APRIL 21, 2008

Meanwhile at Silverstone

The Formula 1 world has been paying very little attention in recent weeks to its normal goings-on, with FIA President Max Mosley hogging the limelight. However, we are hearing disquieting stories from Northamptonshire, where the British Grand Prix is facing a troubled future. At the moment the British Racing Drivers' Club (BRDC) has a deal that will keep the race at the Silverstone circuit only until 2009.

We are hearing that Formula One Management has offered the BRDC a new contract for the years 2010 to 2014. There are, however, a number of commitments needed from the club in order for this deal to be secured. These include the promise that Silverstone will have new facilities by the time the new deal begins. The financial details of the offer are not clear, but we are hearing that these are well in excess of the $15m that the club is currently paying for the right to host the race. Insiders say that the deal on offer is on a par with the deal that was signed with Germany. This is believed to be around $22m, although most of the FOM contracts these days include an annual price increase of 10%, which means that by the end of a five-year deal a promoter would be paying $32m a year. This would mean an overall commitment over five years of something in the region of $130m.

This is not bad value for money given the cost of sporting events in general and with a race able to generate around $80-$100m for the region each year, it might be do-able in another country. However, the BRDC does not benefit from the money that flows into the country and as there is little help obvious help coming from the government, there is a feeling that the race is once again in jeopardy.

Most worrying, however, is a story we have heard suggesting that FOM wants a bank guarantee covering the first two years of the new deal as soon as the deal is signed. This would amount to an immediate commitment of $50m. Even allowing for the low value of the dollar, which has helped races with US dollar deals in recent years, this is simply not possible for the BRDC in the next 10 days.

Even if that can be negotiated away - and FOM has no real need to be generous - the BRDC still has the major problem that it needs planning permission in order to make a commitment to go ahead with the Grand Prix, and it needs a Grand Prix contract in order to get the planning permission.

It is possible that FOM may now try to engineer an arrangement in which the British and French GPs alternate, thus opening the way for another high-paying race in Asia or the Middle East. There are currently 18 races. As things stand there are three new races in the pipeline for the next few years: Korea, India and Abu Dhabi. In addition Indianapolis is keen to get back into the schedule. And the F1 teams say that they will agree to 20 races a year but no more.

That means two events will need to disappear. Merging Britain and France would get rid of one. The other races in the firing line are believed to be Australia and Hungary. The Budapest event is likely to stay alive as long as the Russians are unable to come up with a deal, but has little chance of survival after that.

The race in Melbourne may be popular and may add another continent to F1's list of venues, but the timezones are difficult and the population of Australia is only 21m, which is only slightly larger than the number of people who live in Mexico City, Mumbai or Sao Paulo.