FEBRUARY 5, 2008

What if Silverstone does get a new contract?

The British Grand Prix may have removed one hurdle in its path with the news that its development plans have moved one step closer to becoming a reality - but this is no guarantee that the race will be able to survive in the longer term. We hear that when it comes to negotiating a new British GP deal for the period 2010-2014 CVC, the owner of the Formula One group, is looking for a starting price at around the same level that is being paid by the other European races. The word is that this is now about $22m a year.

Promoters who have contracts in US dollars are obviously being helped at the moment because of the weakness of the US dollar in the last eight years. The US currency has lost 25% of its value against the Pound and 38% of its value against the Euro. In an effort to make up for this the only deals being offered by Formula One these days include a multiplier of 10% a year and with a starting figure at $22m this means that a five-year deal goes up to $32m a year by the end of the deal and commits the promoter to paying a total of $135m over the term of the contract. If the dollar increases in value that is going to cost promoters comparatively more than it has in recent years as a result. And with President George W Bush due to leave office at the start of 2009, there is hope in the US that new policies will result in a stronger dollar.

In the case of Silverstone the cost of the fees will be in addition to the usual running costs and the cost of the circuit development. Obviously the plan is for the new facilities to generate more income but a lot of this potential income is in rental fees and if there is no-one to rent the facilities, there will not be the level of income which is hoped for. In the current financial climate that means that there are serious risks involved in committing to a new Grand Prix contract. And without either government help, or at least guarantees, the circuit is going to be at risk.

Having said that it is hard to imagine that CVC is going to get that kind of money from any other British venue and could run into opposition from the F1 teams if it tries to suggest that there should not be a British GP.

The only option would be to bring down the fees but CVC is not likely to do that for fear that other races would also demand discounted deals.