15/02/2009
NEWS STORY
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Sadly, all too often in recent years F1 has hit the front pages of national newspapers for all the wrong reasons. In 2007 there was the spy saga which resulted in McLaren being fined $100m, while last year it was Max Mosley's sado-masochistic orgy, not to mention the controversial decision by race stewards in Belgium which threatened Lewis Hamilton's championship hopes. Today, F1 makes it back on to the front pages, courtesy of Williams sponsor Royal Bank of Scotland.
The Daily Express has published a lengthy report on how it believes the government-owned bank has been abusing public money. While the bulk of the article is written by the Express' political editor the F1 material comes courtesy of Pitpass' business editor Chris Sylt.
The popular newspaper's main headline declares 'Bankers party on bail-out cash' and explains in detail how RBS is expected to wine and dine its clients in F1's Paddock Club this year with its passes coming courtesy of the sponsorship deal it has with Williams and its trackside advertising deals. However, it turns out that the real news in the article is that RBS is facing calls to pull out of F1. Given that it provides Williams with an estimated $20m annually this could be a major blow for the team.
Matthew Elliott, chief executive of the activist group the TaxPayers' Alliance is quoted in the article as saying "it's ridiculous that taxpayer-funded banks are using taxpayers' money to sponsor sporting events, especially the rich-man's sport of Formula One." He adds that "RBS needs to realise that it's now effectively part of the public sector and taxpayers do not want their money to be used to fund elite sports, especially during these tough economic times."
RBS' sponsorship portfolio also includes deals with Six Nations rugby and tennis ace Andy Murray. However, the F1 involvement is one of its most costly trophies with around $10m spent on advertising hoardings at Grands Prix in addition to the Williams' partnership.
Ironically, on the 19th January, as Williams was launching this year's new car, which proudly displays numerous RBS' logos, the bank was announcing a £28bn loss and an increase in the government's stake to 70%.
RBS' Williams sponsorship began four years ago but, as the downturn began last year, the bank renewed its deal. It runs for another two years but the TaxPayers' Alliance says that this shouldn't be an obstacle.
"Yes, some of these contracts were entered into before the financial crisis, but the acceptance of taxpayers' money should have made these contracts null and void," says Elliott. This would make life easier for RBS' senior executives who have been tasked, by new chief executive Stephen Hester, with making cuts of 10-20% in the bank's total cost base.
An RBS spokesperson says "we recognise the need to ensure that our sponsorship activity reflects the process of restructuring that the bank has underway." However, they continue "we are trying our best to strike the appropriate balance within the constraints of both contractual obligations and of course maintaining the benefit of some key activities to our customer businesses."
A core element to the business-to-business side of its F1 sponsorship is inviting customer businesses to the Paddock Club.
The Express article heaps on the detail about the lavish entertainment on offer in the Paddock Club stating that "guests have access to an open bar with champagne and a gourmet banquet with fine wines. There are select boutiques by exclusive watchmaker TAG Heuer and men's fashion brand Hackett, as well as a masseur, beautician and hairdresser. A guided tour of the pits and chats with team personnel are included, with guests often helicoptered in."
The article highlights the point that a bank which has filed the biggest loss in UK corporate history should surely put returning to profit before promotion through F1. Clearly this was the touchpaper which ignited the criticism from the TaxPayers' Alliance but the upshot for Williams remains to be seen.
It is likely that RBS would have to pay a penalty to Williams if it broke its contract early however filling any empty advertising space on the car could be tough for the team. This year Williams has lost an estimated £33m of sponsorship from Baugur, IT-firm Lenovo and Brazilian oil company Petrobras and it has yet to announce replacements for them. Its most recent accounts show a total loss of £50m for the past two years and in 2007 trebled its net debt in order to stay on track.
Furthermore, at a time when Bernie Ecclestone is calling on the British government - thereby the hard-pressed taxpayer - to come to the aid of the British Grand Prix, stories such as this are hardly going to help put the sport in a good light.
F1 is already seen by many as being an elite sport and therefore undeserving of taxpayer support. This tale of people being "helicoptered", wined, dined and generally treated like royalty will not help change this image in the eyes of the general public… and the fact that the taxpayer is expected to bankroll it, especially in these difficult times, will only add to the anger and frustration.