Formula 1 will enter the second year of its budget ceiling in 2022. According to the FIA roadmap, this will drop from $145 million in the first year to $140 million in the second year. However, with (numerous) exceptions and an extra 2.4 million dollars that the teams are allowed to spend, because not 21 but 23 Grands Prix are held and there is an extra 1.2 million for every race weekend over 21.
The list of exceptions (i.e. costs that are not covered by the budget ceiling) in the Formula 1 financial regulations is four pages long. Points such as bonus payments, social security contributions or costs related to maternity or paternity leave also count as exceptions.
It is also considered an exception if costs arise in connection with sick leave or if an employee leaves the company and collects a severance payment. Or when the team spends money on entertaining their own workforce, for example on company outings or corporate events.
But as important as the budget cap is to ensure the financial health of teams and to close the gap between well-funded and less-funded teams, it also comes with its downsides. For example, that employees have to be cut and the position of employees who want a salary increase is weakened.
Are there better salaries elsewhere than in Formula 1?
That, in turn, skeptics note, could result in some of the brightest minds leaving Formula 1 for more money in other industries. A fear that McLaren CEO Zak Brown does not cause sleepless nights. He doesn’t think such a personal exodus will happen.
“I can only speak for us at McLaren. We love being part of Formula 1. The salary can of course be motivating for the staff, but I’m pretty sure that first and foremost the people at McLaren have the drive to be with McLaren to do motorsport and win car races,” he says.
“Ultimately,” Brown concedes, he can’t say with certainty whether or not such effects will occur. “Certainly there are one or the other for whom the money could be a reason to change industries.” But: “If that’s the case, then these people should just go.”
“Most sports have some kind of budget limit or financial controls. We obviously want to make sure our people are doing well, but we have to stay within the rules that the sport dictates. We’re no different than the NFL , the MLB or the NBA.”
Brown: Team stability outweighs the disadvantages
“Before Formula 1 introduced the budget limit, we saw that the bottom line was that more people lost their jobs because teams went bankrupt. Now, on the other hand, we have very stable, financially well-positioned ten teams. I think that’s a better bottom line situation for the entire industry,” says the American.
Basically, thanks to the new framework conditions in the financial area, Formula 1 in 2022 is “in an extremely healthy economic condition. We have a record number of Grands Prix and more Grands Prix are applying. TV is very strong, digital is very strong. […] Formula 1 is extremely attractive for commercial partners.”
This is slowly becoming noticeable. Red Bull has just unveiled a new title sponsor, Oracle, who is said to be paying $100 million a year. And Aston Martin has just managed a similar mega deal with Aramco. McLaren also benefits: “We now have more than 45 partners or licensees for our racing teams,” says Brown.
“We managed to win more than ten new partners for this year, including some very large companies. Other Formula 1 teams have done the same. Formula 1 is in its own league at the moment. Our sport is very economical strong position. And that’s good news for everyone,” says the McLaren CEO.
Unlike Red Bull and Aston Martin, McLaren is not thinking about building its own engine, at least “at the moment”: “It would be great if Aston Martin really built its own engine, because another engine would be good for Formula 1 . But the answer is no. We are very happy with Mercedes”, Brown dismisses.