F1 unveils financial regulation changes for 2021

Formula 1 has revealed how it plans to lower costs for teams heading into the 2021 season, including the introduction of a $175m cost cap.

F1’s overhaul of the technical and sporting regulation for 2021 was unanimously approved by The World Motor Sport Council on Thursday ahead of this weekend’s United States Grand Prix, including a new financial structure.

Reducing running costs in a bit to create a more level playing field among teams was one of F1’s main priorities for its post-2020 vision, and the new financial changes are expected to “promote the competitive balance and the sporting fairness of the championship”.

F1 says the changes will “ensure the long-term financial stability and sustainability of the F1 teams while preserving the unique technology and engineering challenge of F1”.

The most notable change is the introduction of a $175m cost cap for a 21-race calendar, with an additional £1m added or deducted for each race above or below 21 races.

F1’s main guiding principles for the cost cap are as follows:

- Cost cap level set at a level that facilitate reduction in performance differentials maintaining unique technology and engineering challenge of F1

- Ensure freedom to spend for the F1 teams within Cost Cap limit

- Ensure transparency, fairness and equality of treatment amongst all competitors

- Ensure realistic implementation timescale to enable F1 teams to adjust operating structures and reporting processes

- Reference to internationally recognised accounting, acting standards and best practices

The cost cap will be implemented over a three-year timeline set out by F1. On June 30 2020, teams will have the option to submit their financial date for 2019 on a voluntary basis, before a soft implementation in 2021.

Teams can also voluntarily submit their 2020 financial data by March 31 2021 without application of any financial or sporting penalties, before the first year of mandatory implementation comes into force a year later.

F1 motorsport boss Ross Brawn described the changes as a “turning point” for the sport and confirmed any breach of the financial regulations will have “serious and severe” consequences.

Some of the most relevant exclusions to the cost cap include driver costs, marketing costs, non F1 activity costs, year end bonuses and the three highest paid persons per team costs.