$145m cost cap approved for F1 in 2021, with more limits on testing and development

A cost cap of $145m will be introduced in F1 next year after the measure was approved, along with other restrictions to reduce spending and level the playing field

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F1 testing 2020

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Formula 1 will introduce a $145m annual cost cap next season, after the proposal was approved this evening by the FIA’s World Motor Sport Council.

The decision was hailed as a victory for grand prix racing by McLaren, which lobbied to lower the limit from the $175m originally agreed, in the wake of the economic chaos caused by Covid-19.

Combined with fairer revenue distribution, which is expected to be approved in next year’s commercial rights deal, the move should make the playing field more even for smaller teams, which have been vastly outspent by the top three.

The decision follows a meeting last week between teams, where a number of changes were agreed to reduce spending, limit development and restrict testing both on and away from the track between now and 2023.

Starting this season, teams will face reduced aerodynamic testing time, with a power unit test bench introduced to limit spend. These changes will carry over into 2021, with time allocated to each team dependent on its finishing position the previous season. The allowed time will increase five per cent increments from first to tenth.

A component list including the chassis, gearbox and mechanical components and impact structures will also be placed under a freeze, again removing costs of development between the 2020 and 2021 seasons.

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This will include a limitation on power unit upgrades, with only limited allowances made for each team’s unique requirements, and will be subject to a token system devised by the FIA.

Beginning in 2021, the cost cap will sit at $145m, down from the $175m originally planned. This total will also change for 2022, falling to $140m before another drop to $135m from 2023-2025.

Exemptions from the cap include driver salaries and teams’ Christmas party budget: up to $1m can be spent on staff entertainment.

“Formula 1 wins today,” said Zak Brown, McLaren Racing’s CEO. “This is a crucially important moment for our sport. F1 has been financially unsustainable for some time, and inaction would have risked the future of F1 and its participants, who are to be commended for resolving this issue collectively and determinedly.

“A uniform budget cap, in concert with more even distribution of revenue among the teams, will ensure greater competition and more people wanting to watch live and on TV, driving more sustained revenues to underpin the long-term financial health of the teams and the sport. Ultimately the fans win, and if the fans win, the whole sport wins too.”

 

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