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The risk the big F1 teams face with the updated cost cap

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It would be understandable if fans were left bemused by the ongoing saga of team bosses arguing about a few million here and there.

After all, this sport is supposed to be about the battle between drivers on track, and between the clever people who design and run their cars. It was never meant to be a contest between accountants.

However, we mustn’t lose sight of the big picture. F1 is in a healthy situation at the moment in large part because there is a cost cap, and thus there is a lid on total spending that reins in the biggest players.

Had it not been introduced, more than one team could have been lost in the last couple of years. Instead, investors have been scrambling to become involved in the sport.

“The argument is that F1 is now too cheap,” says Alfa Romeo’s Fred Vasseur. “For me, this one is completely wrong, because I think F1 is in a good shape because we have the cost cap.

“If you kill the cost cap, I’m not sure that we stay in a good shape. F1 was always up and down. Okay we are going up, but at one stage we will have another phase.

“At the end of the day, I think as F1 we were quite close to the deep shit two or three years ago. We were really on the edge to lose three teams.”

Frederic Vasseur, Team Principal, Alfa Romeo Racing, in the team principals Press Conference

Frederic Vasseur, Team Principal, Alfa Romeo Racing, in the team principals Press Conference

Photo by: Mark Sutton / Motorsport Images

It thus has to be accepted that F1’s financial regulations now carry as much weight as their sporting and technical equivalents, and that breaking them has to result in some form of punishment.

The big difference is the time lag. Assuming that nothing untoward happens on track or in parc ferme, then the results of the Abu Dhabi GP, and hence the 2022 world championship, should be definitive on the evening of November 20 – at least in terms of sporting and technical matters.

However, the final financial numbers for this season will only be crunched well into 2023. In theory, a breach could result in a retrospective punishment that impacts this year’s world championship, and possibly triggers a messy legal fight if the team concerned does not accept the judgement.

There’s one precedent in F1 history in terms of a significant post-season change to the season’s outcome.

Following his infamous clash with Jacques Villeneuve at the 1997 European GP at Jerez, Michael Schumacher lost his second place in the world championship, a punishment that meant a lot less than if he’d lost the actual title.

However, a late change of winner is not unknown in other sports. It’s happened in high-profile events such as the Olympic Games and the Tour de France when a drug cheat has been exposed after the fact. So why not in F1 too if a team ‘cheats’ on its spending?

Had the F1 Commission not agreed to the boost to the original cost cap figure, it was inevitable that several teams would have breached the limit, and would then have to face the consequences.

The 3.1% increase is a small number, but it has given the teams a little breathing space as they struggle to keep a lid on their spending. Whether or not they can all now stay under the new limit remains to be seen, but at least they now have some wiggle room.

The basic cost cap for 2022 was $140.0m, to which was added $1.2m for the 22nd race, making a total of $141.2m. That’s the figure that several teams admitted to the FIA that they would not be able to make, thanks largely to inflation increasing utility bills and other costs, and a worldwide jump in freight costs.

Max Verstappen, Red Bull Racing RB18 leads at the start

Max Verstappen, Red Bull Racing RB18 leads at the start

Photo by: Alessio Morgese

The key was by how much they would breach that target. The FIA financial regulations indicate a cut-off at 5% – a breach by less than amount is regarded as a “minor overspend.” Missing the target by over 5% is regarded as a “material overspend.”

The significance is the list potential penalties for the latter, as decided by the FIA’s Cost Cap Adjudication Panel, is much stricter, and it extends to exclusion of the team concerned from the world championship.

The 3.1% inflation boost represents around $4.3m, creating a revised total target total of $145.5m. Above that the new 5% cut-off for a material breach kicks in at around $152.7m.

In Austria, any discussion of the outcome of the F1 Commission involved the word “compromise,” and it was clear that the big spending teams wanted more, and the smaller teams wanted less.

“Obviously, the different positions have been quite far apart from no adjustment to bigger adjustments,” said Andreas Seidl, whose McLaren team was expecting to break the original cap, albeit not by as much as some rivals.

“In the end, we somehow met in the middle. And that’s why it’s called a compromise.

Andreas Seidl, Team Principal, McLaren

Andreas Seidl, Team Principal, McLaren

Photo by: Sam Bloxham / Motorsport Images

“We were also happy with that, because also on our side, we were voting for an increase, because we were facing similar issues to Mercedes, Red Bull, Ferrari and other teams. And we’re very happy now that we find a defined solution, especially for ’22.

“Because I think in the end, it’s in the best interest of the sport, we have a defined solution for this year, and don’t end up in several teams breaching the cap in only the second year of it being in place, due to very special circumstances, and therefore it’s absolutely sensible what is in place now.”

The three biggest spenders welcomed the 3.1% boost, even if they all clearly wanted a bigger number.

“It was positive because we took a decision,” said Ferrari’s Mattia Binotto. “Because in the last F1 Commission, we discussed a lot without any decision.

“I think in terms of timing, we were really borderline. Some teams were already in breach of the budget cap this year, and to find a compromise was important.

“Certainly, as a big team you are always looking for more, but I think that this compromise is good enough to give us a brief and a new target, a new challenge. Yes, it will be tight, but positive that we come to a decision.”

“Of course it does help,” said Red Bull’s Christian Horner. “I think in the interest of finding a compromise, it was too much for a couple of teams, and it was not enough for the top teams.

“So it was a question of finding a middle ground. And it’s not just about this year, it’s about next year and the years after as well. So I think it was the responsible thing to do.”

Of the bosses of the big three teams, Toto Wolff was perhaps the least enthusiastic.

Christian Horner, Team Principal, Red Bull Racing

Christian Horner, Team Principal, Red Bull Racing

Photo by: Mark Sutton / Motorsport Images

“Too little for the big teams, I guess,” said the Austrian. “Because energy prices, inflation, and freight are skyrocketing.

“But too much for the small teams. So nobody’s really happy, and I guess that’s a good outcome.

“I think why we achieved the compromise is that it’s that we that we said to the small teams, we’re not going to come back, and saying we need some kind of negotiation with the Cost Cap Adjudication Panel.

“I think the three of us are very much above it, and that means saving costs will be necessary for Mercedes. So yeah, the outcome is helpful. Does it solve our problems? No…”

That was a pretty frank admission from Wolff that Mercedes will struggle to meet the new limit.

It could be speculated that any team that uses up the 3.1% inflation bonus and still breaches the revised headline total is asking for trouble, even if they only stray into “minor overspend” territory.

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Previously, there was a sort of safety in numbers. It was said that up to seven teams would break the original limit, and the clear implication was that any serious penalties spread across so many teams and applied in mid-2023 would be farcical, and make a mockery of the sport.

Would the CCAP really be willing to do that?

However, if only one or two teams go over the new limit, and the others play the game and prove that it is possible to stay under, the authorities might not be very sympathetic. That’s the risk that the big players now face.

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