Le Mans, Steve McQueen’s classic 1971 film about motor racing, featured Ferrari and Porsche doing battle in one of the world’s premier races.
Although the movie depicted Italy and Germany jousting on French soil, British-built vehicles featured prominently. Lola, one of the biggest names in the history of motorsport, supplied many of the film’s racing cars, with most dressed up as other marques, including Ferrari and Porsche. The use of Lola helped to cement the UK’s position as the global centre of racing car technology, and for decades anyone wanting to compete at the highest level has looked to British engineering and expertise.
The contemporary industry employs about 100,000 people in full-time and part-time jobs, including about 25,000 engineers. They service all classes of racing, from Formula One to touring cars to the millionaires who indulge their passion in amateur competitions. About 75 per cent of research and development, design and manufacturing takes place in Britain.
But these are tough times for an industry that grew accustomed to excess as well as success. Lavish sponsors such as Royal Bank of Scotland and ING are pulling out, and big carmakers are reining in or abandoning racing. Yesterday, however, Sir Richard Branson’s Virgin Group confirmed that it would invest in Formula One for the first time as a significant team sponsor after a deal was reached with Brawn GP.
The multimillion-pound deal, which is expected to be confirmed in Melbourne today by Sir Richard, marks the first big sponsor signing for the Brawn team, which was saved from winding-up by a management buyout led by Ross Brawn, the team principal, after Honda quit the sport in December.
The new Formula One season will begin in Australia on Sunday in typically supercharged fashion, but even this pinnacle of motor racing, with revenues last year of $3.9 billion (£2.7 billion), faces a financial crisis. There will be less glitz and glamour this season. For the first time in years, the talk is of contraction, not expansion.
“The motorsport industry is of incredible value to this country, but has deep problems,” Geoff Goddard, Professor of Motorsport Engineering Design at Oxford Brookes University, said. “There are job losses and there are closures.”
David Richards, chairman of Aston Martin and chief executive of Prodrive, the world’s largest motor-racing technology company, cannot recall a recession like it. He believes that the sport’s financial woes could worsen as sponsorship contracts continue to unwind.
“This has been a growth industry for more than 15 years, so the downturn will mean quite a significant readjustment, and it is likely to be serious,” Mr Richards said. “But I suppose it is only in line with other industries.”
The motor racing supply chain spreads through Northamptonshire, Oxfordshire and the south Midlands. The area is known as Motorsport Valley, although firms are found across the country. Six of the ten Formula One teams are based in the valley, including Williams, Force India and Renault.
The UK racing industry emerged after the Second World War, when abandoned airfields became ideal venues for racing and former aircraft engineers found work helping to build better and faster cars. What started as a cottage industry has annual sales of £6 billion to £7 billion, with about £3.6 billion coming from exports, Professor Goddard said. A staggering 30 per cent of turnover goes on research and development.
But investment and technological development is under threat. Honda, which spent £150 million a year on Formula One, is gone, and there are question marks over Toyota’s long-term commitment. No one would be surprised if a team did not see out the season. Honda sold its team to the management but about 200 of the 700 jobs will be lost at the factory at Brackley, near Northampton. A few miles away, at Enstone, Renault has shed jobs.
Flavio Briatore, the boss of the Renault Formula One team, said that staffing levels across all teams could not be maintained. “The reality is each team employs between 700 and 1,000 people and it’s impossible,” he said.
Max Mosley, the head of the governing body for Formula One, wants to impose a $43.5 million cap on spending for each team. Last year the six leading teams spent a combined $1.3 billion. A cap would mean a huge drop in business for suppliers.
Subaru, the carmaker, abandoned its World Rally programme, leading to 150 job cuts at Prodrive, almost a third of its UK workforce. Suzuki, Mitsubishi, Porsche and Audi have reduced motorsport activities.
Meanwhile, ING, the Dutch bank, which poured £70 million a year into Formula One sponsorship and linked its global marketing campaign to backing the Renault team, will withdraw at the end of this season. Credit Suisse has stopped sponsoring BMW-Sauber.
Sir Richard’s deal to put the Virgin name on Brawn GP racing cars shows that other sponsors are willing to step in, but the prices being paid for sponsorship are thought to be as much as 60 per cent down on last year.
Zytek, which supplies engines and chassis, is “reining in costs to ride out the storm”, John Manchester, the operations director, said. “We are bringing more work in house and subcontracting less. Obviously, that will affect our suppliers.”
Several companies, including Lola and McLaren, have broadened their expertise to include work for the defence, aerospace, and marine industries and this should help to soften the blow from the recession.
Chris Aylett, the chief executive of the Motorsport Industry Association, believes that the gloom is overdone. He asserts that Motorsport Valley is an example of “cluster economics”, the geographic concentration of competing, complementary or interdependent companies that have common needs for talent, technology and infrastructure.
“The valley has a critical mass, just like Silicon Valley or Hollywood,” Mr Aylett said. “Clusters readjust and regenerate. Sure, there will be job losses. But people will move down the value chain, start new businesses and rebuild. When Reynard [a British-based supplier of racing cars for competitions in the United States] folded, six new businesses emerged.”
A century ago France and Germany led motorsport technology. The mantle passed to Italy as Ferrari and Maserati advanced. History shows that the UK’s dominance is not guaranteed.
— Russell Hotten is the author of Winning: The Business of Formula One.
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