Audrey Pangerc
Mr. Reuter
A2 Econ
September 18, 2020
2021 Formula One Budget Cap
At one of the highest levels of motorsport racing, Formula One (F1) has been a leader in innovation, specifically for the speed and aerodynamics of cars. However, for the 2021 season, the FIA (Fédération Internationale de l'Automobile) announced a new budget cap at $145 million dollars. The budget cap was meant to provide a more equal playing field for the 10 F1 teams, but overall the cap will cause a loss in innovation and safety in the sport, and massive layoffs from larger teams. While smaller racing teams, such as Williams Racing are reliant on the budget cap to stay afloat, larger racing teams, such as Mercedes will have to severely decrease their spending to be within the cap. Ultimately, a budget cap will diminish the spirit of the sport, as teams won’t be able to have the freedom to innovate on such a large scale.
The purpose of the budget cap was to create a more equal playing field, and promote more competition among racing teams. The chart on the right shows the 2019 budgets of the 10 F1 teams, Mercedes having the largest budget at $484 million, and Williams Racing having the lowest budget at $132 million. Currently, the teams’ budgets are predictive of their standings and are linked to the teams’ net worth. While Mercedes dominates the sport, Williams Racing can never seem to make it into the points. Creating a budget cap will allow for smaller teams, such as Williams, Hass, and Alpha Romeo to compete against teams like Mercedes, but at the cost of innovation. Christian Horner, the Principal of Red Bull Racing stated that, “The fact that we can carry over chassis and gearbox, that makes life a little more palatable but inevitably with a reduction, there will be the necessity to reorganise our teams accordingly.” In order to save money, and stay within the new budget, teams are having to rely on old designs, which will limit growth and innovation within the sport, lower the teams’ net worth, and overall diminish the spirit of Formula One.
In addition to relying on old parts to save money, large teams will be experiencing massive layoffs as a result of the new budget cap. Even after the Coronavirus pandemic, F1 teams will have to pare down their staff even more due to the new budget cuts. The Race, a digital motorsport channel, stated that, “McLaren announced this week the whole company will undergo a major restructure that results in 1,200 redundancies, including around 70 job losses for the F1 team, and cited the budget cap and the impact of the global coronavirus crisis as the reason for this.” And with a smaller staff due to the budget cap, creativity within the sport will be limited. Additionally, outside of the sport, losses and redundancies in Formula One will create a temporary surplus of automotive engineers looking for jobs, making the job market more competitive. Job losses are never good for the overall economy of a country, so by creating a budget cap that limits the teams’ staff, not only will the innovation in sport be limited, but also the lives of those losing their jobs, and the overall economies of their home countries.
Furthermore, the safety of the sport will be compromised. With scarcity of staff and resources, F1 teams won’t be able to come up with new safety measures the way they used to. For example, the F1 Halo, as pictured in the right, was originally designed by a team of engineers at Mercedes, and is now implemented in all F1 cars as a safety requirement by the FIA. Despite only being implemented in 2015, the Halo has saved countless lives in F1, most recently in the Tuscan Grand Prix, saving the life of Mclaren driver, Carlos Sainz, in a crash that wiped out 4 cars on the straight. With a limited budget, Mercedes and other leading teams won’t be able to develop safety measures at the rate they previously could.
Overall, the opportunity cost of a budget cap outweighs the benefits. Job losses, decrease in innovation, and compromised safety are too important to be overlooked. Large teams should be able to rely on their hard earned revenue to reinvest into their team to build a legacy. Creating a budget cap may temporarily create an equal playing field, but in the long run, the innovation in the sport will slow down drastically, leaving behind the true spirit of competition.
Works Cited
F1. “How the Teams Are Developing the Halo.” Tech Insight, Formula 1, 4 Feb. 2019, www.formula1.com/en/latest/article.tech-insight-how-the-teams-are-developing-the-halo.5zjzo4O4oM0k0WeUoOWqac.html.
George, Dhruv. “Amid Budget Cap for 2021, How Much Is the Current Budget of Teams in 2019?” The Fans Perspective, EssentiallySports, 1 Nov. 2019, www.essentiallysports.com/what-are-the-budgets-for-all-10-formula-one-teams-2019/.
Mitchell, Scott. “Top Teams Hoping to Redeploy Staff They Must Cut from F1.” The Race, Formula 1, 27 May 2020, the-race.com/formula-1/top-teams-hoping-to-redeploy-staff-they-must-cut-from-f1/.
This does bring up the question, how much should money be involved in sports? Take football for example: should all players get relatively the same type of padding, or should players be able to buy more expensive options? How much does the more expensive options give their team an edge in winning? I feel there needs to be regulations for what can be bought, but not a complete standardization for all players in a sport.
ReplyDeleteI think F1 is slightly innovative in this new concept. If you compare it with sports like baseball the teams that always win, Dodgers, have the highest budget out of all of them. While yes a team should still be able to manage their own budget having certain teams just buy their way to victory makes the sport less fun to watch because you know the outcome of every race/game. I think this will give smaller teams an even playing field to work with and perhaps win a competition of their own instaed of Mercedes and McLaren running away with it. It could make the bigger teams have to reconsider their cars and teams but I'm sure they will find a way around it. Although I guess my question for you is why $145 million? It seems like median is closer to $200 million so I think the cap should be about $220 million just so some teams still have the economic advantage.
ReplyDeleteGreat blog I didn't know f1 will have a budget cap for 2021. I don't watch a lot of f1 but when I do I see Lewis Hamilton taking P1 always. Like you mention with this budget cap it will bring in more competition and give the smaller teams a chance in winning podium. The teams will be more creative and figure out what will be needed to be done in order to win.
ReplyDeleteI think that the budget cap on F1 is a very unique cap to make for teams. I definitely agree with you that a universal budget cap doesn't seems to have too high of an opportunity cost, as compromises with engineering jobs and the reduction in R&D is definitely severe for the leading teams. It'd be interesting to see a budget cap on the car itself, as in the parts and pieces, so that more R&D is focused on improving the efficiency of new products with an unlimited budget for teams. I think that would attract more engineers for F1, prevent the negative consequences of limiting innovation, and inspire smaller teams to participate in F1 racing, knowing that the cars have a limited max budget.
ReplyDeleteI think the Fomala One industry is very innovative in this new concept. When this is compared with sports the way in which they operate is very different. It does make sense that any team should be able to manage their budget, the way in which Motorsports work especially F1 allows teams with more money to be able to buy their way to victory. Thus, making this sport less entertaining. And stops the challenge I know that NASCAR has been lowering their Horsepower and allowing more modifications. To allow an equal playing field. If F1 does this it might give other competitors a chance against Mercedes and McLaren. This can allow Drivers to have the race depend on their own skill then the speed of the vehicle. My question is the same as Noah why $145 million?
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