Future of British GP in doubt? (2nd Update)
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| Ecclestone – don't worry they will cough up the money |
(GMM) Bernie Ecclestone has confirmed that the running of next year's British grand prix is in doubt.
Amid similar doubts over the future of another historic race, the Italian GP at Monza, Silverstone chief Patrick Allen revealed this week that because he is already a year behind in fees, he cannot "guarantee" the British grand prix will take place in 2016.
And now F1 supremo Ecclestone has admitted to Forbes: "We have got a clause in our contract where we can stop it in 2016 and I don't know if the race is going to continue next year."
So because Silverstone is a year behind in its fees, the only way forward now is for Allen to present Ecclestone with a 'letter of credit' from the bank.
Ecclestone told the F1 business journalist Christian Sylt: "What worries me is that as soon as the bank starts realizing they have a problem it is not going to continue with the letter of credit.
"We have a letter of credit (now) but whether that is going to continue or not I don't know," he added.
09/28/15
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| Another traditional F1 venue finds itself facing financial troubles. |
(GMM) A dark cloud has moved above the future of the British grand prix.
A report in the Telegraph newspaper quotes Silverstone's managing director Patrick Allen as saying funding has become a problem, raising the prospect the historic race will be scratched.
Writers Christian Sylt, Caroline Reid and Lucy Morson explained that with track bosses a year behind in the race fee to Bernie Ecclestone, a 'letter of credit' is now necessary to guarantee the 2016 race is not axed.
F1 CEO Ecclestone confirmed: "They (Silverstone) are paying next year for this year's race because I have allowed them to do this otherwise they would have closed before."
And Allen said: "Can I guarantee the future? No I can't.
"Could I hand on heart say to Mr. Ecclestone, 'Don't worry, your money is absolutely safe for the next 10 years'? No I couldn't.
"To pull the contract would be a sad thing for Silverstone, it would be a sad thing for motor racing and it would be a very sad thing for Britain," he added.
The solution, Allen suggested, is for Silverstone to find a buyer.
"You want somebody that has got lots of money, who loves motor racing, who really wants to run Silverstone profitably but has the capital to inject into the business so it fixes the balance sheet and takes the risk profile away," he said.
09/27/15 The future of Formula One's British Grand Prix is at risk after the boss of the Silverstone race track revealed that it lacks sufficient funding and needs an investor.
Silverstone has a contract to host the British GP until 2026 but a clause in the agreement with F1's boss Bernie Ecclestone allows it to be terminated as early next year.
The Northamptonshire track is suffering from a loss of rental income after selling a lease on 280 acres of land to clear is debts. Its plight has led to it paying the hosting fee for the British GP in arrears, meaning that a letter of credit from its bankers is necessary for the race to go ahead.
However, there is now a danger – according to Silverstone's managing director Patrick Allen – that the bank will put the brakes on the letter of credit as ticket sales are barely compensating for the annual increase in the race hosting fee.
"Can I guarantee the future? No I can't," said Mr. Allen. "Could I hand on heart say to Mr. Ecclestone, ‘don’t worry, your money is absolutely safe for the next 10 years?' No I couldn't… to pull the contract would be a sad thing for Silverstone, it would be a sad thing for motor racing and it would be a very sad thing for Britain."
Ferrari legal threat over compulsory 2010 entry Jenson Button is a member of the British Racing Drivers Club Photo: PA
Built on the site of a former airfield, Silverstone hosted the first race of the F1 championship in 1950. It is owned by the British Racing Drivers Club (BRDC), a group of 850 members including superstar drivers Jenson Button and Lewis Hamilton. This means that it lacks a single owner who can pump in money and instead investment decisions have to be put to a vote.
An escalation clause in the British GP contract boosts the annual hosting fee by around 5pc and it currently stands at an estimated £16m. The escalator is around half of that of its rivals and Silverstone also keeps half of F1's corporate hospitality takings for British GP whereas other venues rarely receive any of it. Despite this, the race is still in financial trouble as it lacks government funding.
State subsidies usually cover the running costs of an F1 race so Silverstone instead has to use the proceeds from ticket sales. This puts it on the back foot and organizers have been forced to increase ticket prices to compensate for the hosting fee escalation. Last year the British GP's three-day pass was higher than that of any other race at £170 and Mr. Allen said it is reaching the limit.
"If you put the price up you get less people," he said. "It gets more expensive every year and there is a finite capacity that we can get into the circuit. So it is certainly increasingly difficult." Mr. Allen said ticket sales were currently 163pc up on 2014 but it was offset by the increase in costs.
An increasing fee isn't the only cost which Silverstone has had to cover. Prior to signing the F1 contract it upgraded its facilities and in 2011 opened a new pit and paddock complex. This was funded with cash and a £12.7m bank loan with £12.4m borrowed from Northamptonshire County Council.
Three Silverstone chiefs suspended as officials at the home of British Grand Prix are told to keep silent Turmoil: Three senior Silverstone executives have been suspended Photo: AFP
The narrow margins on the race gave the BRDC little free cash to pay down the debt so instead, in September 2013, it leased 280 acres of land surrounding the circuit for £32m to MEPC, a property group owned by the BT pension fund.
The money was used to pay off the loans but it led to the BRDC losing rental income from the land to plug the difference between the ticket revenue and the escalating hosting fee.
Adding to the pressure is the fact that Silverstone is one of few tracks which pays its hosting fee in arrears after years of underperformance. "They are paying next year for this year's race because I have allowed them to do this otherwise they would have closed before," said Mr. Ecclestone. It means that a letter of credit is necessary from Silverstone's bank to guarantee that the British GP will go ahead. Mr. Ecclestone said this might not be forthcoming due to Silverstone finding it difficult to cover its costs.
Mr. Allen added: "What you really need for all parties is, in my opinion, somebody who wants to buy a trophy asset and is willing to put a large amount of equity in…You want somebody that has got lots of money, who loves motor racing, who really wants to run Silverstone profitably but has the capital to inject into the business so it fixes the balance sheet and takes the risk profile away."