SEPTEMBER 7, 2004
The future of the British Grand Prix
The British Racing Drivers' Club has today submitted a written offer to Formula One Management to act as the promoter for the British Grand Prix in 2005, 2006 and 2007. The offer comes because no other promoter can be found, presumably because the numbers involved do not add up.
The BRDC offer was made at a meeting between Bernie Ecclestone of FOM, Ray Bellm and Alex Hooton, respectively the chairman and chief executive of the BRDC. The terms of the deal have not been made public but these are likely to be discussed tomorrow by the BRDC board of directors. This meeting will be followed by a discussion session which is open to BRDC members and there is likely to be some debate about the offer because it seems that the club will have to accept a loss in order to make the race happen. The club has $37m in its bank accounts following the recent settlement with the Interpublic Group after the 2004 race.
The average European Grand Prix is now paying fees of around $15m to FOM each year with France believed to be the cheapest deal at $11.9m. This increases each year by 10%. With the fees included, a race costs in the region of $20m to stage. The problem is that the race contracts mean that Allsport Management takes most of the commercial rights, leaving the promoters to survive on the gate money alone. The British are fortunate in that the Silverstone race attracts big crowds with an estimated 120,000 people this year paying an average of $180 a head to attend the race. This means that the gate will generate around $21m, slightly more than the cost of staging the event. However, there are all kinds of additional costs that circuits have to pay, notably the cost of upgrading work. Disruption from weather or a drop of public interest in F1 can have a very serious effect on the books, turning a race into a money-losing operation.
There is some small potential for Silverstone to get tax-breaks from the East Midlands Development Agency which would help to save money (and thus cut deficit) but the Grand Prix would still remain marginal in 2005. With the fees increasing 10% each year, the task is becoming harder and harder. The BRDC says that the terms of the deal "do not create a profit, and carry inherent commercial risk" but they have made the offer "in the interests of maintaining the British Grand Prix in the United Kingdom".
The club statement concluded by saying that it hopes "for the sake of the sport and the industry in the United Kingdom that agreement can be reached" as it is "the essential first stage in a programme of major development at the Silverstone Circuit so that it becomes a true statement of the world status of British motorsport and its industry".
The board of directors is expected to back the bid, but it is always possible that the BRDC members may wish to throw out the deal, because it will inevitably cut into the club's fund.
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