F1 Spending Cap Could Drive Investment

While UEFA struggles to enforce FFP, the introduction of a spending cap within Formula 1 has the potential to increase competition and profitability for many of the teams.

An accusation often levelled at Formula 1 is the lack of opportunity for new teams to compete with the established elite. The main issue has been the spiralling costs of the sport - as proven by recently announced losses forWilliams and Renault, but for 2021, a new spending cap and an overhaul of the financial structure is hoping to tackle that.

2021 will mark the first F1 season where financial restrictions are part of the rules –a massive change for the sport. A budget cap of $175 per team per year was originally set back in October 2019. However, F1 has since stated plans to reduce this by a further $30m, as the sport looks to cut costs in the wake of the pandemic.

Additionally, the resource gap between the top teams like Mercedes and Ferrari, and midfield outfits such as McLaren will be further shrunk by the improved distribution of prize money

Theoretically, this means more teams should now be able to score podiums, and actually make a profit - making the F1 the business model much more attractive to potential investors.

Mercedes boss Toto Wolff stated “I think owning a Formula 1 team will not only be a marketing exercise like it is today, or a trophy investment for an individual – it will become a real business."

On the flip side, if teams continue to out manoeuvre the financial fair play regulations imposed by UEFA, there is a danger of European football going the other way and becoming less attractive to potential investors.

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