F1 spending cap: Teams brace for over 1,200 job losses in order to comply

The major constructors have threatened that it would be the case, but a recent report has warned that up to 1,250 jobs will be lost within the F1 industry if Liberty Media pushes through a £114million-per-yer budget cap as part of its 2021 vision.

Liberty has introduced the spending limit for three main reasons:

1) Make the sport more economically viable and keep teams solvent

At the moment, Mercedes, Ferrari and Red Bull's budgets grossly outweigh those of the other teams, mainly because their only incentive is on-track success, and their organisations can accept the losses for marketing purposes or other reasons. Mercedes' cost base of £274m in 2016 was, for example, £100m more than the F1 average. With Force India effectively going out of business this year and with the likes of Williams regularly crippled by losses, this is to ensure some kind of fiscal responsibility, similar to Uefa's 'Financial Fair Play' initiative in football.

Claire Williams recently said that if a spending cap is not introduced, then Williams 'will close the whole company'. It's clear that the cap is fully supported by the smaller teams.

2) Create greater competitiveness throughout the grid

By limiting the spend of the top teams the aim is to have a wider spread of victories and podiums throughout the grid. As has been the case in recent years, there's a clear 'A' and 'B' class currently in operation and fourteen of the cars simply represent backmarkers fighting it out for the lowly points positions.

3) Encourage outside investment and entry into the sport from major manufacturers

Aston Martin boss Andy Palmer recently said of potentially creating an F1 team: "At Aston, we love the sport, and we'd love to be involved, but we cannot get involved in an arms race. It's needlessly expensive and it undermines the sport, because whoever has the advantage of that tenth will win."

Liberty wants to make the sport more attractive to outside investment; at the moment, knowing what Mercedes spend to remain on top is prohibitive to other teams entering and growing their business over time. By levelling the playing field and, theoretically, making it easier to win races and compete, it could encourage manufacturers like Aston Martin to get involved.

The plan is to stagger the cap across three seasons, but Red Bull boss Christian Horner made it clear that jobs will be lost within their divisions if they are forced to reduce their expenditure, saying: "A social responsibility needs to be taken into account when talking about restrictions and caps. It doesn't sit well when drivers can earn up to $50m a year."

And a report from The Daily Mail, in association with Formula Money, has revealed that if the proposed spending cap is confirmed, UK-based teams, found in Motorsport's heartland, would be forced to cut their staff by almost one third.

Salaries represent the biggest cost for many teams and are the main cost that will be culled as drivers' earnings and marketing are exempt from the cap. It is thought that some teams may be able to redistribute their staff to other divisions but this is not a guarantee.

It is clear what F1 is trying to achieve. The reasoning is sound, and the owners believe that they can increase revenues enough so that all teams benefit from the sport being marketed more effectively.

But another Formula Money report, found on Forbes, suggests that if Liberty are indeed to introduce a cost cap, then it isn't going far enough.

The report states that Force India were the best performing F1 team to ever go bust in terms of grid positions and, therefore, revenue generation, and their annual expenditure was already under the proposed spending limit. And yet, they still had to be saved from bankruptcy in July. If this is the case, then what is the point of the cap at all?

The suggestion is also that reducing the amount teams can spend brings the smaller teams closer rather than raising their level up, which might not do much for the spectacle.

The spending cap may well come, but how much it is and what other stipulations are implemented alongside it remain unsure.

Liberty has been accused in the past of being idealistic and lacking in substantial consultancy when it comes to sweeping changes. This is another example of a well-meaning, but ill-founded, regulation that needs to evolve before it can make F1 better for all.