Silverstone gears up for F1 Brexit
Shackled by debt and tied to a contract it can’t afford, the circuit is starting to think the unthinkable and ditch its most famous race. So is this the end of the road for the British Grand Prix?
Andy Middlehurst was browsing his emails as usual one morning in December when he came across one from the British Racing Drivers Club, sent to all members. “I don’t read all of them,” says the 53-year-old multiple National Saloon Car champion, “but this one stood out.”
It was from John Grant, chairman of the BRDC, the body that owns Silverstone race circuit, and among the usual updates about the state of the club and of British motor sport was a soberly worded bombshell. “I was shocked. Perhaps it shouldn’t have come as a surprise - I knew there were difficulties - but I didn’t know it had come to this.”
In the email Grant announced that the board was considering a course of action that could trigger the cancellation of the British Grand Prix, meaning that from 2020 there would be no home Grand Prix for the first time since 1947.
“Your board would like to preserve the British Grand Prix at Silverstone … but only if it makes sense to do so,” it read.
“We have to protect our club against the potentially ruinous risk of a couple of bad years. Without some change in the economic equation, the risk and return are out of kilter, and so we are exploring various ways in which this might be altered. Among other alternatives, the board is considering whether we should give notice before the 2017 British Grand Prix (as required) of our intention to exercise the break clause in the contract at the end of 2019.”
Middlehurst, who competes successfully in historic racing, was surprised because six years earlier he and other members of Britain’s most exclusive racing club had been assured that the future of the British Grand Prix was safe. “In 2010 we were told that we would have the race for the next 17 years; now that seems in doubt. It’s a shame. We should have a Grand Prix in this country. We are the home of motor sport.”
Grant’s memo has been dismissed by some as sabre-rattling designed to help in negotiating a new deal with Liberty Media, the sport’s new owner, but in the gleaming office blocks of Silverstone, home to the BRDC, a growing consensus appears to be forming that activating the break clause is all but inevitable. Some powerful figures even believe that dropping the race – at least in the short term – is essential if there is to be any chance of seeing Formula 1 appear in Britain ever again.
Such sentiments would have been heresy only a few years ago. The British GP is one of the oldest and grandest of all races and in recent years has attracted the largest crowds. More importantly it has an emotional pull on many motor sport fans – and nowhere is that pull more obvious than among members of the BRDC, the elite organisation comprising 800-odd luminaries of the sport. There is a romance to the race that so far has ensured it remains, despite its vast cost to the club. But that is changing.
Grant’s email may have been diplomatic, but Stuart Pringle, the circuit’s sporting director, who also sits on the board, is more forthright. “We would not have raised the potential if we were not willing to go through with it. It’s not a threat, but it is very much an option we are prepared to exercise. I wouldn’t be doing the right thing by the company if I allowed us to pass the only opportunity we have to influence a contract that could bankrupt us in a few years.
“There is a risk that giving notice of our intention to activate the break clause will result in the loss of the British Grand Prix from 2020, but we have to keep our options open. There would be a lot of negativity in the media if we were to lose the race and it would be galling because we all love it, but this is something that may have to happen in order for us to arrive at a better place. We will have a better business at the end of this however we reach it, whether that break is for one year or two years.”
The prospect of losing the race has sparked much muttering among rank-and-file BRDC members. “There are two factions developing at the BRDC and it isn’t clear which one is in the ascendant yet,” says one, on condition of anonymity. “The first sees the retention of the British GP as something akin to their sworn purpose. It’s like they have been entrusted with this sacred thing and they will defend it to the death to pass on to future generations.
“Then there is the second faction, who in some ways are more pragmatic. They say, ‘Look, Formula 1 is now like the Premier League in football – it is so big and so expensive that it has left club football, or grass-roots racing behind.’ That would be OK if there was a trickle-down effect and the money earned from F1 was used to support grass roots racing, but it isn’t. The argument, therefore, is that the responsibility of the BRDC is to keep grass-roots racing alive and if that means using money currently tied up in securing F1, then so be it.”
So how has it come to this, and how can the race be saved?
Many trace the problems back to 2008, with the surprise announcement that rival Donington Park had poached the British GP from Silverstone in a 17-year contract from 2010. In the event, the plan to move the race to Donington soon hit a roadblock as money could not be raised but it left the British GP with an uncertain future.
The BRDC rode to the rescue and its president, former F1 driver Damon Hill, negotiated a 17-year contract from 2010. But the deal came with a catch. Bernie Ecclestone, then chief executive of the group that manages the sport and controls the commercial rights, demanded a fee of £12m and an escalator clause that raised the cost of hosting the race by five per cent each year. Meanwhile, he would take the profits from all commercial rights of the race leaving Silverstone with just the gate receipts.
It is this escalator clause that has caused the cost of race fees to rise to more than £17m – a figure that officials say is now simply unsustainable through gate receipts alone.
Critics of the BRDC say it has only itself to blame for the financial problems. In response to Ecclestone’s demands for an upgraded circuit, the club sanctioned the building of a striking – and expensive – new pit and paddock complex known as The Wing. Construction of the state-of-the-art building cost £27m and was partly funded with a £12.7m loan from Lloyds as well as £12.4m borrowed from Northamptonshire council.
To pay off the debt, in 2013 the BRDC leased 280 acres of land surrounding Silverstone to a property group for £32m and, although this helped to clear the BRDC’s debt, it meant losing £1.2m of rental income. The gravity of the situation became clear last year when Grant admitted, “We have no cash reserves to fund future development of the circuit.”
It was against this backdrop in 2016 that the BRDC attempted to sell the circuit, in a deal with Jaguar Land Rover that fell through. Shortly afterwards the club’s managing director Patrick Allen was put on leave of absence and later agreed to leave by mutual consent. His departure followed the sudden resignation of his predecessor Richard Phillips in 2014.
Some members claim the BRDC is ill-suited to running a business. “It is a sporting club that has in the past tried to reinvent itself as a deal-making company and it hasn’t worked. Members are racing drivers, not necessarily businessmen. You get a situation where people who are trying to work together and come to a decision are saying things like: ‘I’m not working with him – he ran me off at Copse in ’72’.”
Lawrence Tomlinson, the millionaire owner of Ginetta who unsuccessfully bid to buy the circuit, describes the collapsed deals as “an absolute farce”, and says the BRDC board needs to make hard decisions. “Any business has to stand on its feet commercially and make sense. The current contract is tricky but everybody knew what the contract was. Bernie didn’t force anyone to sign it. It would be a real shame if we lost Formula 1 but I don’t think anybody should be under any illusions. If they don’t pay, it won’t be here.”
Derek Warwick, the president of the BRDC, remains optimistic that a deal can be found: “I’m a glass half-full person so I believe we will find a way out of this little difficulty. We are talking to FOM, to local councils and the government about ways in which they can help. We are custodians of the race and are working hard to ensure it won’t come to losing it.”
The club received a boost late last year when it was awarded a Heritage Lottery Fund grant of £9.1m to develop an on-site learning centre celebrating the history of British racing. It opens the potential for the track to reinvent itself as a conference and education destination, complete with hotel. Officials believe this will boost its year-round profitability.
But the fact is that Silverstone is not alone in struggling to keep its blue riband event. This year there will be no German GP, after organisers pulled out for financial reasons. The Nürburgring, which used to host the race every other year, announced it was unwilling to pay hosting fees and Hockenheim, which drew only 57,000 fans in 2016, refused to lose money in successive seasons. In 2008 the French GP was axed as a result of falling revenues and rising hosting costs.
According to David Ward, former director general of the FIA Foundation, the problems that such circuits are facing are symptoms of a structural weakness within the sport.
“There was a failure by the FIA years ago, when the deals were being negotiated, about how much it was all worth. You could argue that the men in blazers never realised the value of what they had and that it took Bernie to realise it. F1 is a profitable business; the fact that any component parts of it are near-bankrupt is a sign there is a fundamental problem. The fact that Silverstone attracts a huge audience and can’t make money is bonkers.
“A root-and-branch reform is required and if it doesn’t come then the sport is going to end up in an even bigger crisis. It needs to work out a fresh reward scheme between teams, owners and circuits.”
That new reward scheme might well be the first thing to appear in the in-tray of Chase Carey, the newly installed chairman of Formula 1, following Liberty Media’s takeover. In January, Carey said that the preservation of historic Grands Prix was key to its plans and reassured fans that the British race was safe - although he pointedly stopped short of suggesting a reduction in circuit fees. Whether they can strike a deal in time to save the British race remains to be seen: after years of letting their heart rule their head, it appears the BRDC is finally ready to think the unthinkable.
“We have bottled it in the past,” says Pringle, “but actually this is probably the easiest negotiation we have ever had because we have no choice. Life without a Grand Prix at Silverstone would be a far bigger emotional wrench than a business one.”
British GP timeline
Silverstone hosted the first title round - and the majority since
1948: The first British Grand Prix takes place at Silverstone, a disused RAF base, and Luigi Villoresi wins
1950: World championship for drivers introduced; the 1950 British Grand Prix is the first round
1955: British Grand Prix starts to alternate between Silverstone and Aintree
1964: Aintree is decommissioned and the GP starts to alternate between Silverstone and Brands Hatch
1986: F1’s governing body FISA introduces a policy of long-term contracts for one circuit per Grand Prix. Silverstone and the BRDC sign a seven-year contract to run the race from 1987 to 1993
2004: A dispute between the BRDC and Bernie Ecclestone leads to the 2005 race being left off the official schedule. A deal is eventually struck for the Grand Prix to be held at Silverstone until 2009
2008: An announcement is made – during GP weekend at Silverstone – that rival Donington has secured a 10-year deal to host the BGP
2009: Silverstone signs 17-year contract to host the British Grand Prix from 2010 onwards after Donington deal collapses
2011: Silverstone unveils its new £27m pitlane complex known as The Wing
2014: Silverstone’s managing director, legal director and financial director step down after questions are raised about
a management buyout
2015: Bernie Ecclestone reveals that Silverstone has been forced to pay its £16 million race fee in arrears
2016: BRDC deal to sell off the circuit to Jaguar Land Rover founders
2017: BRDC warns it may activate a break clause in its Grand Prix contract that would lead to the race disappearing after 2019
Opinion: Darren Turner
Retaining the Grand Prix is not worth the risk of bankruptcy
“The BRDC is in a very difficult position”, says Darren Turner, the Aston Martin WEC driver and BRDC member. “They’ve signed a contract with F1 to host the Grand Prix but the way the contract works is that the fee for hosting the race goes up each year so at what point do you say ‘stop’, this is bad for business as we are only ever going to be losing money?
“It’s amazing to have the Grand Prix at Silverstone but it’s no good if it leaves the circuit at risk of going bankrupt. To say ‘no’ to the Grand Prix would be a very hard decision for the board to make but there is no choice but to keep options open at this stage and if it protects the circuit then that’s what they have to do.
“The British Grand Prix is just one weekend of the year and Silverstone hosts other great championships. The WEC is growing, Moto GP is already a big event and they’ve just acquired WRX. There’s enough going on for the circuit to survive and be a profitable business without F1.
“I don’t believe that losing the Grand Prix will affect the circuit’s business during all the other weeks of the year. It hosts many standalone events that don’t go there just because F1 goes there. They go because Silverstone is a fantastic facility – and there are plans to make it even better.
“I hope Silverstone keeps the race as it is a great event, but it shouldn’t be kept if it is bad for the circuit’s long-term health.”
Opinion: Sir Jackie Stewart
Past BRDC President says Britain's Grand Prix must stay
“The BRDC is the only driver club in the world that has its own circuit capable of Formula 1 and I cannot see the club terminating its agreement ahead of the contractual period,” says Sir Jackie Stewart, a former BRDC president.
“If after the contractual period is over, in 2026, then I think they have every right to re-negotiate on the basis that under the current terms it could potentially bankrupt the club. In fact, there is no doubt that those discussions will have to take place in the future, but I can’t see that those changes can be made during the period of the existing contract. The BRDC has to realise what it has got itself into. If by 2026 there is a better opportunity, then good.
“F1 is the pinnacle of all motor sport so we have to keep it. And if we didn’t have it, it would be a great shame for everyone.”
Stewart argues that the government should step in and support the race financially via the BRDC, in the much the same way that it has supported the British Olympic teams.
“Losing the GP would be a shocker. We are the capital of motor sport – not only in terms of teams and drivers but also technology - and we can’t risk losing that title
“To lose the race would be a major blow to the sport and make a very poor statement to the rest of the world. Here we see Britain breaking out of the European relationship; all the more reason for us to fly our own flag on the sporting stage. By hook or by crook we should keep the British Grand Prix.”