When is a Cap not a Cap?

10 November 2022

Formula 1 implemented the sport’s first-ever budget cap in 2021 in a bid to support a financially sustainable sport and give more teams a chance at success and deliver a more competitive racing environment.

Although only introduced in 2021, it has taken little time for Formula One to see the first significant breach of its new financial regulations.

With spiralling costs and a field dominated by the big-spending front three of Mercedes, Red Bull and Ferrari, the FIA wanted to ensure each team was financially secure while encouraging a level of on-track competitiveness that even the smaller outfits could aspire.

Initially, a limit of £152m for 2021, but the coronavirus pandemic accelerated the need for F1 to slash costs. The F1 reduced that limit further to £123m.

For 2022, £121m and £117m for 2023-2025. The figures allow for a 21-race season, and an inflation uplift was applied earlier this season.

The budget cap applies to money spent on car developments and performance but not to some big-ticket items, such as drivers’ salaries, marketing costs, logistics, travel, and legal costs.

The amount of time and resources a team can dedicate to development is decided by where they finish in the previous season; for example, the winning constructor has the least time, whereas the team finishing last is allowed the most.

F1 has set up a Cost Cap Administration to ensure all teams follow the rules, and all 10 teams had to submit complete documentation for the 2021 season by March 31 this year.

If any team has fallen foul of the regulations, they will not receive a certificate of compliance from the Cost Cap Adjudication Panel. A group of independent judges can impose a range of punishments.