If a blessing can at all be sought in Formula 1 matters during the pandemic it is that for the first time in many decades the sport has more time on its hands than it knows what to do with. It has therefore been able to properly clarify its various regulations and devise amendments where required: Either circumstantially, due to the pathogen, or in the interests of improving the sport.
This is borne out by the enormous amount of behind-the-scenes work and goodwill that has gone into all aspects of F1’s current and future regulations. For starters, the FIA amended its International Sporting Code by way of ‘safeguard clauses’ to eliminate the unanimity required for immediate regulations changes.
Ordinarily such an amendment would likely have been challenged in court, causing delays just when time is of the essence. Equally, the fact that all teams agreed to postpone the introduction of the ‘new era’ regulations provides until 2022 further proof of this new-found co-operative spirit. Yes, there was some initial dissent as certain teams demanded payoffs of sorts, but all was amicably resolved.
This postponement has had inevitable knock-on effects for F1’s 2021 sporting and technical regulations for these are now carried over to 2022. It is not simply a matter of shifting the implementation date by 12 months: the 2021 financial regulations were formulated in conjunction with the broader package and will be introduced on cue, albeit with some sweeping changes as outlined.
Circumstances also forced changes to the existing sporting regulations for 2020, which also affect the current technical regulations. In total, far-reaching changes to six sets of documents – the International Sporting Code (ISC}, the financial and two sets of sporting and technical regulations – needed to be agreed within a heavily compressed timeframe.
Usually this might take at least six months to agree, if agreement is reached at all; this time it took six weeks. Stories abound of six-hour team principal video-conferences and nine-hour technical and sporting working group sessions.
F1’s convoluted governance process – referred to as “unfit for purpose” by a number of team bosses – demands that all changes to the regulations pass through the appropriate financial, technical or sporting working groups before being approved at team principal level. Thereafter changes are elevated to the Strategy Group and F1 Commission before being ratified by the FIA World Motor Sport Council.
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Consider that team personnel are spread across Europe and beyond (sources say Mercedes F1 CEO Toto Wolff was holed up on a yacht in Mustique for a time) FIA folk operate out of Paris or Geneva, F1 is based in London, F1 Commission delegates are scattered across the globe and WMSC members hail from 25 countries, the scale of the task and relative speed within which all necessary approvals were gained is remarkable.
Without modern communication platforms F1 would have found it impossible to reach multiple decisions at various levels within the time frame. Such rapid progress could not have been achieved without the ISC safeguard clauses, which effectively overrule the governance process ‘under certain circumstances’. Two clear messages are contained in that sentence, and F1 would do well to take them to heart.
The status quo at time of writing is that all pre-approvals of the revised regulations are in place, with only a WMSC e-vote scheduled to close on Wednesday afternoon still outstanding. However that final step is generally a formality, and the information provided herein by our various sources will likely be approved and enacted in due course.
The most significant changes are to the financial regulations, which see reductions in budget caps from the previously agreed level of $175 million to $145m in 2021, decreasing at the rate of $5m per year over the next two years, so $135m by 2023. However, in the process various additional provisions are introduced, including exclusions for bonuses and clarifications for heritage assets, carry-over parts and inventory levels.
Also clarified are the levels of adjustment permitted for transferable parts (those acquired from another team, in particular where the components may form part of a sub-assembly), and for so-called ‘free-supply components’ (effectively those that may currently be freely sourced, but could be re-categorised later).
Although a number of amendments are required on the grounds of clarity, provisions have been added to prevent ‘flipping’ (small teams supplying majors to benefit the latter), to enable independents to realise genuine savings rather than simply operating below cap levels, and to prevent major teams from benefitting unduly from customer team income without influencing existing commercial relationships between teams.
However the overall impact of these changes, necessary as they are, will be minor in comparison with that of reductions in spending. Where a $175m cap equates to around 650 heads (depending upon business model and in-house versus out-source levels), the initial reduction will prune another 100 or so, with each $5m reducing that by a further 30 employees.
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Taking McLaren as an example, after the Group yesterday announced a major redundancy drive, its current 850-strong Racing division will be reduced by around 70 heads to 780 overall by year-end to meet the parameters of the $175m cap. As the glidepath kicks in further redundancies are expected, potentially reducing the payroll to 700 in 2022 and 650 by end-2023. Thus, the overall reduction could be as many as 130 heads once the cap fully washes out.
Obviously the top five teams – Mercedes, Ferrari, Red Bull, McLaren and Renault – will be affected to varying degrees by the glide-path. Only AlphaTauri, Racing Point, Sauber and Haas are likely to go into 2024 unscathed by staff cuts, while Williams seems right-sized for now and faces minor cuts.
Their individual business models will dictate the impact on each team, and headcounts within teams will in future be divided in two categories for budgetary purposes: operational (included in the budget cap) and marketing/hospitality (excluded). Thus a team with a heavy marketing bias could find itself with a larger staff complement than another, although their actual race department headcounts will be similar.
While the loss of staff is regrettable in any industry, the upside for the F1 is that the measures make the sport more sustainable, foster the survival of struggling teams and make existing entries more attractive to prospective team owners. Unsaid, of course, is that pruned budgets reduce the teams’ dependency on prize money, thus potentially reducing the prize ‘pot’ and in turn boosting Liberty’s profits.
Although the financial regulations apply only to 2021-onwards seasons, the sporting and technical regulations impact on the current and following years. In addition, 2022’s regulations – effectively the 2021 set but delayed a year – are likely to undergo a number of changes over the next 18 months given the additional time window available to F1.
The major changes to 2020’s technical and sporting regulation were revealed here by RaceFans, and will apply once the delayed season gets underway.
However, the most significant change – certainly on paper – is that all teams agreed to retain the current regulations for next season for cost-saving and practicality reasons, although minor revisions – such a modest weight increase to 749kg (to cater for a weight increase requested by power unit manufacturers and teams) and the simplification of the floor to achieve a reduction of downforce – will be instituted.
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The latter was deemed necessary by the Technical Working Group due to fears that downforce improvements generated through ongoing development during 2020 would detrimentally increase the load on Pirelli’s tyres in 2021. These will be identical to those used in 2020, which were carried over from last season and are thus thought to be on the limit.
However, if the changes to the technical regulations appear relatively benign, the 2021 sporting regulations have real bite despite being an adaptation of their 2020 equivalent rather than the full-blown set introduced last year, but now postponed due to the ‘new era’ delay.
The largest, and most controversial change by a considerable margin, is the introduction of performance – aerodynamic wind tunnel penalties imposed via test restrictions. Included as part of Appendix 8, which lists a number of refinements to Aerodynamic Testing Restrictions (ATR), the ‘aero handicap’ will apply on a linear basis between championship positions first to 10th, including provision for any new entrants.
Using a complex formula, in 2021 the championship leader is restricted to a co-efficient (C) of 90% of permitted aerodynamic ‘run time’, rising in 2.5% increments to a C of 105% for the tenth-placed team. Adjustments will be made based on championship positions at the midway point of the season.
However, thereafter the penalty is biased considerably in favour of backmarkers, with first place being restricted to a C of 70% ATR and the tail-ender boosted to 115%, with each step rising by five per cent, and again, adjusted after 30 June each year.
Appendix 10 details restrictions to power unit development by controlling engine bench test hours, with the clauses effectively being carried over from the ‘new era’ regulations and inserted into the updated 2020 set, in turn adopted as a basis for 2021.
Finally, the 2022 sporting regulations, in real terms based on the delayed ‘new era’ package are currently under renewed discussion, particularly where they refer to items such as parc fermé, scrutineering, and curfew, with many clauses and provisions expected to be overhauled before (delayed) introduction. That F1 is revising a largely complete package 18 months ahead of introduction is unheard of, and bodes well for the future.
All this leaves one final but absolutely crucial document unsorted: the 2021-2025 Concorde Agreement, as the current covenant expires at end-2020. While there are factions who suggest the existing agreement should be extended, that would be unacceptable to all teams outside of the top three, for the former group has been marginalised since 2013 through not qualifying for the sweeteners and bonuses paid to major teams.
Extending the current agreement would obviously require all parties to agree, and that is unlikely to occur, particularly as smaller teams have been hardest hit by the epidemic due to not being guaranteed minimum payments by way of said bonuses.
Although such agreements previously outlined the sport’s (convoluted) governance system (as described above), the FIA and Formula 1 imposed the ISC’s provisions on F1’s regulatory framework, although this may be replaced by an alternative process subject to all parties (FIA, F1 and teams) agreeing. As things now stand, the governing body holds sway over regulations and the Liberty over commercial matters.
In effect the CRH could decide on which commercial terms it wishes to remunerate the teams for their participation, leaving it up to them to decide whether to participate. The regulations exist in full, TV and race promoter agreements are in place, so grands prix could be run safely, properly and viably.
The risk is that no big names participate until agreements are signed, reducing the value of F1’s appeal to race promoters and broadcasters, so all parties (Liberty and the teams, with the FIA an interested observer) are sure to push for a five-year deal in order to bring certainty to the sport. However, agreement will not be the work of a moment as previous negotiations prove, but now is not the time for high stakes and risk-taking.
All sides are believed to have been close to a deal in March, with only the odd ‘t’ to be crossed and an undotted ‘i’ here or there remaining, then came Covid-19 and changed everything, not least Liberty’s income streams and the expectations of all teams. Indeed, as McLaren’s redundancy process and a €5bn loan required by Renault to remain afloat proves, nothing can currently be taken for granted.
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