Sebastian Vettel, Ferrari, Monza, 2018

F1 to increase planned budget cap to $200 million for 2021

2021 F1 season

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Formula 1 has revised its plans for the budget cap which will be introduced in 2019, setting a new ‘glide path’ which will start at $200 million.

RaceFans has learned from a high-level source Liberty Media the original $150 million target won’t be reached until 2023. The cap will fall from $200m in 2021 to $175m in 2022 and $150m the year after. These figures are expected to be adjusted for inflation.

Not all team expenses will be covered by the cap. Among the exclusions are driver salaries, the largest individual pay packet, and expenditure on marketing and hospitality.

The final details of the budget cap plan are still being worked out, including what kind of sporting penalty will be imposed on those who violate the spending restrictions.

Several F1 teams have argued strongly for the introduction of a budget cap and warned their future will be threatened if one is not introduced.

“What we need to achieve in this sport now is absolutely fundamental for the very survival of certain teams,” said Williams deputy team principal Claire Williams during the British Grand Prix weekend.

“I don’t think that should be underestimated or taken for granted, the challenge that some of us are facing at the moment because of the circumstances in which this sport has arrived at over the past few years.

“It is incredibly tough for teams like ours and it shouldn’t be underestimated how important these new regulations for 2021 are in the influence that they could have over our teams’ survival.”

McLaren Racing CEO Zak Brown said a budget cap is necessary to help customer teams challenges their factory-backed rivals. “Until that comes in it’s fiscally almost impossible to challenge Mercedes and Ferrari,” he said.

“If we had an unlimited budget or their size of the budget we’d be doing the same thing, so they’ve done an outstanding job, but now they’re spending so much more than the rest of us, then they also have partner teams which not only benefit the partner teams who are doing an excellent job but it’s also benefiting Ferrari and Mercedes having alliances with multiple teams.”

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Author information

Dieter Rencken
Dieter Rencken has held full FIA Formula 1 media accreditation since 2000, during which period he has reported from over 300 grands prix, plus...
Keith Collantine
Lifelong motor sport fan Keith set up RaceFans in 2005 - when it was originally called F1 Fanatic. Having previously worked as a motoring...

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51 comments on “F1 to increase planned budget cap to $200 million for 2021”

  1. Mclaren’s issues aren’t budget related. they can’t compete with midfield teams with lower budgets.

    Mclaren’s issue is bureaucracy, they appear to be running a business more than assembling a collection of purist, petrolhead engineers with the soul aim of winning.

    For a long time now they’ve been focused on marketing “The show” to sponsors and fans, if you’re team isn’t winning this is a futile exercise.

    Obviously this is my opinion from what I can gather watching the sport over the past few years

    1. I agree. They management do not seem to have a clue. Ron Dennis may have been a polarising figure but no one could argue that he did not know what he was talking about. His level of knowledge and attention to detail was respected up and down the pit lane. He also for many years was pretty much the leader of McLaren F1. Zak Brown might well have had a long racing career but not in F1 and is not an Engineer. Jonathan Neal is an Engineer but again mostly with an aerospace background rather than F1. Also you get the impression that these two are also hampered by not actually being properly in charge of anything. It is a problem experienced by many people in many companies however it is magnified in the world of F1 where quick decisions and free flowing ideas by knowledgeable people win the day. McLaren need to go back to their roots and ditch the corporate rubbish if they want to compete with Ferrari and Merc again.

  2. Does really MacLaren spend 180 mil? It is hard to swallow.
    @keithcollantine the team budgets in the graph, do they include everything or just the things that will be affected by the cap?

    1. and are the 2018 budgets in GBP (as stated), which would be almost 30% more when translated to USD.

  3. $200m gliding to $150m sounds fair as long as FOM allows teams to make some $200m from prize money and advertising.
    As unique sport like this should have teams which can be ‘filthy rich’ and can sell their ‘entry ticket’ (championship entry with team) for a high value when they want to quit the sport rather than having an administrator close the door.

    1. Yeah something like that @coldfly

      Also, I guess this means that McLaren can hire some extra people to try and fix their mess before they have to cull the (hopefully less well working part of the) working force; since now it really is only the top three teams, I guess the higher initial number and longer glide path is okay (or will we see Renault grow to 200 million until 2020?)

  4. is this a budget cap or a spending cap? how do they incorporate pay drivers money into this? how is overspend penalised? this whole thing is riddled with unanswered questions. having learnt about the complexity of force india’s ownership and sponsorship loans etc, I find it impossible to believe that this will be implemented in any kind of viable or satisfactory way.

  5. wonder how they are going to police it. Also, does it also apply to all the partners in each team operation? say, Shell or Petronas, are they going to be affected by the cap as well? it’d be interesting to know how are they going to control what third parties expend, given how essential they are in development

  6. Say developing and building your gearbox costs 100. What happens if, after being capped, a team spins off other companies, let them develop and build that gearbox and then buy from them for 10, leaving the other company with a deficit that can be covered with financial trickery? Am I too naive?

    1. @m-bagattini That would be possible if the two companies had different end-of-business-year dates and if they were part of the same group, eg Dacia and Renault or Fiat and Ferrari etc. By the time the FIA actually managed to collate expenditure, two years could have passed. What would the FIA do then, re-award the 2016 WCC and WDC crowns or fine the naughty teams for the 2019 season?

    2. contract Your driver to a supplier, pay the loan of the driver 10x pay the driver 1x, Give the parts almoast for free in trade ”for sponsorship” on the car!
      the same problem is with the engines, gearboxes they can sel them to the main team for 1x and for a costumer for 10x, in ths case the main team is left with more monies!
      Obviously the loopholes will be closed, but in the first Years Iam sure they will easily find how to spend more than the cap!

    3. So many ways around this e.g. free fuel, lubricants or brakes could be supplied in “exchange” for preferred lubricant/brake pad status on road cars. Surely the answer has to be standardized parts and cutting out things like tyre warmers, satellite race control rooms etc.

  7. Going to be fascinating how wind tunnels can be used as ‘hospitality’ suites. And how the ‘marketing’ engineers in Maranello and Brackley use racks of CFD workstations for sponsor speed of promotion services.

    Interpretive accounting will finally get the recognition it deserves on impressionist balance sheets.

    1. @jimmi-cynic – LOL.

      “We had to update the air conditioning fans and ducting. It’s sheer coincidence the duct is as wide as an F1 car.”
      “That’s not an engine on a dyno, we use this to keep us warm through ze cold German winters”.

    2. And before long these balance sheets will move on to cubism and post-structuralism.

      I think the serious answer to these questions would involve copious and frequent disclosures of financing and audits to smoke out inappropriate subsidies from third parties, loans that are never paid back, and other shenanigans. It’s going to be a mess.

  8. @nickwyatt here in Italy it’s not that uncommon, don’t know elsewhere. For instance:

    T0 situation:
    – Fiat owns Ferrari.
    – Ferrari builds gearbox, costing 100.
    – Total expenditure for Ferrari team = 100.

    T1 situation:
    – Fiat owns Ferrari.
    – Fiat owns Gearboxes Etc.
    – Gearboxes Etc builds gearbox, costing 100.
    – Ferrari buys gearbox from Gearboxes Etc for 10.
    – At the end of the fiscal year, Gearboxes Etc loses 90. Fiat injects capital to keep the company alive.
    – Total expenditure for Ferrari team = 10.

    1. The problem here is what is to stop ferrari building a gearbox for 150 and then hiding the spend in Fiats books? Any manufacturer of cars can do this, so that Merc, Ferrari, Renault (and if honda buy out STR them too).

      The cap will work if the teams stick to it but the temptation will be to “hide” costs in the parent company’s expenses not the teams

    2. @m-bagattini

      Its common across the world; Spinning off subsidiaries are done for a multitude of reasons–tax implications, prepping them for a sell-off, etc.
      Unless the FIA enforces the cap with stringent rules such as identifying the name of the supplier (Gearboxes Etc.) and its parent, its history etc. , there is nothing to stop Ferrari or Mercedes or any other company from doing it. In fact, over time, once the teams start optimizing their spend in-line with the cap, setting up subsidiaries will become even more common.

      1. @m-bagattini @webtel You are right. And for me the major problem is that it could take a couple of years before the accounts are completely available, in which case what will the FIA do – cancel the results for that year?
        Actually, I’ve just thought of an even better way to do it, so I’ll keep quiet!

        1. @nickwyatt

          Fair point. But i am guessing all those disparities in terms of reporting standards, FY periods, etc will all have to be normalized to avoid mishaps like the one you have mentioned.
          Nevertheless, i see this entire exercise as a step forward for the sport.

  9. Budget caps lead to one make badge engineering racing. No thanks!

    1. Lack of budget caps lead to one team dominating ad infinitum, and will see the demise of F1. No thanks!

      1. Clearly you have not thought through the long term consequences of increasing budget restraints and increasing costs. The concept will eventually compel the manufacturers into the increased use of shared parts to the point of F1becoming a spec series by default. I know you and a few others refuse to see that.

        1. Nothing I’ve heard from Liberty would indicate they will turn F1 into a spec series, not to mention the teams will draw the line at some point, so no I don’t dwell on long term doom and gloom speculation. I prefer to give them patience and breathing room to mould F1 as they envision it, and even those plans will be altered here and there over time, just as happens in life. Cheer up, it will be fine, and better than we’ve had under BE.

          1. Nothing I’ve heard from Liberty would indicate they will turn F1 into a spec series

            Lol like yeah I’m sure Malone will discuss it with you the next time you are over his place for a barbie.

            I prefer to give them patience and breathing room to mould F1 as they envision it

            You have no idea what they envisage.

            Cheer up, it will be fine, and better than we’ve had under BE

            Oh I’m not unhappy as changes are definitely coming that will dwarf what Liberty are going to try.

            not to mention the teams will draw the line at some point

            The only thing you have said so far that comes close to being correct, and it looks like they already have. It appears that Alfa maybe rethinking their involvement and the majors like Merc, Renault and Honda will only participate as long as they get value for money, and that includes developing and using tech that is relevant to their needs. Hence the extension of the engine regs the raising of the cap and the fudging of the time lines.

          2. For a moment there I thought this was going to turn into a debate… lol.

          3. Yeah I know, eh? There’s no debating someone who has to resort to childish sarcasm to start off a response, indicating he’s got no more knowledge than anyone else, but has the ego to make it sound like he knows it all.

          4. You can agree with “BlackJack” all you like, it does not detract from what I said.
            Without googling do you know who BlackJack was?
            Lets not get into the sarcasm debate as your no Innocent.

  10. Williams spending over a hundred million to run last?
    I could do that with a third of the money and still go home smiling.

  11. I may be wrong, but what difference is a budget cap of 200m going to make when according to that graph, only the three obvious teams are currently above that line and four of them are 100m down on it to start with? Even Renault would have to stump up another 50m just to hit the new cap and it still leaves everyone bar Mercedes/Ferrari/Redbull to find MORE money when they’re already struggling?

    Even if this goes ahead, the pack will probably close up a little bit but not close enough and the ‘big three’ will easily retain their advantage, so all in all this ‘budget cap’ will achieve nothing. They really should have kept the 150m cap – that would go a long way to equalize the current gulf of performance and make the entire sport more attractive to new entrants.

    1. I mean why even bother having this ‘gliding scale’? Just go to 150m and ‘glide’ down from there? The manufacturer teams can easily afford to save that much money and it would make the lower teams able to sustain themselves and compete properly?

    2. @rocketpanda – you’re not wrong. When Dieter (I think) spoke to someone at Force India, they too pointed out your very point, that many teams flew below even the original budget cap, let alone the revised one. They mentioned that such a cap wasn’t their first need, they wanted a more equitable distribution of prize money first and foremost to ensure their survival.

    3. The cap has flaws and isn’t a panacea but at least it’s something to begin closing the gap. It’s going to be supremely difficult to police but the net outcome is still better than no cap at all.

      1. @Allstar GP Thank you for a refreshing and more positive outlook. They have to start somewhere, and it seems the teams get that…even the big teams.

        It’s all well and good for poster after poster to point out the decades old considerations of where teams can hide money or juggle it around to appear to be adherent to a cap when they are in fact not. But things to me have a different feel now, now that a new regime is in charge and now that we are in today’s economy and today’s realities globally and for F1.

        Yes of course the top teams can use all kinds of accounting trickery to keep spending all they are, but I get no sense that that is what we will see. At the risk of sounding naive, it actually sounds like the teams are on board with at a minimum some effort towards some cap. That’s a heck of a lot better than the BE days, especially the last decade.

        I’m going to go out on a limb and suggest the teams are far closer to cooperating toward an improved F1 product overall, than they are to just nodding yes to whatever Brawn asks and then going behind Liberty’s back with the kind of extreme financial sneakiness as described by most posters on this topic.

      2. I agree. I would rather have some sort of financial cap than having F1 become a spec series. F1 needs to appear credible to survive, and having three teams contesting for the podium is just credible. When you look at many other famous sporting series like English Premier Football and the Australia’s National Rugby League series, they all have things like salary caps. I guess the F1 equivalent of that is a power unit and aerodynamics cap rather than a salary cap.

        1. When you look at many other famous sporting series like English Premier Football and the Australia’s National Rugby League series, they all have things like salary caps

          Totally different scenario, capping a salary is totally different than capping the costs of developing technology. And for the record…the NRL salary cap leaks like a sieve.

          1. Thanks, I wasn’t aware the NRL salary cap was badly policed. Nevertheless, that’s a matter for the administrators of that league and the teams involved. I would expect the policing to improve with time.

  12. I still think the budget cap is going to end up creating a big mess at some point as I think it’s going to end up been far harder to police & enforce than some seem to be expecting. It’s just going to open the door to constant accusations & controversy that are going to taint championships in the eye’s of many.

    I also honestly don’t think it’s going to do what people seem to want it to because budget alone isn’t why the top teams are where they are, If it were then Toyota would have won races/championships & Ferrari would have far more wins/titles than they do & McLaren wouldn’t be as bad as they are.

    Additionally £150-200m is something most of the teams can’t get to anyway so who’s it helping?

    1. I think you make a very good point here.

      1. I can’t see how an effort to instill a budget cap can create more of a mess than F1 is already in thanks to BE. And given that the teams seem willing to cooperate post-BE for the greater good, I can only see some degree of a tidying up of F1 from the financial side.

        Who is the budget cap helping? Obviously the smaller teams. That they aren’t at or can’t get to the 150-200 mill mark is not the point as they obviously have nothing that needs be capped. It is meant to take the top most resourced teams down a notch from their dominating (crushing) levels, and to therefore also attract new entrants who would normally not bother when they only see giants dominating year after year. All the top team principals have agreed when even their own domination year after year is not good for the sport.

  13. Apart from the difficulties people have laid out in policing subsidiaries etc., on a more basic level, I don’t think teams are going to be willing to accept damage to their cars caused by outside forces and shrug it off as the cost of racing. McLaren claimed that Alonso’s car was written off after the Spa crash. With a budget cap would Renault be responsible for the cost of the car? Or is Liberty to introduce a rule that fixing a damaged car is not covered by the cap but you can’t put new or improved parts on the car (good luck policing that too)?
    It just doesn’t seem like F1 is suitable for a budget cap and rather than capping spending perhaps they should consider changing the rules to “make speed cheap”.

    1. I think you are picking on low hanging fruit here. I’m sure all teams have always budgeted for an amount of carnage to their cars throughout the season. That is what budgeting is. It’s allotting moneys for various aspects of business so that when those expenses come due, the money is there in place ready to be allotted. You are talking about a pretty basic aspect of the costs of running racing cars in a series, far removed from things like spending on hundreds of extra staff to find one tenth of a second, as just one example.

      1. I’m sure all teams have always budgeted for an amount of carnage to their cars throughout the season

        I reckon Verstappen caught RB out this year :)))

  14. Here is an idea: how about Mercedes put that budget cap to good use? Complaining about how they can’t put their young talent anywhere, talking about a third car… Why not start a second team? Current budget of around 400m can easily be split, Ocon and Russell get seats, the grid gets another competitive car, job done. Ferrari: put some more money into Sauber. Red Bull: Toro Rosso. Quality.

    1. I like the idea. Some think it is about to happen with FI or at least think that Stroll wants that for FI and his son.

    2. I’d like to see second teams as well. Second teams will fill the grid, give up and coming drivers greater opportunity and spread the development costs by allowing . . . customer cars! Just like the fifties and sixties.

  15. 200mil ? … But given inflation, pension fund deficits, fluctuations in the exchange rate and tax, it will be a round billion…ish..

  16. A cost cap of some sort is necessary in F1. Survival of the current teams, possible new teams joining and the competitiveness/parity of the sport rely on its idea. It would be fascinating to see teams building prototypes with similar cost and rules and be from car 1 to 20 within 1sec. of each other. A chance to have up to 10 different winners in a season and 3-5 constructors legitimately fighting for the prize. A much healthier & exciting sport.

    I also think this would bring more brands and companies to join as sponsors or even principal/title sponsors because there will be more chance to have their brand on the podium on any given weekend.

    I understand IndyCar is a spec series but they have an amazing racing model. Cars are within tenths to each other, driver’s talent really shines thru and the cost is controlled which probably helps them have a grid of 25+ cars. F1 needs this level of competitiveness; basically the midfield in F1 should have it’s own championship. You can even look at the NHL and NBA for inspiration.

    According to the chart in this article, competitiveness is directly related to the amount of $$$ you spend; with Mclaren being an exception last few seasons. But, you can argue McLaren is in rebuild mode and I do believe as a fan they will find there way back to front.

    F1 also can’t have these partner teams because that will nullify the cost cap. It gives the “owner” teams more reason to spend on more resources which is happening now. All F1 teams need to supply their own chassis, suspension, gearbox, aero, etc. obviously using common parts that are specifically allocated from F1. Customer’s can only purchase the engine and it’s programming software; which will be the exact same as the manufacturer’s car.

    Same rules, same money…&…GO!

    1. @ Ken

      I understand IndyCar is a spec series but they have an amazing racing model. Cars are within tenths to each other, driver’s talent really shines thru and the cost is controlled which probably helps them have a grid of 25+ cars.

      We already have this, it is called F2.

  17. I’m disillusioned by it all, I want to watch good racing, that’s all, not a domination or fight between 2 cars

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