For most of Formula One’s history, the sport operated as an “arms race” where the bigger teams outspent their smaller rivals by a massive amount, which resulted in a competitive divide. The idea of capping spending in F1 was first floated in the late 2000s by then-FIA president Max Mosley; however, it was fiercely resisted by the high-spending manufacturer teams.
The bigger teams sucked in most of the sponsorship and partnership funding, and the gap on the grid continued to widen.Teams began to go bust in the 2010s as the sport faced the crisis of manufacturers leaving F1.
The sale of the commercial rights to Liberty Media in 2017 drove a shift in the mentality of those running the sport. Now sustainability and profitability were the new drivers, along with making F1 more competitive.
Cost Cap grudgingly accepted
Eventually, the cost cap was finally accepted by the bigger teams due to the COVID-19 pandemic and a season where the F1 schedule was turned on its head and cut short. The new financial regulations came into effect on January 1, 2021, with the cap set at $145m for all areas of the team relating to the competitiveness of their cars.
There were many exclusions from the restricted items of spending, which included driver salaries and the three highest-paid members in each of the organisations. Yet teams found ways to circumvent the regulations by engaging ‘non-F1 staff’ in activities restricted under the cost cap.
Over time, the FIA continually updated the regulations to prevent teams from bypassing the cap using external projects,sister companies, or advanced technology divisions. Further, a cost cap was instigated for engine manufacturers, which had previously been unrestricted. This limited spending, of course, led to almost eight years of Mercedes dominance from 2014 to 2021.
Capital Expenditure and Legacy Infrastructure
Further, spending on capital items was introduced, meaning teams could not blow unlimited amounts on the latest production equipment, supercomputers, and simulators. The amount was set at $36m spread over four years until the amount was integrated into a new $215m limit, which includes many of the previously excluded spending categories.
Yet, as Williams boss James Vowles has been advocating, there should be an allowance for the teams who have suffered underinvestment over the past two decades. Having worked for much of his career at the Brackley-based team—now Mercedes—Vowles was shocked when he arrived in Grove to see the ageing facilities and creaking production line.
The team was using spreadsheets with hundreds of pages to track components through the system. At Mercedes, they use a state-of-the-art CRM modular software system, making internal processes more efficient and less manpower-dependent.
The Threat of a Two-Tier Championship
Whilst the cost cap has improved competitiveness in F1, it in effect baked in the advantage the bigger teams had built over years into their infrastructure. Vowles argues F1 needs to address this matter with some urgency, as the current rules have entrenched a two-tier championship where Red Bull, Mercedes, Ferrari, and McLaren are in a division of their own.
These squads monopolize the podiums and the points, leaving the rest to fight for scraps. The Williams boss forces a doomsday scenario on the horizon, where the lower-tier teams risk losing commercial value, sponsor appeal, and the long-term incentive to stay in the sport.
This has triggered intense paddock debates over whether the FIA needs to introduce dynamic mechanisms—such as sliding-scale allowances or targeted exceptions—to help teams with inferior legacy infrastructure bridge the gap.
Looking for the Right Balance
Of course, F1 is in rude health at the moment, with almost double the number of US sponsors and partners in the sport since the arrival of Liberty Media. And, of course, in most sporting competitions, there are perennial favourites and those who rarely challenge at the top.
Pierre Gasly claiming pole position in Monza was one of those ever-diminishing moments in the sport where the minnows triumph. Further, predictability is bad for sporting competition as the excitement of the unknown is drained away.
Vowles has now been joined by some of F1’s other leading figures in calls for changes to be made to the capital aspects of the cost cap. F1 guru and car designer—Aston Martin’s Adrian Newey—is joined by Audi Racing director Allan McNish and Cadillac team principal Marcin Budkowski in their calls for a rethink.
McNish weighs in on the need for the regulations to ever evolve, stating: “I think that the cost cap, first of all, is a very important part of the sustainability of Formula 1. It is something that’s evolved, and I think will continue to evolve as we go through.”
Adrian Newey reflects on how in other aspects of F1 there are sliding-scale allowances giving the teams performing less well additional resources to improve their competitiveness. “If you look at things like wind tunnel testing, then that—and also the engines with the ADUO—then those are both examples where teams that are behind are granted more wind tunnel time or dyno time or whatever it might be than the teams that sit at the front,” stated Aston Martin’s technical magician partner.
“So, it’s easy from that point of view to then extrapolate that to, okay, if teams are behind, then also give them a small extra allowance on the budget,” adds Newey. In terms of wind tunnel allowances, every six months the ranking in the constructors’ championship is taken, and the team at the bottom is allowed the most wind tunnel time and CFD alliance,whilst the one leading is awarded the least of these resources.
Rejecting Balance of Performance
Something F1 is keen to avoid is a system of “balance of performance” (BoP) as used in the World Endurance Championship. There, teams performing better are handicapped with extra weight, aerodynamic restrictions, and other methodologies designed to bring the cars all to 100% convergence.
Cadillac F1 boss Marcin Budkowski agrees the cost cap should be looked at again, although avoiding the pitfalls of the WEC methodology. “Yeah, completely agree on that. It needs to be done in the right way,” he said. “We are absolutely not in favour of any balance-of-performance mechanism. It’s really not what Formula 1 is about.”
By increasing the cost cap allowance for the teams performing less well, this is a catch-up mechanism rather than a penalty for the team that has delivered the best. The warning from Vowles that the sport could be undermined by having a two-tier racing series appears to be the best argument for the top teams to come to the table.
Team values have rocketed as F1’s popularity has exploded, with Ferrari F1 recently valued at over $7bn, with Mercedes close behind at around $6.5bn. Of course, if the teams P5–P11 cease to exist or lose interest in hardly ever scoring points,the Formula One championship would be significantly devalued.
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The Judge, a nom de plume of an experienced F1 journalist and site founder with long-standing sources across the paddock. With over 30 years of experience in Formula 1 as an insider journalist, I have built trusted connections across the paddock, from race engineers and mechanics to senior team figures. At The Judge 13, I and a handful of trusted colleagues share exclusive Formula 1 news, expert analysis and behind-the-scenes stories you will not find in mainstream motorsport media.
