04/08/2017
NEWS STORY
Formula One currently finds itself facing the prospect of losing one of its oldest, most established races after the British Racing Drivers Club (BRDC) cut its contract to host the British Grand Prix at Silverstone last month.
As things stand, the last British Grand Prix will be in 2019 unless a new venue comes forward or the BRDC signs a new deal with FOM. According to a report in Forbes the BRDC turned down a £254m deal which would have secured the future of the race.
The offer was made by Lawrence Tomlinson, one of Britain's most respected businessmen. His LNT Group employs in the region of a thousand people and its investments range from care homes to sports car maker Ginetta. Over the past decade he has personally invested around £40m in grass roots international motorsport and is an accomplished racer himself having won the GT2 class at Le Mans in 2006.
Crucially Tomlinson was acting chief executive of Silverstone with BRDC chairman John Grant in 2014 and he put this experience to use with his offer for Silverstone.
Forbes reports that Tomlinson offered £5m upfront in the form of a payment for a 249-year lease on Silverstone and agreed to transfer this sum immediately into a lawyer's account for a short period of exclusivity.
But that's just the start.
Tomlinson offered an annual payment of £1m for 249 years to lease the BRDC estate and £1m of this was due to be paid in advance. In later versions of Tomlinson's offer the term was reduced to 125 years based on feedback from BRDC members but, either way, it was a huge commitment.
In addition, Tomlinson committed to protecting the jobs of the Silverstone team and investing in the maintenance and development of the track. He even agreed to fund the creation of an executive lounge for BRDC members and their partners.
Finally, Tomlinson vowed to put his grassrooots racing expertise to use by raising the profile of the BRDC's Rising Stars and Super Stars junior programmes.
It sounds like a no-brainer but not to the BRDC. Despite multiple extensions it let Tomlinson's offer lapse and it was not accepted within the final deadline. In February it took Silverstone off the market after it failed to get any buyers to the line.
The BRDC was forced to drop the British Grand Prix after burning up huge losses due to the estimated £17m race hosting fee which increases by 5% annually. It has been clear for a long time that this was inevitable.
In January a senior BRDC member told Pitpass' Christian Sylt that "they will definitely drop the Grand Prix and see what is going to happen over the next two years. It's a two year notice period. They will have to give notice. There is no question about it because it is not affordable. They will give notice to terminate the Grand Prix, there's no question. If it is unaffordable it is unaffordable so that will have to happen."
It proved to be spot on but remarkably the BRDC bluntly denied it in a statement. In its report just days later, Reuters said that "Silverstone's owners have dismissed as ‘speculative and wrong' recent media reports suggesting the British Formula One Grand Prix would be dropped after 2019. The British Racing Drivers' Club (BRDC) said in a statement on Friday that no decision on exercising a break clause would be made before mid-July, when the race is held."
Looking further back, in 2010, when the BRDC signed its F1 contract, Sylt forecast in the Telegraph that the cheapest British Grand Prix ticket prices, which were then priced at £125, would rise 22.5% to £153 by 2014. The article stated that by 2026 their price would double to £249 to compensate for the increase in the hosting fee.
In response to the article a Silverstone spokesperson said that "the figures reported bear no resemblance to the facts, or Silverstone's plans for the future. They are speculative and unhelpful. Any increase in ticket prices would be in-line with the annual rate of inflation, or rises in VAT. Silverstone is looking at alternative ways to increase revenue from the British Grand Prix to help cover any increase in costs or fees."
In fact Silverstone's statement was fake news as the ticket prices didn't just rise, the increases exceeded those in the forecasts. Thanks to the escalation in the hosting fee, the cheapest tickets actually hit £170 in 2014 and this year came to £199 compared to the £173 forecast. The higher the ticket prices, the harder it is to get spectators through the gates and that is precisely what the BRDC found itself up against.
Last year's British Grand Prix was won by local hero Lewis Hamilton and although he was on a winning-streak in the run-up to the race, spectator numbers were down by 1,000 to 139,000. Grant lifted the lid on the impact of this in a letter to BRDC members on 19 December. It said that "the GP, although an excellent sporting spectacle with a hugely popular British winner (thanks Lewis), fell short of budget and the previous year in terms of revenues."
Last month he added that "it is not financially viable for us to deliver the British Grand Prix under the terms of our current contract. We sustained losses of £2.8 million in 2015 and £4.8 million in 2016, and we expect to lose a similar amount this year. We have reached the tipping point where we can no longer let our passion for the sport rule our heads."
Fans are vainly clinging to the hope that Liberty will cave in and reduce the hosting fee but if it did this then all the other tracks would want the same treatment. Indeed, if the BRDC's fee was cut after it broke its contract it could encourage others to do the same in a bid for a reduction.
It came as a huge shock to the industry that the BRDC actually went ahead and tore up its contract. Although it had a sometimes fractious relationship with F1's former boss Bernie Ecclestone, it had never broken its contract with him over the decades that they worked together. Within six months of F1 being taken over by Liberty Media the BRDC finally took the plunge.
The circumstances that led to the BRDC dropping the British Grand Prix were put in motion long before Liberty got the keys to F1 but it still had an opportunity to stop the contract from getting the red light.
This is because the BRDC had been in talks with Liberty about renegotiating the British Grand Prix contract but they weren't fruitful. In May F1's new boss Chase Carey said that he "will not be renegotiating the contract. We value Silverstone and we want the race to be a success and will work with them to help achieve that, but we won't be redoing agreements that were previously concluded in good faith between two parties."
However, back in January, Carey told the BBC that new countries join F1 "because they want to be part of that show that includes Monaco, Silverstone, Monza, Hockenheimring and the Nurburgring. You have still got to maintain those traditions to have the values in F1... We will have a British Grand Prix." Six months later the outlook is much less certain.