Daniel Ricciardo, McLaren, Baku City Circuit, 2022

McLaren will exceed F1’s budget cap in 2022 – Seidl

2022 Azerbaijan Grand Prix

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McLaren has become the latest team to confirm it will exceed the Formula 1 budget cap in 2022.

Team principal Andreas Seidl said rising costs outside of the team’s control relating to freight and energy will make it impossible for them not to exceed the maximum spending limit.

F1’s budget cap was introduced in 2021. It is set at $140 million (£113.17m) this year, excluding certain items such as drivers’ salaries.

However several teams have warned the sharp rise in inflation since the year began would make it difficult for them to stay within the spending limit. Ferrari team principal Mattia Binotto said in Monaco there was “no way” they could meet the limit.

Seidl told media including RaceFans in Baku today McLaren is in the same position.

“For us as a team that planned to run at the cap at the beginning of the year, with all these unexpected costs that came up we are at a position where we can’t make the cap anymore,” he said. “You have certain fixed costs in order to start the season, you have fixed costs with your resources which you have in place, the personnel and so on, which you can’t adjust any more.

Race start, Circuit de Barcelona-Catalunya, 2022
Feature: Could F1’s budget cap impasse tip the balance in the title fight?
“With this unexpected huge increase of costs, mainly on the freight side and utility bills, we’re in the same position as some other teams, so we can’t make the cap this year.”

F1 previously announced it would not replace the cancelled Russian Grand Prix, reducing the number of rounds teams would have to attend, thereby cutting their freight costs. Teams are in discussion with F1 and the FIA on how else to alleviate the financial pressures they face in 2022.

“I’m still hopeful with all the conversations that are happening at the moment, together with the other teams with the FIA and Formula 1, that we still find a solution which is in the best interests of the sport moving forward,” said Seidl.

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He stressed McLaren remains committed to the idea of the cost cap. “I’m absolutely happy we have the cost cap in the place,” he said.

Pierre Gasly, AlphaTauri, Baku City Circuit, 2022
Gallery: 2022 Azerbaijan Grand Prix practice in pictures
“It was a necessity for the sport in general, for Formula 1, but also for us as a team in order to be able to take part in F1 in a financially sustainable way, but also in a position where we can also be then actually competitive on the sporting side,” he said.

“It is just a new dimension, a parameter which you need to consider in your way, how you complete a year in Formula 1. And it is clear, especially in the current circumstances, that the development of the car is heavily influenced by the cost cap at the moment because of all these unexpected costs that came up recently. But in the end it’s the same challenge for everyone so I don’t have any concerns on that.”

Some teams are unwilling to support changes to help rivals stay within the cost cap. Nonetheless Seidl said he remains hopeful a compromise can be found.

“Because of the opportunistic views each team has in this paddock, which is a normal part of the competition, I still hope and I’m very confident that with strong leadership from the FIA’s side, we’ll find a good solution there.”

“I don’t want to go too much into detail about the discussions we’re having at the moment with the other teams and the FIA,” he added. “The most important thing is in the interest of the sport to find a defined solution for everyone because I think that’s also crucial in order to make sure that the principles of the cost cap do not get watered down or whatever.”

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Keith Collantine
Lifelong motor sport fan Keith set up RaceFans in 2005 - when it was originally called F1 Fanatic. Having previously worked as a motoring...
Claire Cottingham
Claire has worked in motorsport for much of her career, covering a broad mix of championships including Formula One, Formula E, the BTCC, British...

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35 comments on “McLaren will exceed F1’s budget cap in 2022 – Seidl”

  1. What ramifications are there if they exceed the cap? I guess this will be the first test of it and how it will be policed and enforced.

    But more curious is just how much of an increase inflationary expenses represent. I dont entirely buy the argument that its just inflation and freight. Alpha Tauri, Aston Martin, and Alfa Romeo have said that they factored it in and should be able to adjust. So how some teams are able to and others arent is curious and suggests more politics.

    1. They can’t be fined because, well, that would make them exceed the cap even more! 😄

      1. They can have the fine taken out of their following year’s budget…

      2. I am unsure if this was tongue in cheek, but as I have said elsewhere, for teams that have the money, a fine is hardly a disincentive to a cost cap breach.

    2. I dont entirely buy the argument that its just inflation and freight. Alpha Tauri, Aston Martin, and Alfa Romeo have said that they factored it in

      The 4 teams you listed are the ones with the least money and quite simply don’t have any more to spend – they had no choice but to leave money aside for such unforeseen circumstances.
      For them, there is no safety net.

    3. @JackL

      “Alpha Tauri, Aston Martin, and Alfa Romeo have said that they factored it in and should be able to adjust.”

      No way could those teams been able to forecast last year the current percentage of inflation increase before it happened. If they did, they would need to start worrying about going over budget cap with all the new money they would have made in futures and investment banking with their supposed crystal ball. Talk about having a money maker, where can I get one?

      When did the very significant inflation % hit the market, maybe December, Novemeber at the very earliest?? Before that there was some inflation talk but nothing remotely like it is now. For one instance, Who last fall was announcing how much fuel costs would be today?

      1. I did. Over a year ago when I saw the rate at which CB’s had been printing fiat, since the start of covid. I felt inflation in my pocket already then. It doesn’t take an expert to expect super inflation when over 40% of all money circulating was printed in the last 2 years.
        I made precautions for my family and our business to be prepared for an economic collapse a year ago already. And yes, I did so while taking into account likely high inflationary markets and possible food shortages. The team’s CFO’s should had watched the markets too.

        I think the FIA should enforce the rulebook. There is a cap and it is the responsibility of the teams to make sure they operate within the limits of it. It would be unfair to the teams that adhered the rules, to get to see the top teams get away with not operating within the rules they agreed to.

    4. If those teams could accurately forecast inflation then they’d be better off becoming a investment fund of some sort. All teams would’ve factored in inflation, but none would’ve accurately forecasted it. It’s just those teams all have the lowest budget, hence why it’s not an issue. No matter what inflation does they’ll probably be fine.

      1. It’s just those teams all have the lowest budget, hence why it’s not an issue. No matter what inflation does they’ll probably be fine.

        No matter what inflation does, those teams have no other choice but to deal with it.
        The wealthy ones, though, can just demand the rules be changed to benefit them.

  2. The Construction industry has got these things down to a T. . .Pre-Construction escalation, contract escalations are contengency amount included in the project cost calculations. These are all derived from different stastistical indices and they cover, labour cost, fuel Prices (Especially Diesel), Building Material and Machinery cost. . .F1’s supposed to know better and Team bosses and their accountants should have known better before agreeing

    1. They do know better – but they also know that F1 is weak when it comes to enforcing regulations.

    2. Andy (@andyfromsandy)
      10th June 2022, 17:19

      Every large building project in the UK goes massively over budget, the latest to finish and open is the Elizabeth line. £4 billion over. HS2 massively over. The list is endless.

      The company that bid to build Wembley stadium put in a fixed price bid of £455 million. It cost nearly £1 billion in the end.

      So the few million F1 teams want pales into insignificants in comparison.

      1. @andyfromsandy you’re spot on.

        Any projection costs and numbers used in the formula to come up a construction projection cost and still be good enough/low enough to be awarded last year will guaranteed to be well above lasts years forecasted numbers; especially if there just now having to purchase materials.

        Only today did the EU Banks raise points due to the increased inflation we’re currently experiencing. I would definitely think F1 teams are in the same situation. I’m all for the budget cap but can understand making a slight correction for drastic and unforeseen rise in inflation.

        Admittingly this does not help any team not hitting the budget cap ceiling and they still are getting hurt by new much higher costs to run a team globally. They better go out and start raising some money to hit the ceiling and stay competitive against the ones who have

        1. They better go out and start raising some money to hit the ceiling and stay competitive against the ones who have

          Ah – if only they’d thought of that before…

    3. In my neck of the woods, the going rate for the current local dude you pick off the street in front of the hardware store for untrained labor/no vehicle/no tools/language barrier to dig a hole is now about £32/hour cash!

      Wasn’t like that nine months ago; far from that. Then add the higher cost to feed them lunch and petrol cost to drive them around.

  3. Could spell an early end to Mr Ricciardo’s career if McLaren cannot pay to participate in every race of 2022.

    1. Bruno Verrari
      10th June 2022, 21:14

      It’s a budget cap, not a cash flow issue.
      Maca has money but they’re not allowed to spend more.
      Driver salaries are excluded from the budget cap, so it makes no difference…but Maca could skip going to Japan?

      1. I imagine they’ll do business as usual while continuing to threaten non-participation in the final races of the season if no changes to the cap are forthcoming.

  4. I was initially going to point out the car development aspect once again until I came up with the following possibility: Perhaps Mclaren has already decided to stop this season’s development sooner than planned, but they’ve realized they still can’t stay within the cap, hence, why Seidl has declared they ‘will’ exceed & the same with Binotto’s ‘no way’ remark.
    Nevertheless, if some teams can’t avoid exceeding the base limit even without further work on development & other less critical things, tough luck, as they should’ve been more careful with how much budget they use for development earlier.

    1. But what does “tough luck” mean. They’ll have to punish them in some way but anything other than a reasonably low financial penalty and this will go to court. I don’t think F1 wants to have a fight in court against it’s 4 biggest teams….

  5. I don’t feel any kind of sympathy for teams exceeding the budget cap. If they think they are going to exceed it, the FIA should impose some kind of penalty on those teams, otherwise it’s just ridiculous.
    The argument regarding the high inflation rate isn’t a valid one, because it affects the less wealthy teams (Williams, Haas, Alfa Romeo) even more than the big ones. Both sides get less value for their money, so it’s only fair to leave the cap at where it is. Would the FIA increase it by, let’s say 8% to counter the high inflation, teams like RB, Ferrari, Mercedes & McLaren would be able to outspend teams that can’t increase their budget by 11.2 million $. That’s exactly what the cap was implemented for to stop!

    I’d look it at it this way: If you think you need to spend more than the regulations tell you to spend, fine. But as soon as you spend more than is allowed by the regulations, your car is effectively illegal, meaning you can’t earn any championship points.

    1. I’d look it at it this way: If you think you need to spend more than the regulations tell you to spend, fine. But as soon as you spend more than is allowed by the regulations, your car is effectively illegal, meaning you can’t earn any championship points.

      That would be a sensible, very firm, way to go about it.
      By the end of the season, the car is bound to have parts on it that were funded by the budget overrun, after all.
      Not really any different to Aston Martin’s illegal brake ducts saga recently… The car may be technically legal, but how it came about isn’t.

      I’d totally support that – but I know F1 won’t.

      1. You think it would be sensible to kick Mercedes, Red Bull, Ferrari and McLaren out of the Championship? It would be a lot of things but I’m not sure “sensible” is one of them. It would be an absolute disaster for the sport that would end up with a lengthy court battle and threats of break-away series.

        1. Exclusion is the punishment for an illegal car, sure.

          You say disaster, others would say media frenzy that would be absolutely guaranteed to get more people interested for next season.
          Last season’s finale worked a treat. This would be a good way to top it.

          And breakaway series?
          YES PLEASE!!!!
          I’ve been wishing they’d follow through on that threat for 30 years.

          1. If someone as silver S would have gold. If i had a mill in the bank you would have more. Breakawayseries how stupid. Every comment you make is opposite, you do not always have to go against the grain m8 jesus.

    2. 100% agreed. They know the rule. You can’t spend more than X money. If you have spent that money and 5 races are remaining, you have had a bad job. You either race this 5 races without spending money or be disqualified. The rule is made so that teams that have a lot of money can’t spend so much that teams that have little can’t compete. If you allow them to skip it on the first difficulty, the rule doesn’t make sense.

      1. The problem is that I think teams have to submit accounts for 2022 by some time early in 2023 (Williams have just now been fined for late 2021 submission). So what might happen is that after the last race team X has won, then suddenly 4-5 months later, it can all get reversed. Not good.

  6. I understand if Ferrari, RBR or Mercedes were pushing to overspend after all they are financially stable and they have stratospheric resources. McLaren on the other hand was one of the main reasons that pushed the FIA to tighten the cap further to 145 million because as far as I remember Zak Brown lobbied a lot behind the scenes and publicly with his famous rant in press conference. Mclaren group layed off 25% of its workforce because of the pandemic and the F1 team lost around 70 of their employees and now they say that they will not meet the cap ? Absolutely ridiculous.

  7. It’s not normal McLaren to moan about the cap. There is a bed RBR smell under this one.

  8. The answer is stop developing your car…

  9. Wow, I didn’t know there were optional rules and that teams could skip them whenever they wanted.

  10. If a team is scared that they’ll exceed the budget cap they should amend their development plan and adhere to the financial restrictions. Teams moaning about this is like children spending their allowance and then asking for more if the parent can. Let the teams handle this as frugally as they can. If an update package makes the team exceed the cap , they simply cancel it but stay within the budget cap.

    1. Andy (@andyfromsandy)
      11th June 2022, 11:19

      I do agree that development work will suffer and that was the main point of the cap.

      If a team stops developing it then affects the work force. It is peoples lively hoods that some team principles are talking about. It will probably result in redundancies and generally when people leave industries they don’t come back.

      Some comments don’t look at the human side of this. People losing their jobs because some bloke thought it a good idea to introduce a development cap is not nice.

      The teams are also handicapped with development time so being allowed to pay the work force or freight costs isn’t gaining a particular advantage.

      1. Some comments don’t look at the human side of this. People losing their jobs because some bloke thought it a good idea to introduce a development cap is not nice.

        Some people aren’t considering that the budget cap was introduced in support of the human side of this.
        What good is it having free spending if it becomes completely pointless or unsustainable to have more than 5 teams in F1? That would cost a lot more jobs than restricting each team’s expenditure.
        Williams alone employs about 600 people – so having just one team less on the grid would be a huge amount of employment lost.

        ‘Some bloke’ was made up of all of the teams in F1, let’s not forget – the employers of these people. F1 has given them the power to make these decisions.

        So if you think about it – losing a few staff to save hundreds, potentially thousands, of jobs isn’t really all that terrible at all in the grand scheme of things, is it, @andyfromsandy?
        Assuming they aren’t willing to be more flexible with their employment and pay conditions, of course… Which is something they almost certainly would prioritise.

  11. The suggestion that this only affects the big teams that spend up to the cap is a fallacy.

    If anything, this issue is going to affect the smaller budget teams even more to the point of some possibly not being able to attend races later in the year.

    The massive increase in freight, energy and supply costs for them has to come out of their much smaller budgets which could mean for some that they’ll have to stop all development immediately and even possibly lay off staff just to be able to afford to get to the tracks.

    In simple terms their % of budget affected is likely to be much much higher that the % of budget affected for the bigger teams.

    So it’s probably not the bigger teams that are in trouble (other than exceeding the cost cap which, knowing the FIA, will get them a slap on the wrist) – it’s the smaller budget teams that quite possibly might struggle to survive even if the stop all “development” type expenditure right now.

    @robbie put forward an excellent suggestion in another thread a couple of days ago – the best possible solution would be for Liberty to stump up a fixed amount (5m, 10m) specifically to cover freight and transport for the remainder of this year. Keep the cap in place, but at least give the teams some relief from what is quite frankly a ridiculous increase in costs that has been forced upon them by external sources.

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