in to cost cap is of no use to these teams because their spending limit is below the maximum allowed.
Alfa Romeo boss Frederick Vassuer said recently “My budget limit is my budget”, so of course these teams gain nothing by those with bigger budgets being allowed to spend even more.
Within the regulations there is an allowance to increase the budget cap based on the September inflation figures for the G7, but only if that aggregated number is 3% or more. In September 2021 this number was 2.9% due to Japan’s poor economic performance.
Since the war in Ukraine began, the G7 combined inflation figure has been around 6.2% though growing month on month, yet this adjustment would only take place for the 2023 season.
McLaren, Ferrari, Mercedes, Red Bull, Aston Martin and Alpha Tauri have in recent weeks been lobbying FOM for a force majeure ruling to allow an increase in their budgets and it appears following last weeks meetings there is an agreement close to completion.
A source has leaked either $3m or 3% of current budget cap ($4.2m) will be paid to all the teams by the F1 right’s holder. This means the smaller teams are not at a disadvantage as the bigger teams spend more. In fact they will have a small relative advantage in percentage terms as their actual budgets will grow.
However, the money is not incremental funds but will come out of the share of the pie the teams receive already. The teams are paid incrementally more the higher up the constructors table they finish. Exactly how this calculation will be adjusted is not clear yet.
AMUS reports Alpine team boss Otmar Szafnauer can live with this compromise: “If everyone benefits equally from it, we will be there.”
Haas colleague Guenther Steiner reportedly said: “That would be a decent compromise, because the teams that do not reach the budget limit also benefit from it.”
Given inflation in the UK where all the teams are used is currently around 10%, Christian Horner and Toto Wolff would probably have hoped for more. Wolff has already explained the energy bills for the two Mercedes factories has risen £4m this year and the team have made a number of redundancies already.
The deal is to be formally announced by F1’s CEO Stefano Dominicali and may be revealed at this weekends British GP.