F1 introduced the budget cap in 2021 to create a level playing field and stop the bigger teams from outspending their rivals. The hope was that the smaller teams at the back of the grid would become more competitive and the racing would become closer.
The initial plan from the FIA was to set the cap at $175 million, which was too much for some of the teams at the back of the field. McLaren was a team struggling financially and on the edge of bankruptcy. The amount was too high for the Papaya outfit. However, the disaster of COVID-19 saved them from exiting F1 and led to them becoming the champions of the world.
COVID-19 reshaped the budget cap and saved teams like McLaren
McLaren began their F1 journey in 1966 and has been a success in the sport. However, after a few poor seasons, the team were struggling financially as well as on the track. CEO Zak Brown was keen to get the budget cap brought into the sport. The initial cap limit was too high for the Woking-based team.
However, COVID-19 transformed the world’s finances. This helped Brown reduce the cap limit, as in response to global financial pressure, F1 decided to lower the cap limit to $145 million for the 2021 season.
Speaking on the How Leaders Lead Podcast, Brown explained how COVID-19 saved McLaren. He began: “That was huge, and we were lucky on timing from a COVID point of view.
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“Obviously, COVID was a terrible thing, but it put the sport under an immense amount of pressure. And that was right when we were talking to the budget cap, which was actually going to be significantly higher.
“So we got a little bit lucky with the timing because it allowed me to push even harder to get the budget cap down.”
The cap has since decreased to $135 million from the 2023 season, helping the teams that lack the financial firepower of the top 3. McLaren has used the cap well as they caught up to the top teams. They won the constructors’ championship last year and are looking on course to retain their title this season.
Is the budget cap working?
There is a debate about whether the cost cap is working and has closed the field together. In 2022 and 2023, Red Bull dominated both seasons with little fight from their rivals. However, Brown pointed to the 2024 season, where he says the benefits of the cap could be seen.
Brown pointed out: “Last year we had seven multiple winners; the first time I ever recall that amount of winners in Formula 1.
“[There were] four different teams that won races. The top three teams swapped the constructors’ championship late in the year. And that’s because now we’re all playing with the same size bat.”
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However, critics of the budget cap say that the structure of the cap needs tweaking, with staff salaries a big talking point. All the teams’ salaries minus the top three earners are included in the cap. This leads to most F1 teams not being able to spend big on some of the best minds in motorsport. They will be tempted by other series that don’t have caps, preventing teams from hiring the top engineering talent.
Teams that invested heavily before the cap also still hold an advantage, as others can’t spend big to catch up. This means the gap hasn’t fully closed, and the smaller teams still find themselves at the back of the grid. But what are your thoughts on the budget cap, and has it worked? Let us know your thoughts in the comments.
