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Silverstone activates 2019 break clause with British F1 GP host at ‘tipping point’ under contract
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Posted By: Editor   |  11 Jul 2017   |  3:46 pm GMT  |  105 comments

Silverstone has triggered its break clause with Formula 1 owners Liberty Media citing losses over its last two years as host of the British Grand Prix.

The break clause in its contract with F1 has now been formally triggered meaning that 2019 will be the last year that the British GP takes place at Silverstone unless a new contract is agreed.

“This decision has been taken because it is not financially viable for us to deliver the British Grand Prix under the terms of our current contract,” said British Racing Drivers’ Club Chairman John Grant before a press conference at the circuit on Tuesday.

The BRDC owns and operates the circuit having invested £50 million over the last decade to develop Silverstone, which attracts over 350,000 spectators over the GP weekend.

The British GP boasts the highest attendance of any race in the calendar and the highest attendance for a British weekend sporting event.

“The net revenue is not enough to cover the overheads let alone turn a profit,” said the BRDC President.

“We sustained losses of £2.8m in 2015 and £4.8m 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. It would not only risk the very future of Silverstone and the BRDC, but also the British motorsport community that depends on us,” continued Silverstone’s Sporting Director Stuart Pringle

Silverstone has hosted the race since 1950 and its current contract has been in place to host the GP since 2009, agreed with the previous owners of F1 under Bernie Ecclestone’s tenure.

Its losses stem from a 5% annual increase in promoter’s fees; the fee has increased from £11.5m in 2010 to £16.2m in 2017.

Had the fee kept in line with UK inflation, it would have increased to only £13.6 million this year (£2.8m less). By 2026, (the last year of the contractual obligation) the fee will have risen to £25m.

“The 5% inflation rate might have looked quite a reasonable bet back in 2009. nobody then remotely would’ve expected inflation to be as low as it’s been,” said Grant.

“To some extent there is a sense of relief that we have that break clause because then it can bring that to a stop, and stop the situation becoming even more dire for us in the future.”

The race will run in 2018 and 2019 as normal and discussions between Liberty and the BRDC will continue over the circuit’s future as host.

“Ongoing discussions with Liberty’s new F1 team secure long term financial viability of the event [shouldn’t take] more than a few months.

“We share [Liberty’s] vision for putting fans at the heart of the sport and we’ve made it clear that we’re open to working with our friends at Liberty.

“We’re basically open to considering all alternatives with Liberty to find this sustainable and viable future for the GP. Having said that we’ve also said in recent month that it’s the BRDC’s strategic direction not to sell the circuit”

“I think there’s a sense of relief that the guys who negotiated the contract had the sense and foresight to put a break clause in.

“It’s only one [clause] but they had the the foresight to put a break clause in and presumably that was in the event that things didn’t work out as either side anticipated. It could’ve been one way or the other.”

“We have no choice today but to exercise the option, that we have done this morning. This is something that we’ve been giving a lot of thought to over the last couple of years. We don’t take this lightly.

“We recognise that one of the possible outcomes is that there will not be a British GP here after 2019, and that would be a monumental shame.” said Pringle.

Have your say on Silverstone’s decision to activate its break clause in the comment section below

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1

I find it hard to accept how the BRDC continues to make a loss on Britain’s biggest sporting event of the year. Let’s face it the GBP is expensive and without Lewis Hamilton’s success they would be making an even bigger loss.

I’ve been to several BGP’s, but personally I now prefer to spend a similar amount attending the Belgium GP @ Spa which is a much better spectator track.

Whilst the overall experience is good (the atmosphere and free concerts are usually excellent) for a racing fan, paying £300+ to sit in a grandstand and watch the race through binoculars because the cars are so far away isn’t that appealing to me.

2
Cedric Baumgartner

If Liberty media is really interested in keeping Gp’s like Silverstone on the calendar why don’t they make a deal similar to F1 teams (Ferrari) that honours their historical contribution in F1?

3

Make the tickets £35 adults and kids under 16 free…pack it out and build the fan base, keep the beer tents and food trucks busy and sell more merchandise and not have the rather sickening feeling that you have spent the GDP of a small country on a days motoracing event

4

Has anyone actually realised that we all being taken for mugs here? £180 and £90 for a child to attend a race day….and still Silverstone can’t turn a profit….

5

There us a stubborn trait in the British ‘character’ and I admit that it is not one of our most endeering ,even though it helped create the British Empire (which now looks like a mistake!). I can afford to go to the GP but I choose not to effectively hand over money to US Hedge Funds. I could afford Sky TV but I choose not to pay money to Rupert Murdoch. I suspect there are a lot like me and the rest of Europe may have plenty who think the same way. F1 is too expensive to be sustainabe for much longer. The FIA sold it down the river as we say!

6

May be a Palmer will be involved in F1 in the future at Donington? Or is that a long way off in facilities? Also how does Silverstone do with WEC and moto Gp? Surely liberty have to wake up.

7

It really pains me to say this BUT for once this is not Bernie’s fault! The BRDC (NEGLIGENTLY) signed what is essentially a Sub-Prime agreement. That is an agreement where the front years are designed to benefit the BRDC and the back years benefit the commercial rights holder. Like all the other sub-primes instruments, you ONLY sign one if you are 100% confident you will secure a STEADY source of future income to cover the additional back year costs or you MUST REFINANCE. FYI, this is the type of contract that help blow up the US mortgage business in 2008. The sad reality is there is NO commercial or financial interest within the UK for a British Grand Prix. Even including the 5% rider, you are not talking about that much money for one of the giant financial or commercial businesses based in the UK, if they were confident there was a genuine commercial value in the grand prix. This is more important when you consider that sponsoring the grand prix would be a straight tax deduction for any company since it is a simple marketing and promotion expense on your profit and loss statement. The BRDC has failed to find a commercial partner for Silverstone and that should inform Liberty Media about the kind of deal they will expect to make to keep Silverstone alive. I suspect that is why some are calling for the race to be moved to London in the hope it attracts some of that city money.

As for renegotiating, I suspect Liberty do not want to touch that nut. Sorry to say this but with BREXIT looming, how would it look if Silverstone got a sweetheart deal while the European circuits have to meet their current contracts? In addition, Liberty is a publicly traded company, so it is accountable to its shareholders and would have to justify surrendering significant revenue in Europe to keep the UK happy. Liberty are walking a very sensitive financial and political path here and I am sure they are loath to open that can of worms right now.

8

OK, Silverstone isn’t the only European GP with money problems. The only real way to get Liberty to take a serious look at race fees is if all the European promoters got together and all gave notice to quit at the end of their contracts because they’re unsustainable (bear in mind that there aren’t F1 grade circuits just lying around all over so just switching venues isn’t necessarily and option and who’d take them up on it anyway based on the fact that existing circuits can’t make it work). How would Liberty feel about having Monaco as it’s only European venue (and no return for it!)? That’d take the value out of the F1 Group for a start. They’d end up with a 10 race calendar run in places where for a good part, nobody cares less about F1. The whole championship would lose value and fans would drift off to other series (Moto GP anyone?), leaving Liberty with an empty shell which they paid $8 billion for. It’s proper hardball, but I’ll bet it’d work.

9

The problem is the different tracks have very different ownership structures. Some are run by private for profit organizations, some are public spaces or parks managed by local governments, and some are managed by nonprofit organizations. Which means they all have different legal obligations to their respective communities. For example, if the Liberty Media guys now sign a deal with another UK location for 2020, what happens to all that land at Silverstone? It will became like Valencia – a graveyard to its glorious past, but the BRDC may still be liable for financial expenses like property maintenance, or local land taxes, etc. So they may not all have that avenue open to them.

10

Thats what I’m talking about!

11

350,000 people thru the gates last year, well theres 350,000 reasons, the race must go on, dont panalise the public for managment problems, get it togeather guys

12

I would have thought the simple maths of how many people could fit in the venue,all the running costs ,and how much they could charge would instantly show them if it was possible to make money.This is before you got an accountant to have a look.
I guess they had other plans to develop the land within the venue that never worked out.
Interestingly the long suffering Bernie is a member of the BRDC. Maybe he gave them sound advice at last
rather than bamboozling them like all the years before.

13

If a privately run F1 race which is well organised, has heritage status, and massively attended event can’t even break even then there is something very very very wrong with the F1 business model.

F1 is being propped up by governments around the world who have artificially inflated the cost of hosting an F1 GP. If there is ever an argument against state intervention in a market this is it. (I can’t even imagine the opportunity cost for other industries too) F1 has stagnated massively over the last few decades as innovation has become less and less important. Why innovate when you are guaranteed an income from tax payers?

Like I say, if a well run and well attended race can’t be possibly, then F1 isn’t real. It’s a bubble.

14

I think Silverstone is playing a dangerous game here.

1st: They knew from 2009 what they would pay in fees every year, with a 5% increase each year it really isn’t that hard to calculate. You have to match that with revenues, otherwise you will be at a loss….
2nd: if they renegotiate a sweeter deal with Liberty, then I’m assuming that other circuits with the same kind of option in their contract will try to renegotiate as well. If I was Liberty then I would make an example out of Silverstone.
3rd: there are plenty of alternative circuits inside and out of the UK.

On a personal note: I hope Silverstone stays on the calendar beyond 2019. I like the circuit (though I appreciate the old layout better).

15

Let’s hope that sanity will prevail and we will see an F1 race in 2020. The F1 world needs Silverstone. Lots of contracts have Rise & Fall provisions which take inflation and CPI into account, it’s not difficult, if both parties want a solution.

16

Here’s hoping old mate!

17

In 2009 the smart money was on deflation as the real risk – inflation was never and should never have been a valid concern. So all this sounds like bull. I would expect to see the GP in a street venue around London – this sounds more like the real reason.

18

Government and London mayor have no appetite for that at present

Focussed on Brexit and other problems

19

Seems to me Sadiq got hungry – at least his comments made at the London street party, seemed to indicate that …… as for May , she needs all the help she can get.

As for May,

20

I’m pretty certain that I attended a British Grand Prix at Brands Hatch in 1982. 1984 and 1986 spring to mind also.

Prior to that, wasn’t Stirling Moss the first British winner of the British GP… at Aintree?

21

”The British GP boasts the highest attendance of any race in the calendar and the highest attendance for a British weekend sporting event.”

And still they can’t make it work? Maybe the wrong people are operating it?

The name Silverstone is legendary, but the track is a shadow of it’s former self since the butchery a few years ago.

22

I don’t think the ‘butchery’ did it any harm really. Longer circuit, another overtaking opportunity that isn’t ridiculously easy and maintained pretty much all of the older circuit.

23

Sure it’s not a Hockenheim level of a cut and shut, but I thought the track was long enough and I liked the change of direction through Bridge and Priory.
Just personal preference.

24

It should be clear that F1 is not worth the incredible fee being charged for circuits to host events. A gearbox failure for Hamilton and it potentially wrecks your show. If you look at Austria I’d question why the sport decided to hide that penalty for Hamilton, as it seemed like a purely commercial concern.

Silverstone should break from F1 until F1 gets its house in order again. F1 is a very different prospect to 2009, when we had just seen one of the most exciting championships of all time and a real shock with Brawn coming from the abyss to dominate. Viewership in the UK was at an all time high and was actually a prime time success.

So yes, F1 is in a much weaker position and I actually don’t see the wide spread fuss if we lose the GP as F1 is much more niche these days and has lost the mainstream appeal thanks to the Sky deal.

25

Or use a variable interest rate based on good old LIBOR. But yes good of the BRDC negotiators to fight for that break clause.

26

You British really don’t mess around with that Brexit thing huh?
What a shame, such a great layout
Tough times…

27

Welcome to round 1 of greedy US hedge funds vs greedy UK aristocrats.No rules allowed the most ruthless and remorseless to win

28

Ah hedge funds! One of my friends has lost a packet this week with the collapse the Corillian share price while the hedge funds who were shorting it have apparently trousered about £80 million. This is what Silverstone are up against!

29

As I said before this will be the acid test for liberty media, are they just paying lip service to “wanting to protect the heritage” of the sport or do they really mean it.

Personally I don’t think they have any intention of lowering prices, they have said repeatedly they want more for the money but that means more for the money not the same for less money.

30
Robin (the other Robin)

Search Gary Hartstein’s blog for, “What the fuck is wrong with CVC, FOM, Bernie, the lot of them?” and you’ll see why the BRDC (Silverstone) had to do this.

31

Language their old boy?
Language there are kids reading this also !!!!
But yes totally agree with you regarding Bernie and the super slime ex owners CVC.

32

Lets hope they do get a deal sorted, because the idea of a London street circuit race which has been touted fills me with dread.

33

Good. I find Silverstone really boring and the blue blazer brigade of the BRDC really annoying.

I know it’s a historic circuit, but history in itself is no reason to have a race there. As for the circuit itself, sure it has some challenging and exciting corners that must be great for the drivers, and I’ve enjoyed driving in games. But the problem is that just doesn’t come across on TV. It’s flat, dull, and dreary.

34

Chance of the British GP fslling off the calendar? Zero, a deal will be done, the alternative venues will come to nothing, and it will be business as usual at Silverstone.

35

The sport that continues to price itself out of its own market.

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