Talking Formula One money is rather crass

From my chair in my favourite club I can look up from my leather armchair and see the past glories of empire glinting at me from the walls, I can drink my tea from a china cup and hear the satisfying clink as I place it back on its saucer and I can generally muse about politics, sport or history without worrying about economic impacts or anything so disgustingly “modern”.

Now though the economics of sport is being thrust in my face, even in my favourite newspaper.  Sports journalists are becoming Economics professors overnight and business journalists are peeking into the back pages to try to return the favour.  It’s all rather demeaning and, on a very personal note, rather trying.

I prefer my frustrations to be simple in nature.  The idea that one of the maids has failed to refill the butter dish can render me speechless. While my Lady simply looks on with a cool reserve I can go into paroxysms of righteous indignation while politely crunching on dry toast – of course I’m far too well-behaved to actually say anything, preferring to leave these matters to the butler (it is his job after all).

Unfortunately One cannot ignore everything, particularly when it is becoming a problem, and Formula One would appear to be reaching a crisis point with financial woes afflicting circuits and more worryingly the teams themselves.

The problem first reared its ugly head with the demise of HRT but their economic model was always going to lead to ruin.  The team was built on borrowed money and those Johnny-come-lately’s at Thesan had no idea of what they were letting themselves in for.

Personally I don’t think that they even understood the concept of “sport”, they were looking for (that horrible phrase) “a return on their investment”.  Well, a vanity project is all well and good when you have money to spare (witness my gardener’s wonderful work to the Demesne’s old commons two years ago) but you don’t go in without a clue as to how much money you have to spend to make it a success, and that seems to be exactly what happened.

I mean HRT were at the back of the grid, the recognised lowliest team in the formula.  They had no headquarters, no proper factory facilities, and in the three years they survived in the paddock little investment would seem to have been made and little or no sponsorship was visible on their modified Dallara chassis

Not a huge amount of work ever took place to the car year on year.  The whole approach was wrong.  Apparently the entire working budget over the 3 years was only £94 million/ £25 million of that money came from the drivers, the Concorde money was somewhere just shy of £30 million, and we can assume that they must have sold sponsorship of around £5 – £7 million per annum which meant that the operating capital from the investors worked out at between £6 – £8 million each year.

For a team in its infancy this is suicidal (and that is what it was eventually).  No investment meant the team could not go forward, no improvement meant no improvement in revenues and the whole thing ended up in stagnation, decline, and demise.

I can see the same problem beginning to occur in other teams:

Rumours abound about Force India’s monetary plight and where rumours begin troubles follow.  Grand statements from the owner about throwing £50 million into the team pot only serve to fuel those rumours and, couch the reason for the cash injection how you will, the sponsor’s will only see that there are problems and perhaps they shouldn’t spend that £3 million on your team.

Caterham are attempting to float themselves on boats other than Formula One, trying to follow Williams and McLaren into other markets but they too will someday have to pay the piper, in the form of Tony Fernandes, who has thrown some £65 million into the pot and will, one day, call that loan in.  I hope they’re ready when the call comes.

If the fall of HRT has done anything it has confirmed that having a Formula One entry is worth nothing, having a team and structure in place is worth nothing; nobody is willing to pay for their place in an increasingly fragile economy.

Trimming the fat is what is needed.  In order to save the house you have to sacrifice going out with the hounds twice a year, you must dispose of the weekend runabouts, and you must even consider St. Andrew’s as an option for the offspring’s education (not the heir’s you understand, but those Scottish universities can save us thousands a year for the spares and we do have a little place just outside).

Asset rich Cash strapped will not leave anything for the future.  An even keel under your feet, all sails hoisted, and fair winds at your back and you have a chance at bringing your ship in.